THE ROLE OF CENTRAL BANK OF NIGERIA IN THE DEVELOPMENT OF NIGERIA ECONOMY (A case study of Central Bank of Nigeria, Kaduna Branch)
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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 THE ROLE OF CENTRAL BANK OF NIGERIA IN THE DEVELOPMENT OF
NIGERIA ECONOMY
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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.
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.
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