The Role Of The Central Bank Of Nigeria In The Development Of Money Market

THE ROLE OF THE CENTRAL BANK OF NIGERIA IN THE DEVELOPMENT OF MONEY MARKET

Abstract

The central bank of Nigeria’s role in the growth of the money market will be examined in this research project. The difficulties the bank has implementing government programs will also be covered. It is impossible to overstate the Central Bank of Nigeria’s contribution to the growth of the Nigerian economy. The nation’s economy is reflected in the central bank, which serves as the lender of last resort and the bankers’ bank. Through a field survey of the CBN account department workers, the study used primary data. However, the purpose of the oral interviews was to further gather the same information that the questionnaire was unable to reveal. The researcher relied on the records and documents that the chiefs of the accounting and internal audit departments had made available to them. Libraries, source materials, newspapers, and other sources that are pertinent to the inquiry could be used to gather secondary data. The need for and implications of CNB in assuring monetary expansion in the economy and the efficient operation of the money market have been made clear to the researcher.

Chapiter 1

Introduction

1.1 Historical Context

Due to the complexity and limitations of the monetary system, Nigeria’s central bank was founded. A central bank institution in west Africa currency board was established to finance the need of the expert trade of repatriate fixing in west Africa with the goal of issuing a spade convertibility a currency providing team whereby the colonial government might issue the currency in this case, as the development of indigenous banking and growth in the financial mechanism would not be achieved without its help. No room existed for monitoring management.

Professor W.C. Uzoaga said in his book “Money and Banking in Nigeria” published in 1976 that the system was institutionally and operationally constrained, leaving the board with no authority to communicate or carry out monetary policy. As a result, the West African Currency Board had no discretion over the total amount of money and refused to carry out any financial functions. It also did nothing to teach African institutions. The result was that the nation’s banking culture never really took off. Demand deposits made up less than half the value of the currency, with government organizations holding nearly half of the deposits made for the domestic market. Banking was also important because the majority of the deposits were made by people from Europe and European businesses. Since it wisely invested all of its resources in beginning overseas, no local investments were made.

In order to create legal lender currency in Nigeria, maintain external reserves, protect the currency’s value abroad, and advance monetary stability and a sound financial system in Nigeria, the central bank of Nigeria was eventually founded by CBN decree in 1958. to serve as bankers and to provide the federal government with financial guidance.

The Nigerian central bank created the Nigerian currency, according to Professor E.C. Nwankwo (1989), in his work titled “Nigeria Financial System,” to help the government make up for its revenue shortfall. Due to the market and global glut during this time, the government has been experiencing growing shortfalls in revenue.

1.2 Outline Of The Problems

Professor G.O. Nwankwo (1989) claimed in his book “Nigeria Financial System” that the Central Bank of Nigeria’s primary responsibility was the expansion of the Nigerian money market. The issue being investigated here is how well the Bank of Nigeria has played its part in establishing the money market, which is often shown by the availability of suitable investments such as cash call money, treasury, etc.

1.3 Study’s Objective

With a view to implementing those projects that will support the establishment of a highly organized money market in Nigeria, the project aims to provide the following solutions to the central bank of Nigeria through the government.

1.4 Research hypothesis

1. H0: CBN does not make central bank credit provisions

nearly every banking institution.

The H1 CBN makes central bank credits available to

nearly all financial institutions.

2. H0 The money market amnesty is independent from

Central doesn’t have any financial goals.

H1: The central bank’s money market amnesty

intended to be used for financial purposes only.

3. H0: The CBN does not truly support monetary policy.

Nigeria has stability and a robust financial system.

H1: The CBN actively encourages financial stability and a

Nigeria has a sound financial system.

4. H0: The credit system is not well-implemented.

the CBN’s tool in commercial banks.

H1: The execution of credit is weak.

CBN’s tool in commercial banks.

1.5 Relationship To Other Studies

The importance of the study provides pertinent information on the part played by the central bank in the growth of the money market, which makes a significant contribution to economic growth.

1.6 Term Definitions

In order to achieve the intended monetary and credit objectives, the central bank manages the cost of money, the amount of money accessible in the economy, and the direction in which money and credit follow one another.

b. Commercial Bank: A commercial bank is a business that accepts cash, near-cash assets, and other forms of credit. It also uses its money market institutions to make payments on demand.

There are financial institutions that offer discounts.

pays the face value of a bill to the holder of that bill upon meaningful consideration.

Money Market: This is the system by which

Money lenders and borrowers get into a short-term contractual arrangement.

e. Long-term capital is traded on the capital market.

It gives investors the chance to borrow and lend money for medium to lengthy periods of time.

f. Stock Market Exchange: This is a market that

makes it easier to acquire and sell securities such as shares, bonds, and debentures.

G. Call-Me-Back: This setup allows for the

Commercial banks frequently or urgently borrow money from one another.

Treasury Certificates: These certificates are utilized for

Government borrowing money from the money market for periods of between one and two years.