The Role Of Central Bank Of Nigeria In The Development Of Nigeria Financial Sector

Project and Seminar material for Banking and Finance

The Role Of Central Bank Of Nigeria In The Development Of Nigeria Financial Sector


Abstract


The Central Bank of Nigeria through its various regulatory, prudential and contingency measures has continued to contribute the development of financial sector and the economy.

The establishment of Central Bank of Nigeria (CBN), has been of great help in providing solutions, to problems facing financial institution, industries and the general public.

And the purpose and objective of this study is to investigate and report on the role of Central Bank of Nigeria in development of financial sector. Meanwhile, this research work will be made up of five chapters.

Chapter one will discussing the introduction, General overview of the study, statement of problems, its objective, scope and limitation, statement of hypothesis and significance of the research.

Chapter two, will take a detail look of various literature review relating to the topic with subheadings. Furthermore, chapter three will be discussing research methodology, sources of data collection sampling procedure, method of data collection and data analysis techniques.

Chapter four presentation and analysis of data

Finally, chapter five will summaries all the research findings, drawn conclusion and also make recommendation. Bibliography and appendix shall be attached to this project work and these chapters will be discussed in details in the previous chapter.


Table Of Contents


Preliminary Page(s)

  • Title page
  • Approval page
  • Dedication
  • Acknowledgment
  • Abstract
  • Table of Contents

Chapter One

1.0 Introduction

  • 1.1 General Overview of the Study
  • 1.2 Statement of the Problems
  • 1.3 Objective of the Study
  • 1.4 Statement of Hypothesis
  • 1.5 Significance of Study
  • 1.6 Scope of Study
  • 1.7 Limitation of the Study
  • 1.8 Definition of Terms.

Chapter Two

2.0 Literature Review

  • 2.1 The Evolution of Central Bank of Nigeria
  • 2.2 The Structure and Working of Central Bank of Nigeria
  • 2.3 An Overview of Nigeria Financial Sector
  • 2.4 The Function of Central Bank of Nigeria
  • 2.5 The Role of Central Bank of Nigeria in the development of Nigeria Financial Sector
  • 2.6 Problems Faced by Central Bank of Nigeria in the Development of Financial Sector
  • 2.7 Importance of Central Bank Role on Financial Sector

Chapter Three

3.0 Research Methodology

  • 3.1 Sources of Data Collection
  • 3.2 Samples Procedure
  • 3.3 Method of Data Collection
  • 3.4 Data Analysis Techniques

Chapter Four

4.0 Data Presentation, Analysis & Interpretation

  • 4.1 Data Presentation
  • 4.2 Analysis of Data
  • 4.3 Testing of Hypothesis

Chapter Five

5.0 Summary, Conclusion & Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendation
  • Bibliography
  • Appendix

Chapter One


1.0 Introduction

1.1 General Overview Of The Study

The background to the establishment of the Central Bank of Nigeria (CBN) lies in the characteristics and deficiencies of the monetary system, which preceded it. This was the currency board system. The West Africa current Board (WACB) was established in November 1912 following the recommendation of the Emott committee. And because of the deficiencies and demerits of the board there was an urgent need for the established of an institution in the nature of the a Central Bank of Nigeria (CBN).

The nationalists mounted pressure on the colonial government and as a result, the patron commission, was set up by the colonial government in 1952. And upon the report of the commission, the first banking legislation in Nigeria was passed in 1952 known as the Banking Ordinance 1952.

The motion for the establishment of Central Bank of Nigeria (CBN) was defeated initially but the call could not be totally ignored. Thus Mr. J. L. Fisher of the Bank of England, 1953 to inquire into the desirability and practicability of establishing a Central Bank of Nigeria (CBN and his report was not feasible to established a Central Bank.

Meanwhile as Mr. Fisher was reporting the world mission visited Nigeria in 1953. They also examined the desirability and practicability of establishing a Central Bank of Nigeria (CBN. But recommended the establishment of a state bank. However, in 1957, Nigeria gained an internal autonomy backed by the report of the world bank mission on the subject, the federation government appointed a commission headed by the Mr. J. B. Loynes, again of the Bank of England in 1957, to make recommendations in the establishment of Central Bank of Nigeria (CBN), the introduction of Nigeria currency and other associated matters.

It recommendation culminated in the establishment of CBN on march, 17th, 1958 by the Central Bank of Nigeria (CBN ordinance of the year. The bank came into existence and started operation fully on 1st July, 1959, thus anticipating the date of October 1st, 1960. Today Nigeria has a Central Bank with about seven branches and seven currency centers.

The Structure Of Central Bank Of Nigeria

The board of directors is at the Apex of the Central bank, the actual operation are the responsibility of the excessive directors and through them the department director. The board consist of a governor, a deputy government and nine other directors, three of whom are executive directors. The governors and deputy governor are appointed, by the head of the Federal Government while in office, these two officials of the bank cannot engage in other services expect those specified by the federal government. The directors are persons, of recognized standing and experience in affairs of monetary management. they are also appointed by head of the federal government.

Financial Sector

A financial sector is a composition of various institutions, markets, instrument and operators that interact within an economy to provide financial service. It can also been seen in the content of sets of rules and regulation and heap of financial arrangements within the financial sector.
In Nigeria, the financial sector has undergone remarkable changes in terms of ownership structure the depth and breath of instrument employed, the number of institutions established, the economic environment and the regulatory framework within which the sector operators. The Nigeria financial sector has also witnessed remarkable evolution over the past two decoder.


1.2 Statement Of Problems

The essence of this study is to known how Central Bank of Nigeria (CBN) role contributes to the development of Nigeria financial sector. And it is evident that Central Bank of Nigeria (CBN) encounter a lot of problems trying to carryout this role. Among those problems are as follows.

  1. One of the fallings of Central Bank of Nigeria (CBN) is their inability to guide against unethical actions of commercial banks in the areas of money laundering, Interbank force exchange, fraud;
  2. The Central Bank of Nigeria (CBN) inability to curb the current rising inflationary rate in the country
  3. Its lack of effective regulatory measures has led to high lending rate imposed by commercial banks on their customer
  4. It also lack the capacity to effectively execute government economic policies
  5. Inability of Central Bank of Nigeria (CBN) to monitor the skyrocketing foreign exchange rate in the country
  6. Central Bank of Nigeria (CBN) has been unable to promote the need saving culture among Nigerian which could have helped the nations capital base.

1.3 Objective Of Study

The purpose of this study is ascertain the role Central Bank of Nigeria (CBN) plays to develop Nigeria Financial Sector. And this research will be conducted under the following objectives.

  1. To determine the effect of Central Bank of Nigeria (CBN) role in the development of Nigeria finaical sector
  2. To ascertain the relationship between the role of Central Bank of Nigeria (CBN) and financial sector
  3. To examine the extent to which Central Bank of Nigeria (CBN) role contributed to the development of Nigeria Financial Sector
  4. To evaluate how financial sector comply to Central Bank of Nigeria (CBN) regulatory guideline in Nigeria

1.4 Statement Of Hypothesis

Hi: financial sector compliance with the central bank of Nigeria (CBN) policy guidelines leads to financial sector stability.

H2: Financial sector are required to maintain certain minimum reserve requirement with CBN in order to control liquidity.


1.5 Significance Of Study

The research work will serve as a valuable contribute to knowledge and will also be of particular importance to the student of banking and finance, Accountancy and other related course and will serve as a source of useful reference for future researchers.

Secondly, the study will be great significance to as it will encourage Nigeria populace to embrace saving culture.

Again, this study will also encourage foreign investors to invest in Nigeria. thus, by creating an enabling environment or policies for investment and above all the facilitation of good conducts of monitory and fiscal for ensuring macro economic stability and stable governance.

Furthermore, this study will help to restructure the business cycle to enhance its effectiveness, efficiency and productivity. Finally the study will reveal the current problems confronting efficient rate of Central Bank of Nigeria (CBN) in developing our financial sector.


1.6 Scope Of Study

This research work shall cover the role of Central Bank of Nigeria (CBN) to the development of financial sector with more emphasis on baking industry.


1.7 Limitations Of The Study

The re search work could not come to time light without the researcher encountering a lot of limiting factors ranging from finance, dearth of relevant reference text, time.

Finance

This research was conducted with the limited resource of the researcher, lack of fund coupled, with the economic condition and inflationary trend in our country today, has resulted to high cost of completing research work.

Dearth Of Relevant Reference Test

I think it is not an overstatements for one to say that scarcity of relevant reading materials, is a social ill, thus disturbing the fabric of education in our country today. The issue of dearth of relevant rending materials is more with reference to text in Banking and Finance, where only the out dated ones exit.

Time

The time available for the student to carryout the research is listed. This limited normal semester work which are pursed concurrently.


1.5 Definition Of Terms

Money Market

The money market is a market where money is sold and bought for a short – term period

Capital Market

The capital market refers to the mobilization of medium and long term funds from surplus unit to the economy

Foreign Exchange Marketing

It is a market where foreign currencies are bought and sold

Financial Sector Surveillance

This is a situation when central bank of Nigeria carriers out close observation of financial sector

Federal Ministry Of Finance (FMF)

The federal ministry of financial in responsible for licensing bureaus de change an regulation of insurance companies.

Security Exchange Commission (SEC)

The Security and exchange commission is an apex regulatory organ of the capital market.

Federal Mortgage Bank Of Nigeria (FMBN)

The federal mortgage bank of Nigeria is the apex regulatory body of mortgage institutions

Nigeria Bank For Commerce And Industry (NBCI).

Nigeria Bank For Commerce And Industry grant loans to small and medium scale enterprises

Nigeria Agriculture & Cooperative Bank (NACB)

Nigeria Agriculture And Cooperative Bank responsible assisting the agricultural sector

Nigeria Deposit Insurance Cooperation (NDIC)

Nigeria Deposit Insurance Cooperation is responsible for providing deposit insurance and other related service for banks

Nigeria Industrial Development Bank (NIDB)

Nigeria Industrial Development Bank is responsible in developing industrial sector

People Bank Of Nigeria (PBN)

This bank helps to provide easy credit facilities to the down trodden masses who have no access to conventional financial institutions.

Central Bank Of Nigeria (CBN)

The Central Bank of Nigeria is the apex of financial institutions, they supervise and regulate the activities of all other financial institutions.

Liabilities

Liabilities are referred to as the amount of money a company owes.

Financial Sector

Is a composition of various institutions, markets, instruments operators that interact within an economy to provide financial service.

Efficient Payment System

It underlies the optimal utilization of resources, enhances implementation of monetary policies and maintains monetary stability.

Liquidity Management

This is the method of handling funds that have not yet been converted to cash.

Capital

It could be defined as the money or fund used to start a business

Assets

Assets are instruments owned by companies especially properties that can be sold to settle debt.


Chapter Five


Summary, Conclusion And Recommendation

In this chapter, the research would make summary of findings discussed in the proceeding chapter draw conclusion and also make recommendations.

5.1 Summary

The Role of Central Bank of Nigeria (CBN) in the development of Nigeria Financial Sector can not be overemphasized.

This research has been able to discuss briefly the history of CBN, it organizational structures, the role of CBN in the development of financial sector of course is the project topic.

However, this study reviewed various literature relating to the topic. The chi – square method was used to carryout the test of hypothesis to analysis in some of the questionnaire distributed.

Furthermore my findings during the course of this research revealed that CBN as the apex of all financial sector is pivotal in the management of the national economy. It role is not only to regulate and monitor the financial distress which could undermine confidence in the system as ell as facilities sustained growth. From all indication it can be seen from the findings that CBN has been working hard to provide a good conducive atmosphere for financial sector operations.


5.2 Conclusion

Based, the findings on this study the researcher wishes to concluded that Central Bank of Nigeria (CBN) has contributed greatly to the development financial sector. Thus the task of maintaining a sound and competitive financial system is an arduous one, the CBN has also taken proactive steps to strengthen the financial sector through various regulatory, prudential and contingency measure aimed at ensuring the soundness and stability of the sector.

In this regard, the bank has designed measures to enhance the capital bank of banks and promote. Professionalism in the financial service industry, it also encouraged the adoption of international best practices, including the new Basle capital accord and uniform according standards.

The CBN is also at the forefront in promotion good corporate governance in Nigeria financial system.

Furthermore, the CBN introduced the contingency framework for systemic bank. Distress which provides early warning signals on the health of deposit money banks and stipulates measure to be adopted in dealing with individual bank problems so as to avert contagion.

However, the CBN remains committee to nurturing a more competitive and efficient financial environment through it policy initiatives and surveillance activities.


5.3 Recommendation

Based on the research findings the following recommendation has been put forward.

  1. The Central Bank of Nigeria (CBN) should mobilized excess liquidity by expanding banking industry towards economic development
  2. The CBN should intensify its efforts at promoting confidence in the financial sector and stimulate output and employment and growth.
  3. Effective Regulatory /Supervisory Oversight
    The CBN should ensure that adequate regulatory and prudential guidelines are maintained for effective monitoring of the activities of financial institution.
  4. Undue interference in the affairs of bank could lead to distress. CBN should take necessary step to address the problems of political interference which is one of the most common sources of distortion in financial business because such interference contributes to financial sector instability;
  5. The enthronement of appropriate management is necessary for the provision of effective in the day – to – day running of the institution because, it has been observed that weak management is one the factors that causes distress in Nigeria financial sector.
  6. The observed delays in judicial process have the potential of engendering unhealthy speculations and uncertainties, which could adversely affect public confidence and stability of the financial system. So there is the need for the legal process to be reinforced in order to complement the efforts of the regulatory authorities in tacking the problems facing the sector effectively.
  7. The CBN should also take active step the modernize and standardize the operations of the financial Β sector in orderΒ  to achieve the desired efficiency.

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