THE ROLE
OF CENTRAL BANK OF NIGERIA IN THE DEVELOPMENT OF NIGERIA ECONOMY
(A
case study of Central Bank of Nigeria, Kaduna Branch)
ABSTRACT
This research work is aimed at the
examination of the role of central bank of Nigeria in the development of
Nigeria economy. The banking industries in the public and private sector whose
main activities are valuable. Usually such companies are characterized by heavy
capital. The Role of central bank in development of Nigeria economy, the method
of data collection for this research it content analysis and this data on table
and percentages, etc. these data were from C.B.N. Annual Report of financial
economic review. Reports made by previous researchers and statistic bulletin.
Monetary policy which is aimed at development and growth of the economy should
also focus on the stability of foreign debts resulting in the smooth running of
the countries.
TABLE OF CONTENTS
Title
Page – – – – – – – – – i
Declaration – – – – – – – – – ii
Approval
Page – – – – – – – – iii
Dedication – – – – – – – – – – iv
Acknowledgment – – – – – – – – v
Abstract – – – – – – – – – – – vi
Table of
Contents – – – – – – – – – vii
CHAPTER ONE : Introduction
L.1 Background to the Study – – – – – – – 1
L.2 Statement of the Study – – – – – – – 2
1.3 Objectives of the Study – – – – – – 3
1.4 Statement of Hypothesis – – – – – – – 4
L.5 Scope of the Study – – – – – – – – 5
L.6 Significance of the Study – – – – – – 5
1.7
Historical Background of the Central Bank of Nigeria – – – 7
CHAPTER TWO: Literature Review
2.0
Introduction – – – – – – – – – 11
2.1
Literature review – – – – – – – – 11
2.2 Function
of Central Bank of Nigeria – – – – – 13
2.3 Control of the Financial System by Nigeria
central bank – 15
2.4 The
efficiency of bank rate as an instrument of money policy 18
2.5 Other instruments of monetary policy – – – – 19
CHAPTER THREE
3.0 Research Methodology – – – – – – 21
3.1 Introduction – – – – – – – – – 21
3.2 Population and Sample Size – – – – – – 22
3.3 Method of Data Collection – – – – – – 23
3.4 Sampling Techniques and limitation – – – – – 23
3.5 Method of Data Analysis – – – – – – – 24
3.6 Justification of the Choice – – – – – – 25
CHAPTER FOUR
4.0 Data Presentation and Analysis – – — – – 26
4.1 Introduction
– – – – – – – – 26
4.2 Data Presentation – – – – – – – – 26
4.3 Data Analysis – – – – – – – – 27
4.4 Testing Hypothesis – – – – – – – – 32
CHAPTER FIVE
5.0
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary
– – – – – – – – – 35
5.2 Conclusion – – – – – – – – – 35
5.3 Limitation of the study – – – – – – – 37
5.4 Recommendations – – – – – – – – 38
Bibliography – – – – – – – – – – 40
Appendix
– – – – – – – – – – 41
Questionnaire
CHAPTER
ONE: INTRODUCTION
1.1 BACKGROUND
TO THE STUDY
The Central Bank of Nigeria as the Apex Financial
institution within the financial structure, consist of commercial banks and the
Allied Institution, it’s primarily created to promote monetary stability and
sand financial system. The important of the central bank of Nigeria (C.B.N) can
be fully appreciated when one understands its dominant role in development of
Nigeria Economy. The major role of Central of Nigeria includes:-
Issuing or mounting the National currency such as
maintaining its values, enhancing the mobilization of funds and facilitating
the competition among banks and other non financial banking institutions within
the systems and other role of central bank of Nigeria includes moderation of
inflation, reduction of unemployment, enhancing external reserve position and
creating appropriate monetary and financial environment to whether the
development of Nigeria economy is facilitate the growth and development of
Nigeria Economy.
However, if the Economy condition of a Nigeria can be a
yardstick or index to judge the effectiveness of central bank of Nigeria, then
the current economy depreciation is unfortunately the manifestation of poor performance
of the central bank of Nigeria, this can be justified by raising confusion in
the financial Institutions, such as distress, syndrome, problems in the foreign
exchange, Transaction, particularly, the continuing depreciation of Naira it
value of much should be maintained and stabilized by the Central Bank of
Nigeria.
In the light of these, the researcher is inspired to
examined the expected role of the central bank of Nigeria against the existing
performance in order to establish enhancing not the focus of the study is the
central bank of Nigeria (CBN) Kaduna branch, which control the monetary and
fiscal policies and also of the recent recapitalization which as been
introduced by central bank of Nigeria.
1.2 STATEMENT OF THE PROBLEM
The central bank of Nigeria, despite its credibility still
have short coming. The short comings are:
i.
The central bank of Nigeria
is supposed to serve as a lender of last resort, but some times, there is delay
in granting assistance to some commercial banks. When they run out of enough
funds to pay their customers.
ii.
Sales and purchase of
securities are riot timely and adequately done to curb inflation
iii.
The bank (Central bank of
Nigeria) is constrained in selecting the tools to enhance the realization of
the mandates.
iv.
The appointment of official
in the bank is based on political influence rather than merit and has created
inefficiency in same section of the bank.
1.3 OBJECTIVE OF THE STUDY
The purpose of this research work is to example the
expected role of the central bank of Nigeria against the existing performance
in order to establish whether the development of Nigeria Economy is enhancing
or not and also to find ways of solving particular problem associated with the
smooth running and operations of the central bank of Nigeria, particularly, the
Kaduna Branch.
Therefore the purpose of this study will be determined
as follows:
i.
The legal framework of the
central bank has to be strengthened in other to address Lapses in the financial
system.
ii.
The roles which central
bank of Nigeria has played in the development of Nigeria since inception.
iii.
Ways and how to make other
financial institutions comply with the central bank act of 1958, Which were
largely unregulated.
iv.
To streamline the practice
of the banking operations, so as to ensure monetary in the economy.
v.
The Amendment of the
banking acts which depends on the operations and stipulated penalties and
effectively carried out.
1.4 STATEMENT OF HYPOTHESIS
Without effective regulatory measures by central bank to
monitor activities of the commercial bank and other financial institution also
development of the Nigeria economy.
There are some preliminary investigations which must be
conducted to enhance quick development of the economy and to see the practical
role of the centered 1)811 k or Nigeria.
The Hypothesis of the study are:
Ho:
Regulatory measure and instrument employed by the central bank have not
assisted in curbing inflation in Nigeria economy.
H1:
The regulatory measure and instrument employed by the central bank have
assisted in curbing inflation and depression in Nigeria economy.
1.5 SCOPE OF THE STUDY
The scope of the study is limited to the Central Bank of
Nigeria P1c, Kaduna Branch sited along Yakubu Gowon Way. The research work has
being conducted within the bank along, covering the range from the top
management to the lower management period of the study from January 2010 – 30th
November 2010.
1.6 SIGNIFICANCE OF THE STUDY
The study is important because, it carefully asses the
role of central bank in development of Nigeria economy.
The study has acquitted me with the role and the
contribution of the central bank towards the accomplishment of growth and
development of the economy.
Also, the study has analyze the work and effort of the
central bank to ensure sound monetary policy and also save the problems of
inflationary and deflationary gaps in the financial sectors of the Nigeria
economy Central Banks towards positive change in the financial system of the
economy.
Also, the significance of this study which IS the role
of central bank of Nigeria economy can not be over emphasized, because the work
will help the reader to know and have ideas in the filminesses contribution,
central bank is giving in the development and growth of the Nigeria economy. It
will also help the students of accounting, business studies and other financial
profession In making reference during the studies reach work.
1.7
HISTORICAL BACKGROUND OF THE
ESTABLISHMENT OF THE CENTRAL BANK OF NIGERIA (CBN)
Central bank is referred to as the role of central monetary
authority or Apex financial institutions within the entire financial structure
in promoting monetary stability and sound financial system.
The central bank of Nigeria involves through direct
legislation and was super imposed on the colonial financial structure that
exists prior to 1959. The establishment of the bank was stimulated by various
factors, prominent among which were the nationalistic feeling that was the ease
in the 1950’s the adverse effect of the 1952 banking or ordinance which lead to
the collapse of many indigenous banks the lopsided method of approval and
disbursement of loan by the surviving expatriate banks to indigenous business
men, the quest for accelerated economic development of the country and the need
for economic independence of the country.
These reasons propose the private member motion by Hon.
K.O Mbadiwe in April 1952 in the Federal House of Representatives calling for
the establishment of a central bank of Nigeria, to perform functions generally
expected of central banks.
He advocated that the Federal Government should
initiate, organize and easterlies within two from the passage of the motion, A
central bank of Nigeria was defected In the house since colonial authorities
felt that the establishment of the bank was premature, considering the non
-existence of a domestic financial infrastructure and an organized money
market.
An amendment to this motion calling an the government to
examine and report on the possibility and desirability of establishing the
central bank of Nigeria was later adopted by the house and this compelled the
colonial government to appoint Mr. A. U. Fisher, an adviser to the bank of
England, in 1953 to carry out these assignment.
Fisher based his repast on orthodox banking principle.
He argue that sound financial environment does not exist for a central bank in
Nigeria at that part in time. The rather proposed a three step programme
leading to the establishment of a central bank. According to Fisher (1956)
these includes:
a. Transfer
of all operations of the West African Currency Board to African so that its
management would eventually be indigenized after the local people have acquired
the necessary experience.
b. Establishment
of a Nigeria currency and a separate currency board to take over Nigeria’s
share of West African Currency Board (W ACB) assets and
c. Establishment
of a bank of issue as the embryo of the future central bank.
The Fisher’s report was reserved with mixed feeling by
the indigenous people. The World Bank mission of 1955 also reviewed the case
for a central bank of Nigeria. The World Bank report lead to the invitation of
Sir J.B. Loynes (another adviser to the Bank of England) in 1959 to advice on
the feasibility of Establishing a Central Bank the Loynes Report favoured the
establishment of Central Bank, subsequently; this led to the promulgation in
March 1958 of the Central Bank of Nigeria ordinance.
The Central Bank later opened for business on July 1959
with wide power to perform various functions as specified in the ordinance with
an initial capital of 3 million.
The Bank is principally found by the Federal Government
and its controlled and managed by it. The act confirmed it power to control the
operation of Commercial Bank and the monetary policies. The Central Bank
operated with the 1958 ordinance as amended for many years. This ordinance was
later repeated in 1991 by CBN Decree No. 24 of 1991.