Evaluating the Impact of Monetary Policy Instruments on Bank Stability in Nigeria: Implications for Green Technologies and a Sustainable Environment

This study investigates the determinants of bank stability in Nigeria from 1992 to 2024, focusing on the interplay between conventional monetary policy instruments, green technology adoption, and environmental sustainability. Using the Autoregressive Distributed Lag (ARDL) framework as the baseline model, the analysis reveals that interest rate control consistently undermines bank stability, while open market operations and reserve requirements exhibit asymmetric effects conditioned by the adoption of green technologies and sustainable environmental practices. Short-run dynamics show that these interactions produce immediate but selective effects, with error correction terms indicating rapid adjustment toward long-run equilibrium. Canonical Cointegrating Regression (CCR) robustness checks confirm that the estimated long-run relationships are structurally reliable, demonstrating that green technology adoption and environmental stewardship enhance resilience and mitigate climate- and policy-related risks. Marginal and threshold effect analyses highlight the nonlinear nature of policy impacts, revealing that aggressive monetary interventions can destabilize banks unless complemented by sustained green technology adoption and effective environmental governance. Structural break analysis identifies critical periods—2004, 2007, 2010, 2014, 2015, 2020, and 2024—where policy shocks, environmental pressures, and institutional inefficiencies intensified fragility, whereas positive deviations reflect effective interventions and governance improvements. The findings underscore that Nigerian bank stability cannot rely on conventional monetary policy alone; integrated, context-sensitive strategies combining monetary prudence, technological innovation, and environmental sustainability are essential to enhance resilience, reduce systemic risk, and support a climate-aligned, stable banking sector.