THE CENTRAL BANKING AND MONETARY REGULATION IN NIGERIA

By

EZEAGOR CLINTON CHINEDU

Presented To

Department of Accountancy

37 Pages 4,098 Words 2,046 Views Microsoft Word Format No. of Chapters: 1 to 3 Chapters

TITLE PAGE

APPROVAL PAGE

DEDICATION

ACKNOWLEDGEMENT

TABLE OF CONTENTS

CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDIES

1.2 STATEMENT OF THE PROBLEM

1.3 SCOPE OF STUDY

1.4 OBJECTIVE OF THE STUDY

1.5 DEFINITION OF ITEM

CHAPTER TWO

2.0 REVIEW OF LITERATURE

2.1 HISTORY

2.2 DEFINITION

2.3 FEATRURES/FUNCTIONS

CHAPTER THREE

3.0 SUMMARY

3.1 FINDING

3.2 RECOMMENDATION

3.3 REFERENCE

CHAPTER ONE

1.0 INTRODUCTION

The question of money is a very important question today. This is because of the role of money in social and economics development.

Money plays a key role in this sectors and requires that its position is always under focus.

The government of any country keeps it's eye on this sectors by using monetary policies are a weapon of control. Monetary policies are directives, guidelines, or order issued to the player in the money markets by the government.

In Nigeria, the Central bank of Nigeria (CBN) is the highest organ used by the Federal Government to control the economy. The CBN was established to perform this duty and to creates money to influences economics activities and achieve economics objectives of the government. The pursuance of this objectives gives to Central Banking and Monetary regulation in Nigeria. The CBN is the highest bank or known as the apex bank.

This position it is occupying make it possible to regulates direct and control economics activities fro both the government and private sector. Much of government activities may lead to high spending of money which may also lead to inflation.

Inflation does a lot of damage to the economy. It weaken the economy because it reduces the values of the currency.

It makes the cost of goods and services very high. It affects planning and dis-encourage investment etc.

The Central bank start it function on the economy by first of all licensing the commercial bank and playing supervisory role for all other player in the money market.

This is to makes sure that he aims monetary regulation in Nigeria is ascertained.

1.1 BACKGROUND OF THE STUDY

The Central Bank of Nigeria (CBN). The Institution that perform the Central Banking function for Nigeria is called Central Banking of Nigeria. In this section, I shall briefly discuss the background to it's establishment, it's organizational structure, it's operational modalities, and financial statement.

BACKGROUND TO THE ESTABLSHMENT OF THE CENTRAL BANK OF NIGERIA

Like the case in many countries, Commercial Banking started in Nigeria long before the Central bank was established, where as the trust commercial bank branch was established in Nigeria as far back as 1892, it was only in 1953 "6 years later" that Central bank of Nigeria was established by Central Bank of Nigeria Act of July 1959 with an authorized capital of N1.5m of which N1.25m was paid up.

Prior to the establishment of the Central bank of Nigeria, the role of a Central bank was performed by the West African Currency Board, which was established by British Government in 1912.

This body was established to perform the primary role of issuing a West African Currency in all the five countries that were British Colonies.

In the year 1952 a motion was moved in the National Assembly for the establishment of Central Bank of Nigeria. Following the insistence of Nigeria political leader on developing of Central Bank for the country, J.L. Fisher, a financial expert of the Bank of England was appointed to investigate the desirability and practicability of instituting such Bank. Fisher recommended, the establishment of an issuing bank. His recommendation was rejected.

A team of World Bank carried out another investigation in the year 1955 and recommended a State Bank of Nigeria endowed with power of Modern Central Bank. Their recommendation were not implemented.

It was the 1957 report of J.B Loynes of the Bank of England that pared way for the establishment of the Central Bank of Nigeria. The Central Bank of Nigeria Act was passed on 15^th May, 1958.

ORGANISATIONAL STRUCTURE OF THE CENTRAL BANK OF NIGERIA

A. BOARD OF DIRECTORS

It is the highest policy making organ of the Central Bank of Nigeria. The Board is presided over by the Governor of the Central Bank of Nigeria. The member are appointed by the presidency.

B. COMMITTEE OF GOVERNOR

The committee is charged with the daily administration of the Bank. It is headed by the Governor of the Central Bank of Nigeria.

Other member of the committee are: -

DEPUTY GOVERNOR - Domestic Monetary and banking

Policy

DEPUTY GOVERNOR - General Administrations

DEPUTY GOVERNOR - Domestic Operations

DEPUTY GOVERNOR - Internal Operations

DEPUTY GOVERNOR - Management Services

C. PRINCIPAL OFFICERS OF THE BANK

The major division of the Central bank of Nigeria are headed by some principals officers of the Bank referred as to as directors.

Director of Agricultural Finance

Director of Administration

Director of Research

Director of Foreign Operations

Director of Currency Operation

Director of Banking Supervision

Director of Finance and Account

Director of Banking Operation

Director of Security Services

Director of Internal Audit

Director of Personnel

Director of International Economic Relation

Director of Trade and Exchange

Director of Building and Engineering Services

Director of Computer Services

Director of Branch Operation

D. DEPARTMENT CHIEF

These are the principal officers of the bank that are referred to as Departmental Chief. They are in charge of certain operational unit of the bank.

They are:

The Chief Bank Examiner

The Chief Research officer

The Chief of Agric Credit Officers

The Chief Medical Superintendent

The Chief of Foreign Operation

E. HEAD OF AUTONOMOUS UNITS

These are the officers that report directly to the office of Governor of Central Bank of Nigeria. These officer are: -

The Deputy Director Operation and Management

The Deputy Director Legal Affairs

F. ZONAL CONTROLLERS

The Central Bank of Nigeria has some zonal officer that are under the Central Zonal Controller

Zonal Controller - Ibadan

Zonal Controller - Kano

Zonal Controller - Enugu

Zonal Controller - Bauchi

Zonal Controller - Abuja

Balance sheet of Central bank of Nigeria.

The balance sheet of the Central Bank of Nigeria is a statement showing the Asset and Liabilities of the Bank as at data:

Typical Balance Sheet of Central Bank of Nigeria

Assets N

Gold xx

CONVERTIBLE CURRENCIES

Foreign Government Securities

And Balance with Foreign Bank xx

IMF Gold Tranche x

Special Drawing Right x

Total External Reserve xxx

Federal Government Securities xx

Others Securities xx

Rediscount and Advances xx

Other Asset xx

xxx

LIABILITIES

Capital Subscribes and paid up xx

General Reserve xx

Currency in Circulation xxx

DEPOSIT

Federal Government xx

State Government xx

Banker xx

Other xx

Other Liabilities xxx

xxx

1.2 STATEMENT OF PROBLEM

In this section, the researcher focused on the prevalent

problem that has led to Central Banking and Monetary Regulation in Nigeria. These problem militating against the Central bank of Nigeria are as follow:

(A) Poor Banking function

(B) Lack of Monetary regulation and control functions

(D) Lack Debt Regulation and Control Functions

(E) Lack of other Development Functions

1.3 SCOPE OF STUDY

Ina study of this nature, one would like to accumulate data

from many areas.

But, in view of length of time allowed for this research such a wide range sample study was almost external difficult. The researcher or therefore, concentrated has field work in Enugu metropolis. The choice of Enugu metropolis was based on the time factor allowed and upon practical consideration including the fact that the researcher knows almost everything about Enugu metropolis

1.4 OBJECTIVES OF STUDY

(1) To find out the role of central banking and monetary regulation in improving Nigeria economy.

(2) To find out problem facing Central banking and monetary regulation in Nigeria.

(3) To find out the central Banking and monetary regulation's role toward protection of fund in the country.

(4) To find out whether the standard of central has fallen in recent year.

(5) To find out the effectiveness of Central banking and monetary regulation report and implantation.

1.5 LIMITATION

Besides, there were many other problem that stamped up during the

research work in which some of them are as follows: -

FINANCIAL CONSTRAINT: As a student there was not enough capital to spend in transport and fact finding and borrowing of necessary literature that would have helped in the writing of this research work.

MANAGEMENT CONSTRAINT: The respondents, especially the Zonal Controller - Enugu did not co-operate as was expected. Also the workers in the different department visited were as well reluctant in answering some of the question asked.

All this problem not withstanding did not prevent the continuation of the research work.

1.6 DEFINITION OF TERM

CBN - Central Bank of Nigeria

M2 - Quantity of Money in Circulation

Player - Securities and Exchange Commission (SEC)

Nigeria Stock exchange (NEC), Issuing Houses,

Merchant Bank, Commercial Bank and Non-Bank Financial Institution, Bureau de Changes

Money/Capital Market - Call money, Commercial

papers stabilization Security, T.B, etc.

OMO - Open Market Operation ; involves the selling

of government short team securities to public.

C.R.R - Cash reserve Requirement, CBN gives

directives to commercial and other institution to increase the amount in their deposit account.

Liquidity Ratio - The percentage of Bank deposit which

must be maintained as liquid asset in CBN

1.7 SIGNIFICANCE OF THE STUDY

The significance of the study offer relevant information about

the role of central bank in development of money market, which will turn contribute immensely to economic development.

Since we all know the central bank issue of currency, banker to other banks, banker to the government, lender of last result clearly and collection of cheques and other instrument, it becomes clearly that every individual should master the role of central bank in money market.

1.8 DEFINITION OF TERM

Central Bank: It is the apex financial institution which

manages in the cost of money, the volume of money available within he economy, the direction of money and credit how in the same economy with a view to realize the designed monetary and credit objectives.