THE ROLE OF CENTRAL BANK OF NIGERIA IN THE REGULATION OF NIGERIA ECONOMY THROUGH MONETARY POLICY

(Banking and Finance)

THE ROLE OF CENTRAL BANK OF NIGERIA IN THE REGULATION OF NIGERIA ECONOMY  THROUGH MONETARY POLICY

(A CASE STUDY OF CENTRAL BANK OF NIGERIA ENUGU BRANCH)

 ABSTRACT

The study was done to ascertain the role of Central Bank of Nigeria plays in the regulation of Nigerian economy using the monetary policy.  Among the goals of economic stabilization the most important is to achieve full employment, price stability, balance of payments and exchange rate stability, hence the regulation of the economy  using monetary policy.  To solve the research problem, primary and secondary data were collected. The research instrument used in collecting the data were the questionnaires and oral interview.  The respondents comprised of the top business executions both private and public servants.  The population of the study and the population sample is 100 and 80 respectively.  The researcher employed statistical techniques of simple percentage frequency to analyze the data collected.  The researcher’s findings showed that while monetary policy has been vital tool used by the Central Bank of Nigeria to regulate the economy, some hindrances still arise as a result of some variables such as socio-political problems.  However, the researcher is of the view that the Government, the Central Bank of Nigeria and other relevant monetary authority are able to come up with some policies such as fiscal policies to augment the monetary policy, the Nigerian economy will surely be best managed.

 

TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION                                                                         

Background of the study                                                                               

Statement of problem                                                                        

The purpose of the study                                                                               

Significance of the Study                                                                              

Scope of the study                                                                                         

Research questions                                                                                         

Definition of terms                                                                                          

CHAPTER 2: LITERATURE OF RELATED LITERATURE                                   

Meaning of bank                                                                                            

Brief history and meaning of CBN                                                   

Objectives and functions of CBN                                                     

The role of central bank in economic development                           

Regulatory monetary policy of CBN                                                 

The problems of Nigeria economy                                                     

CHAPTER 3: RESEARCH METHODOLOGY AND DESIGN

Research design                                                                                                         

Area for the study                                                                                                      

Population for the Study                                                                                           

Sample and sampling procedure                                                                    

Instrument for data Collection                                                                                  

Validity of the Instrument                                                                             

Reliability of the Instrument                                                                          

Method of data Administration of the Instrument                                        

Method of Data Analysis                                                                                          

CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA

Presentation and analysis of data                                                                              

CHAPTER 5: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION

Summary of findings                                                 

Recommendation                                                                   

Limitations of the study                                                        

Reference                                                                               

Appendix                                                                               

 

CHAPTER 1:  INTRODUCTION

Background of the Study

            The development of central banking can be said to date from the middle of the 19th century.  But precisely there is no exact data when banking started in Nigeria.   Historically, records showed that domestic banking activities started in 1961, when a shipping company Elder Dempter Lines started banking services in Lagos the chairman of the company in 1392 established the first banking institution called African Banking Corporation, which metamorphosed, into First Bank of Nigeria. In 1917, Barchays banks now known as Union Bank of Nigeria Plc was established.

            Before 1952, the West African Currency Board (WACB) established I 1912 was used as the state banks for Anglo-phone West African Countries, such as Nigeria, Serra-Leone. Ghana and Gambina.  The West African Currency Board (WACB) was based in London and it issued notes and coins for the Anglo-phone West African countries.

            The banking failure of the 1950’s could not but lead to the establishment of Central Bank to serve as banker to the banking system, to perform supervisory role over the commercial banks and issue currency notes and coins thus, regulating the supply of money in Nigeria.  Not only these, it acts as financial adviser to the government on monetary policy and implementing the policy on behalf of the government.

            The central bank of Nigeria is government bank, established to keep a country’s financial system under control and close supervision.  The responsibility of managing the central bank of Nigeria is vested in the hand of the board of directors whose members are appointed by the government.

            The central bank of Nigeria is expected particularly in promoting economy growth by fostering the development of money and capital market; develop banking habits and sound financial system.  In order to facilitate economy development, central bank of Nigeria tends to engage in activities, which extend beyond its traditional functions.  In this regard, it played a unique role in the development of Nigeria economy, particularly in promotion agricultural and industrial development in general.

            Central Bank of Nigeria was established to act as the organ of government that should undertake the major financial operations of the government and by its conduct influence the behaviour of financial institutions so as to support the economic policy of the government.  It follows therefore that the central banks of Nigeria must in some sense be a part of the government machinery with its action clearly co-ordinated with those of other executive branch of government.

            Argument has been advanced for the complete independence of the central bank of Nigeria; so far this has not been achieved as there is no country where the central bank is completely free from government intervention.

            There is no gainsaying in the fact that the role played by the central banks of Nigeria is establishing Nigerian economy through monetary policy is an enormous one.

            Since it inception in 1958, it has engaged in one stabilizing role or the other, that is direct or indirect monetary policy.

Statement of Problems

            The wind of change economically which is more pronounced in the development countries, especially Nigeria.  In attainment stability in the economy of Nigeria the central bank of Nigeria is faced with many problems.

These problems include:

(a)                In Nigeria, the banking habit is still not widespread.

(b)               Our money market and capital market are not well developed.

(c)                The failure of central bank in putting the non-bank financial intermediaries under it.

(d)               Political instability

(e)                Government policy

(f)                Administrative bottleneck

 

Dependence in agricultural sector, unemployment, poor standard of living and low income per capital are the major problems facing Nigerian economy.

Purpose of the Study

            Every research work is aimed at solving a specific purpose.  The purpose of this research is to:

(i)                 To identify the problems inhabiting the growth, development and stabilization of Nigerian economy.

(ii)               To identify the roles of central bank in economic development.

(iii)             To identify the various regulatory policies of the central bank of Nigeria through monetary policy.

(iv)             To make appreciable recommendation that would enhance the Nigeria economy through central bank monetary policies.

(v)               To make available suggestions on how to reduce, if possible remove entirely those problems facing Nigeria economy so as to ensure maximum economic development in Nigeria.

Significance of the Study

            The study of the role of central bank in the regulation of Nigeria economy through monetary policies with particular focus on Enugu state will be of immense benefit to both the private and public sectors of the Nigeria economy.

            Student’s captains of industries, political office holders, National Assembly members, and infact, the general public will benefit a lot from this study.  Investors, especially those who trade on government securities will also benefit a lot.

            Foreign investors who are always eager to see a stable and viable economy will find this study very beneficial.

Scope of the Study

            This study covers the role central bank of Nigeria plays in the economic development of Nigeria using the measures know as monetary policies.

Research Questions

            The following research questions were formulated to get to the indept of the topic and also based on the statement of problems.

1.         Identify some of the problems you think that militate against the economy Nigeria

2.         What role, if any does the central bank play in the development of the Nigeria economy?

3.         Do you think that the central bank is doing enough in regulating the economy?

4.         What policies does the central bank employ in regulating the economy?

5.         Can the efforts of the central bank be improved upon?  If yes, how?

6.         Do you think that in controlling other financial institutions, the central bank is also controlling the Nigeria economy?

7.         How would you rate the Nigeria economy at present?

Definition of Terms

                        The operational definitions of some technical terms employed in this research work are given below:

            Economy:  The use of available resources is a way that saves money, time and avoids or minimizes waste.

            BANK:  As a place where money and other valuable things are kept for safety purposes.

            Currency:  Money used in country as a medium of exchange.

            OPEN MARKET OPERATION:  Is the buying and selling of government securities by the central bank to the public through commercial banks.

            Monetary Policy:  The control of money in a country.

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