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

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:   

1. 1. Reduction in the level of unemployment

1. 1. Reduction in the level of inflation

1. 1. The enhancement of rapid economic growth and economic development

1. 1. 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.