CHAPTER ONE
- INTRODUCTION
The central bank is the only financial institution established and charged with the day to day management and control of the nation’s monetary affairs, the supervisor and co-ordination of banking and financial activities of the country. Ever country has only one central bank whose motive is not to make profitable but to carry out the major financial operations of the central government of a country. In the world, the central bank stands at the apex of every country’s financial system, acts as the only issuer of the country’s legal currency, and acts as the government representative in the banking industry. However, in West Africa before independent, the West African Currency Board was the highest financial institution established by the Colonial masters in various parts of the British Colonial empire to act as a quasi-central bank. This board was meant to control the issue of currency in the member countries and to keep currencies of West African Nations at per (Standard) with the pound sterling. But the operation of this board especially the money supply function was too rigid and inelastic to allow for fast economic development of the countries concerned. Also, it made the provision additional currency unreasonable burden some for the colonial territory and this situations clearly called for the establishment of the central bank to hasten economic growth and to play the role of promoting economic development and capital formation, and ensure the ger mination of growth of the vital institutions and practice that encourage savings mobilization. With the dissolution of the West African Currency Board (WACB) and the submission of report by Mr. T.B Loynis in August 1957, the central bank of Nigeria (CBN) was established in 1958 as a state bank that undertakes the major financial operation of the government.
The (CBN) promotes the development of the monetary and financial mechanism appropriate to Nigeria’s need, issues and centrals the Nigerian currency, acts as the Federal Government Agent by Managing the public dept and floating short and long term credits, and opening a local channel of investment for the commercial banks. Also, it plays the role of controlling banks by directing their credit facilities to suit the economy. This role is achieved throught the credit guideline of the central bank.
- BACKGROUND OF THE STUDY
The background of the study is concerned on the operations of the central bank and its impact in the economic development of Nigeria. The central bank is considered as the apex bank and head of the country’s banking system.
It is owned by the government which appoints its board of directors and its governor. In comparison, the central bank of Nigeria can be compared with the bank of England which is the apex bank or the Federal Reserve System that undertakes central banking in the United States. The central bank of Nigeria performs the function of carrying out the country’s monetary policy. In order to perform this function, the (CBN) must work closely with the state and have some means of influencing the credit policy of the commercial banks.
Moreover, the (CBN) does not aim at making profit for itself nor to compete against the commercial banks in the state for ordinary banking business, but to supply cash required by commercial banks and to assist in the clearing of cheques.
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