Yes, every Nigerian knows that there is a central bank of Nigeria. But how many people know what the functions of the CBN are? Few people, and after reading this article, you’ll be one of the few.
Let us start with answering the question ‘what is central bank of Nigeria’? It is simply the highest financial body in Nigeria. That implies that the central bank of Nigeria rules the country’s finance.
Below listed are 15 functions of the CBN that you must know as a citizen of Nigeria:
- Banker / Adviser to the Government
The central bank is the financial adviser to the federal government. It serves in the dimension of ;
- providing foreign exchange for payment of debts or purchase of foreign goods
- manages the account agencies of government
- It accepts deposits from the government
- it gives financial information and counsel to the government on economic matters.
- and it keeps the account of the federal government.
- Banker to Other Banks and Financial Institutions
The central bank keeps account for every bank and financial institution operating in the country.
- Managing Debt
The central bank also has the responsibility to give the government advice on how best to manage and possibly reduce how much debt the government gets into. This it accomplishes by
- giving the federal government advise on the timing and size of new debt instruments
- advertising for public subscription to new issues
- redeeming matured stock
- paying interests and principals as to when due
- collecting proceeds of issues for and on behalf of the Federal Government
- bringing to the governments attention the implications of the size of debt and the inadequacies of the budget.
- Warden of National Reserves
The central bank keeps the nation’s reserve of gold and international currency and takes the proper measures to safe guard these reserves.
- Issuing Legal Tender
The Central bank of Nigeria is the only body that has the right to print or issue money notes in the country.
- Maintaining The Foreign Exchange Rates
The central bank also has machinery in place to enable it keep a steady hand on the rate of foreign exchange in the country.
- Strengthening the Country’s Banking Structure
The onus is on the central bank to strengthen the banking structure in the country. They achieve this by;
- ensuring deposits insurance
- extending banking facilities in the areas without banks
- Controlling and Supervising other Banks’
They control and supervise other bank’s activities with;
- giving out license
- inspecting bank accounts
- Maintaining Monetary Stability
The Central bank ensures fiscal stability by promoting reliable, efficient and smooth operation of national payment and settlement systems.
It is also extremely important for monetary stability to be maintained because it in turn ensures price stability. Price stability is very much needed for money to perform its role of medium exchange and store of value.
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- Control of Credit
The central bank also takes on the function of regulating the volume and direction of bank loans.
- Lender of Last Resort
The implication of this function is that when a bank is at the verge of bankruptcy and has tried every other means but still could not get help, it can obtain a loan from the central bank.
- Acts as a Clearing House for Cheques From Other Banks
Because the Central bank acts as a bank to other banks; it also performs the function of serving as a clearing house for the cheques that go through every other commercial bank.
- Entertains Complaints Against Commercial Banks
The Central bank also sometimes serves as a provost between customers and the banks. Customers can report other banks to the central bank and hope that the matter will be looked into and resolved in the best possible way.
- Inhibiting Low Inflation
The bank also works to make sure that low inflation is curbed to the barest minimum to ensure that the country’s currency retains it’s worth when placed beside other currencies.
- Stabilizing Exchange Rates
It is also the duty of the central bank to ensure that the exchange rate in the markets are stabilized or kept at a constant price without uncoordinated increases or decreases.