APPRAISING THE MONETARY POLICY OF THE CENTRAL BANK OF NIGERIA ON COMMERCIAL BANKS IN NIGERIA. (A CASE STUDY OF WEMA BANK PLC.)

ABSTRACT

This project appraised the monetary policy of the Central Bank on the commercial banks Nigeria. Part of the statutory power of the Central Bank of Nigeria is to conduct the activities of commercial bank in other to sustain a verily economy. However, when monetary policy be implemented, the external reserves will maintained safeguard the international value of the currency and promotes stable exchange rate. The monetary instruments which the Central Bank of Nigeria used to achieve these objectives are open market operation, moral suasion, reserve requirement, special deposit, bank rate etc. which subsequently have a positive impact on the economy. To authenticate the statement of fact that the Central bank play an important role in the economy through the implementation of monetary policy, a well structured questionnaire was presented at Wema Bank Plc. The method of statistical analysis used in chi-square in conclusion, this project appraises the role of the Central Bank of Nigeria on commercial banks in Nigeria through a well implemented monetary policy with turn-over on liquidity channel, credit channel, exchange rate mechanism etc.    

TABLE OF CONTENT 

Title page                                                                                                        i

Certification                                                                                                    ii

Dedication                                                                                                      iii

Acknowledgement                                                                                          iv        

Abstract                                                                                                          v

Table of content                                                                                              vi

CHAPTER ONE

1.1       Introduction                                                                                        1

1.2       Statement of problem                                                                         2

1.3       Purpose of the study                                                                           3

1.4       Significant of the study                                                                      3

1.5       Scope of the study                                                                              3

1.6       Definition of terms                                                                             4- 5

CHAPTER TWO

2.0       Literature review                                                                                 6

2.1       The Nigeria Financial System                                                             6 - 7

2.2       Composition and Regulation of Nigeria Financial System            7 -8

2.3       The Regulation of the Financial System                                          8-10

2.3.1    Distress in Banking                                                                             11

2.3.2    Causes of Bank Distress                                                                     11

2.4       The Historical Background and the Establishment of

Central Bank of Nigeria                                                                      11

2.5       Traditional and Development Function of Central

Bank of Nigeria                                                                              11 - 16

2.6       Responsibilities of Central Bank of Nigeria                                       16

2.6.1    Problem Confronting Central Bank of Nigeria in the

 Management of Nigeria Economy.                                                    16

2.7       Monetary Policy Formulation and Implementation                 17 - 19

2.8       Objectives of Monetary Policy                                                     19 – 20

2.9       Instruments of Monetary and Credit Policy Measure in Nigeria   20

CHAPTER THREE

3.0       Research methodology                                                                   21

3.1       Unit of Study                                                                                     21       

3.2       Research Instrument and Collection                                           21       

3.3       Data Preparation and Organization                                            21 -22 

3.4       Limitation of the Study                                                                  22

3.5       Analysis of data                                                                                 

CHAPTER FOUR

4.0       Data Analysis, Presentation and Interpretation                              23

4.1       Administration of Questionnaire                                                        23

4.2       Testing of Hypothesis                                                                    23 -24

CHAPTER FIVE

5.0       Summary, Conclusion and Recommendation                              27

5.1       Summary                                                                                             27       

5.2       Recommendation                                                                         28 - 29

5.3       Conclusion                                                                                          29

            Reference                                                                                            30

            Questionnaire 

CHAPTER ONE

1.1       INTRODUCTION

Managing an economy entails articulating well meaning strategies and devising various polices and measures that ensure efficient utilization of nation’s resources with a view to promoting economics growth and employment and maintain domestic and external sector stability.

The role of the monetary on financial sector in promoting the rapid development of the sector of the economy cannot be over-emphasized. Central Bank of Nigeria is the apex of the economy’s financial system, shoulders increasing responsibility in development not only a sound monetary and financial system, but also actively advancing the development objective of the Federal Government. The Central Bank of Nigeria has nurtured the financial institutions, promoted the money and capital markets and improved the payment system.      

1.2       STATEMENT OF PROBLEM

In the conduct of monetary management, however, the Central bank of Nigeria faces some challenges which include government fiscal operation over which the bank has no control. The problem of excess liquidity and excessive expansion of bank credit, and inadequate financial infrastructure in the adoption of indirect approach (market based tools) of monetary control.

The issues of above become problems because the implementation of monetary policy has failed to tackle the objective it is often used and those objectives are:    

i.                    Reduction in the level of unemployment

ii.                  Reduction in the level of inflation

iii.       The enhancement of rapid economic growth and economic development

iv.                Increase in industrialization

The Central Bank of Nigeria is therefore set up to coordinate and supervise Federal Government monetary policy. 

1.3       PURPOSE OF THE STUDY

The purpose of this study, therefore is to highlight the contribution of the Central Bank of Nigeria in the management of a economy in term of the performance of its functions with emphasis on it’s monetary management role. 

To examine how successful is the Federal Government and Central Bank of Nigeria, is doing in their bids to control money in the economy. Must especially to check credit creation of commercial banks.

In addition, it is the aim of this study to point out, how these polices been adhere to by financial institutions such as commercial banks, merchant banks and non-banking institutions. S

Furthermore, it is the aim of the study to identify the process involved in the formulation and implementation of these policies.        

1.4       SIGNIFICANT OF THE STUDY

It is against this backdrop that a deliberate research effort in the Nigeria macro-economic environment has become very relevant.

It is hoped that the research findings will provide valuable guide to the managers of the Nigeria economy regarding the application of the relevant policy measures for more effective and greater result. It is hoped that the research findings will be relevant to the following sub-sector of the economy.

Federal Government: It will be benefits to the Federal Government if an appropriate policy is put in place towards achieving the desire result. This is the desire to check mate the rate of inflation in the economy through various monetary policy.

Banking Sector: The research finding is of importance to the banking sector to adjust the level of efficiency in banking operation bearing in mind the development role expected of the sector in the move to correct all imbalances with in the nations economic system. the sector will also benefit through the provision of information and data from the research work.

Public Sector: The research findings would be of benefit to this sector by allowing a review into the operation of the sector. As efficient utilization of various instruments of the policy would bring improved economy changed with high level performance and hence, increase in productivity within the sector with resultant effect of improved standard of living for the entire populace.

Private Sector: The fining where well utilized will bring about  efficient implementation of the various policies tools and would come inform of adjusted price of raw materials for production. Leading to over all reduction in the cost of production. Leading to over all reduction in the cost of production through elimination of or reduction in the inflationary rate would eventually result in efficient utilization of the resources in the private sector and this would bring about improved economy.

1.5       THE SCOPE OF THE STUDY

The write-up restricted to describe in general the Nigeria financial system with special emphasis on Central Bank of Nigeria.

The study reveals the historical background of the Central Bank of Nigeria and its establishment and more importantly the concept of the Central Bank of Nigeria. It also shows the definition of the Central bank of Nigeria, not only that, it’s objectives and functions with responsibility. The Central Bank of Nigeria present predicament was discussed and special recommendations in minimizing and or eliminating these problems was shown.

1.6       DEFINITION OF TERMS

It will be importance to define some key worlds in this project for the benefit of non-financial student who might need to read this project for a purpose and in ability to have a clear meaning of some of the following words may be incapacitated to make any meaningful decision.

Monetary Policy: These are policies usually exercised by the Central Bank on behalf of the Federal Government. They have as their targets, the quantity of money in the economy, the cost and direction of credits.

Central Bank of Nigeria: Is the government banker, receiving and holding revenue collected on behalf of the federal government. It holds the government banking business both internally and externally, it holds the balance or reserve of other commercial banks.  

Fiscal Policy: These are government policies that are normally affected through manipulation of government revenue and expenditure. They are basically in the nature of tabulation, government expenditure, direct government investment, subsidy etc.    

Bank Rate: It is the rate which the Central Bank lends money to banks, discount houses and other financial institutions and since their lending is usually through rediscounting of bills, the bank rate is also called the re-discount rate.

Open Market Operation: It means the buying and selling of government bonds, treasury bills and other securities in the open market (i.e. to individuals, commercial banks, and other interested institution)

Treasury Bills: Is the main operational instrument of open market operation, it is gilf-edge security with higher degree of safety which make it attractive to investors. It also enjoys trustee and liquidity status.  

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