Functions of CBN in Nigeria
The Central Bank of Nigeria is the main institution that deals with distribution of currency within the country. It`s very important to know its functions! That`s why we`ve prepared top 10 functions of CBN in Nigeria for you! Continue reading to know more!
Top 10 functions of a Central Bank of Nigeria
1. Currency Monopoly and Distribution
Nigerian economic transactions are mostly cash oriented. One of the main CBN functions involves the safeness of the custody of stocks, currency distribution, currency issue, regular supply of currency and economic activities.
What is a Central Bank of Nigeria? It`s the only institution that can issue currency in Nigeria. No other bank or legal entity can print banknotes. The bank also sets the banknotes` nominal values. It uses top security devices to print banknotes and create designs difficult to copy.
No other bank or legal entity can issue currency in Nigeria. The highest banknote in Nigeria today is N1000.
2. Banker of Other Banks
This Bank promotes confidence through its activities. The Central Bank of Nigeria can also seek for the cooperation with other banks. It includes the cooperation with international banks and bank services.
The functions of CBN includes the ability to issue directives on the cash reserve. It also provides monetary guidelines for other banks in Nigeria. The banks will face sanctions if they fail to comply with the CBN monetary guidelines. It helps to sustain a reasonable financial system in Nigeria.
3. Banker to The Government
The CBN undertakes most of the Federal Government banking businesses on the international and domestic arenas. The bank also acts as a banker to the Federal Government institutions. It provides banking services to the local governments and states.
Still, new directives from the Government can change that. These new directives transfer the Government`s funds to the commercial banks. The CBN also mobilizes funds for the Federal Government. The bank is the instrument for the Government development stock.
4. Domestic Debt Management
The CBN has a function which involves advising the Federal Government about the size of the national debt. This function also includes:
- Advertising for public subscriptions;
- Providing information about timing of a new debt instrument;
- Redeeming matured stocks;
- Payment of Interest;
- Providing information about budget deficit.
However, fiscal deficits have become bigger for the last few years.
5. External Debt Management
The CBN monitors external debts of the country. The CBN chairman is personally responsible for short-term trade debts. The CBN also takes responsibility for informing the Federal Government about the external debt. According to the statistics, the international debts of Nigeria keep decreasing. Despite the recession in the last two years, Nigeria managed to pay back about $2 billion to the international banks.
The President`s policy also targets potential debts of international banks to Nigeria. Muhammadu Bihari`s government consistently requests the foreign banks to return stolen money to Nigeria.
6. Promotion of Monetary Stability
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One of the main functions of CBN is providing the monetary stability. The existence of this function helps Nigerians to keep prices stable. The promotion of monetary stability includes the price stability.
It guarantees that prices are of store value, units of accounts, different payments and medium exchange. The effective monetary policy ensures stable development of prices in Nigeria. It also leads to the stability in households and families.
7. Foreign Exchange Management
Due to the recent downfalls of Naira, it has become the most crucial function of the Central Bank of Nigeria. Exchange management includes following tasks:
- Reduce of destabilizing short-term cash flows;
- Monitoring of scarce foreign exchange;
- Ensure foreign exchange utilization according to the economic priorities of the country;
- Foreign exchange disbursement.
This CBS function is the most questionable amongst Nigerians.
8. Promotion of The Financial Market Growth
One of the main functions of the CBN in Nigeria is the promotion of the financial markets. These money markets can mobilize short-term and long-term funds. The financial markets are also very controversial in Nigeria.
9. Promotion to Entertain Public Complaints
The Central Bank of Nigeria serves as a judge between Nigerian banks and their clients. It also regulates relationships between banks. The bank has a public complaint desk in the head office and its every branch.
If banks are found to be unfair with customers, the CBN can start investigations towards these banks. If the investigations find that the complaints are reasonable, the CBN can impose sanctions.
10. Monetary Policy Management
This function is highly important in the Federal Government. It`s the monopoly for money and exchange manipulations. The monetary policy affects every sector of the economy which includes:
- Investment level;
- Consumption level;
- The rate of economic growth.
Monetary policy management is an instrument to regulate, design, supply and value the cost of money. The main focus of the CBN Nigeria is money supply. It helps to achieve the Federal Government economic objectives.
What is a Central Bank of Nigeria?
The CBN is the main institution bank. It sets the rules of the game. It plays a role of the judge between customers and banks. The main function of this bank is to provide funds for realizing the economic objectives of Nigeria.
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Source: Legit.ng
