There is a central bank in Nigeria, known and called, the Central Bank of Nigeria CBN. A good number of Nigerians know that this is true, but how many of them know about the functions of the Central Bank of Nigeria?
In this article however, I will be explaining some of the functions of the Central Bank of Nigeria, and I promised you at the end, you will come to know exactly the functions of the Central Bank of Nigeria. But before that, what is Central Bank of Nigeria?
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Central Bank Of Nigeria CBN
One may be tempted to ask what Central Bank of Nigeria is. In a simple definition, the Central Bank of Nigeria is the Nigeria’s highest financial institution, saddling with the responsibility of controlling or ruling the Nigeria’s finance.
Functions Of The Central Bank Of Nigeria:
The Central Bank of Nigeria has been assigned a number of functions, when it was established in Nigeria, and those functions are what I am about explaining in this article. You can therefore, read the functions of the Central Bank of Nigeria bellow:
1. Central Bank Of Nigeria Is A Banker And Adviser To The Government
The Central Bank of Nigeria acts as the federal government banker, as well as, financial adviser to the government. And these however include, the provision of foreign exchange for the purpose of paying debts and also purchasing foreign product.
The Central Bank of Nigeria also saddled with the responsibility of managing the account of government agencies.
Apart from accepting deposits directly from the government, the central bank of Nigeria gives financial information as well.
It counselled government on matters relating to economy. More so, the account of the federal government is kept by the central bank of Nigeria, as well as accounts of all the financial institutions and banks operating in Nigeria. The central bank of Nigeria also served as banker to these banks and financial houses in the country.
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2. Central Bank Of Nigeria Manages Debts
Another functions of the central bank of Nigeria is to manage debts. It saddled with the responsibility of giving advise to the government on the best way to manage debts, as well as the possibility of reducing the amount of debts owned by the government.
This function is achieved by the central bank of Nigeria through advising the federal government on the time, as well as, the size of debt instruments particularly, the new debt.
It advertised new issues for public subscription. The central bank of Nigeria also helped in making sure that, matured stocks are redeemed, including payment of interests and principals as at when due.
Collection of proceeds of issues for the federal government is part of the function of the central bank of Nigeria. It also make sure that, it brings to government attention the inadequacies of budget, as well as, the implications of debts’ size.
3. Central Bank Of Nigeria Wardens National Reserves
One of the functions of the central bank of Nigeria is to warden national reserves. It is the function of the central bank of Nigeria to keep Nigeria’s reserves, be it of gold or international currency.
It is the function of the central bank of Nigeria to also endeavour to take proper measures towards safeguarding these reserves.
4. Central Bank Of Nigeria Issues Legal Trader
Central bank of Nigeria issued legal tender. Being the highest financial institution in Nigeria, it is fundamentally, the sole function of the central bank of Nigeria to print money notes in Nigeria, and as well, issue these money notes in Nigeria.
The only financial body, that has the full right to print and issue legal tender in the country is the central bank of Nigeria.
5. Central Bank Of Nigeria Maintains Foreign Exchange Rates
Central bank of Nigeria maintained foreign exchange rates. It is fundamentally, the function of the central bank of Nigeria to also ensure that, this rate is maintained.
The central bank of Nigeria has a machinery, which it has put in place with a view to enable the central bank to keep the rate of foreign exchange in Nigeria steady.
This is very important and necessary, since keeping steady hand on Nigeria’s foreign exchange rates will help contribute to the overall growth of the Nigerian economy.
6. Central Bank Of Nigeria Strengthens Nigeria’s Banking Structure
The central bank of Nigeria strengthened Nigeria’s banking structure. This is one of the functions of the central bank of Nigeria in the country.
The central bank accomplished this function by making sure that, deposits insurance is ensured. That asides, the central bank of Nigeria also achieved this function through the extension of banking infrastructure and facilities in the areas, where there are none.
7. Central Bank Of Nigeria Supervises And Controls Other Banks
Central bank of Nigeria supervised other banks and financial houses in the country, and also control them. The central bank controlled and supervised the activities of these banks by issuing licenses to them. The central bank of Nigeria also make sure that, bank accounts of these financial houses are properly inspected.
8. Central Bank Of Nigeria Maintains Monetary Stability
Central bank of Nigeria maintained monetary stability. It must make sure that the fiscal stability is maintained by making sure that, it promotes reliable, and efficient transactions as well as, smooth operation in the system.
Such operations must include national payment as well as, settlement systems. Other reason has been considered as to why maintenance of monetary stability is important and necessary.
This is because, maintaining monetary stability will help to ensure price stability too. Price stability is very important, given the fact that, it will help in making sure that, money performs its function of store of value and function of medium exchange.
9. Central Bank Of Nigeria Controls Credit
Another function of the central bank of Nigeria is to control credit. It is fundamentally, the function of the central bank of Nigeria to also consider the responsibility of making sure that, the volume of bank loans and the direction of bank loans are regulated.
10. Central Bank Of Nigeria Acts As Lender Of Last Resort
The central bank of Nigeria do acts as the lender of last resort. For instance, in a situation, where a bank is about collapsing or at the verge of running out of business perhaps, it has tried other options, yet it seemed as if it will go bankrupt, the central bank of Nigeria can intervened and offer loans.
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Conclusion
Central Bank of Nigeria is the Nigeria’s highest financial institution, saddling with the responsibility of controlling or ruling the Nigeria’s finance.