Functions of central bank of Nigeria and the objectives of the cbn in the country.
The central bank of Nigeria cbn was created by ordinance of 1958 and it opened its doors for operation on 1st July 1959. CBN today has branches and currency centers operating in various states capital with its head office at Abuja.
Objectives of the Central Bank of Nigeria(CBN)
1. To issue legal currency in Nigeria
2. To maintain the reserves and international value of the currency.
3. To promote monetary stability and sound financial structure for the country.
4. To act as banker and adviser to both the commercial banks and the federal Government.
5. The cbn act as an agent to the federal government.
All these objectives of the central bank of nigeria are very important to the development of the country’s economy.
Functions of the Central Bank of Nigeria
- To issue notes i the country
- To manage the national debt
- To discount bill to the deposit bank houses and other financial institutions
- To manage the exchange equalization account that is a administrator to the exchange control regulations that might be in force.
- To supervise the entire banking system
- To promo economic growth in the country
- Tonywrap.com act as lender and last resort.
The central bank of nigeria acts as Banker to other banks.
The banks promote confidence in the system through its activities as banks to other banks within and outside Nigeria. They may seek the cooperation of other banks in pursuit of this objective [CBN decree No 24 of 1991. Sections 37 and 38 ].
The purpose is for the bank to promote and sustain reasonable banking services for the public and to ensure a high standard of conduct and professionalism in the banking activities.
The CBN as banker to other issues directives on cash reserve and liquidity rations, prudential requirement and on other activities of the banks.
This is done through its monetary policy circular, which is issued at the beginning of each fiscal year. Sanctions are usually imposed on banks for non-compliance with monetary guidelines.
The CBN also determining interest rates: This is one of the fundamental roles of the central bank in controlling the Nigerian economy.
At the MPC meeting,a rate is agreed at and later made use of by all banks.The rate is called the Monetary policy rate (MPR).
This rate forms the benchmark upon which commercial banks will build on to arrive at the interest rates they charge on their products.MPR at the last meeting of the central bank was agreed at 11%.
(6) promoting sound financial environment and monetary policy: By this we mean the central bank must ensure there are no bottlenecks in the system that will not allow the sector run smoothly.
The central bank ensures there is sanity on the financial system and protection for all stakeholders like bank customers from exploitation and other charges,shareholders etc.
Try to imagine banks operating without ghe existence of the central bank.We might all wake up one day to find our investment is gone.monetary policy can be described as a policy tool used to actualize macro economic objectives.
Monetary policy, put another way is a combination of measures used to regulate the value, availability, and cost of credit which will in turn influence the volume or quantity of money supply. This is a key role the central bank performs as it affects the general level of prices.