EFFECTIVENESS OF CREDIT GUIDELINES AS AN INSTRUMENT OF MONETARY POLICY IN NIGERIA

ABSTRACT: The credit guidelines are those monetary policy instruments used by the monetary authorities particularly the Central Bank to influence the supply, allocation and cost of credit with view to attaining specific macro-economic objectives in the country. It is a deliberate measures aimed at controlling the qualitative supply of money. Some of the goals are directed towards steering and maintaining the economy at its full potential output to attain full employment, to achieve a balance of payment equilibrium and to moderate inflationary pressures. The objectives of the study includes the examination of credit guidelines, to identify factors militating against the realization of the guidelines, to evaluate the Central Bank’s method of compliances, to identify areas of frictions (if any) between the CBN and the government and to make recommendation for the effective improvement of the policy guidelines.   Using the correlation analysts and chi-square distribution, four hypothesis listed below were tested.

1. The effectiveness of monetary and credit policy in credit guidelines in Nigeria economy
2. CBN is autonomous in the real sense of it.
3. Some banks violate some of the guidelines in preference to paying fines.
4. CBN encounter problems while ensuring compliances by banks and other financial institutions.

Source of data used included primary and secondary sources. Primary data involved interviews and use of questionnaires while the secondary data were sourced from the CBN library, literature in the field of economics, banking and finance.

Recommendation and conclusion were based on find lasting solution to improve the operation of the credit guidelines in Nigeria.

LIST OF TABLE

1. Banking System Credit to the Economy (1993 – 2000)
2. Sectoral Allocation of Commercial Banks Loan and Advances (1993 – 2000)
3. Money Supply in Nigeria (1993 – 2000)
4. Price Stability (1993 – 2000)
5. Economic Growth (1993 – 2000)
6. Nigeria Balance of Payment Positions (1993 – 2000)

TABLE OF CONTENTS

CHAPTER ONE

INTRODUCTION                                                                 1

1. Background of Study                                                     1
2. Statement of the Study                                                  3
3. Objectives of the Study                                                  4
4. Significance of the Study                                                        5
5. Statement of Hypothesis                                                         5
6. Scope and Limitation                                                     6
7. Definition of Terms                                                       7

CHAPTER TWO

Review of related literature12

1. Literature Review                                                          12
2. Objectives of Credit Guidelines Policy                           16
3. Instrument of Credit Guidelines                                     20
4. The Credit Guidelines Historical Perspective                          22
5. Banking System Credit to the Economy                        28
6. Sectoral Allocation of Commercial

Banks Loan and Advances                                            29

1. Money Supply in Nigeria                                                        31
2. Price Stability                                                                32
3. Economic Growth                                                                   33
4. Balance of Payment                                                       35
5. The Financial Institution, the CBN

and Some of their Operations                                        36

1. Analysis of the 2000 Credit and

Monetary Policy Instruments                                        42

CHAPTER THREE

RESEARCH DESIGN AND METHODOLOGY                47

1. Source of Data                                                               47
2. Questionnaire Design                                                     48
3. Method of Investigation                                                 49
4. Sampling Population and Sample Size                                    49
5. Determination of Sample Size                                       49
6. Method of Questionnaire Distribution                                    51

CHAPTER FOUR

DATA ANALYSIS                                                               

1. Data Presentation and Analysis

PAYMENT