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.