APPRAISING / EXAMINE THE MONETARY POLICY OF THE CENTRAL BANK OF NIGERIAN ON COMMERCIAL BANKS IN NIGERIA. (A CASE STUDY OF WEMA BANK PLC.)
ABSTRACTThis project appraised the monetary policy of the Central Bank on the commercial banks in Nigeria. Part of the statutory power of the Central Bank of Nigeria is to conduct the activities of commercial banks in other to sustain a very economy. However, when monetary policy is implemented, the external reserves will be maintained to safeguard the international value of the currency and promotes a stable exchange rate. The monetary instruments which the Central Bank of Nigeria used to achieve these objectives are open market operation, moral suasion, reserve requirement, special deposit, bank rate, etc. which subsequently have a positive impact on the economy. To authenticate the statement of fact that the Central bank plays an important role in the economy through the implementation of monetary policy, a well-structured questionnaire was presented at Wema Bank Plc. The method of statistical analysis used in chi-square, in conclusion, this project appraises the role of the Central Bank of Nigeria on commercial banks in Nigeria through a well-implemented monetary policy with turn-over on liquidity channel, credit channel, exchange rate mechanism, etc. TABLE OF CONTENT Title page iCertification iiDedication iiiAcknowledgment iv Abstract vTable of content viCHAPTER ONE1.1 Introduction 11.2 Statement of problem 21.3 Purpose of study 31.4 Significant of study 31.5 Scope of study 31.6 Definition of terms 4- 5CHAPTER TWO2.0 Literature review 62.1 The Nigeria Financial System 6 - 72.2 Composition and Regulation of Nigeria Financial System 7 -82.3 The Regulation of the Financial System 8-102.3.1 Distress in Banking 112.3.2 Causes of Bank Distress 112.4 The Historical Background and the Establishment ofCentral Bank of Nigeria 112.5 Traditional and Development Function of CentralBank of Nigeria 11 - 162.6 Responsibilities of Central Bank of Nigeria 162.6.1 Problem Confronting Central Bank of Nigeria in the Management of Nigeria Economy. 162.7 Monetary Policy Formulation and Implementation 17 - 192.8 Objectives of Monetary Policy 19 – 202.9 Instruments of Monetary and Credit Policy Measure in Nigeria 20CHAPTER THREE3.0 Research methodology 213.1 Unit of Study 21 3.2 Research Instrument and Collection 21 3.3 Data Preparation and Organization 21 -22 3.4 Limitation of Study 223.5 Analysis of data CHAPTER FOUR4.0 Data Analysis, Presentation, and Interpretation 234.1 Administration of Questionnaire 234.2 Testing of Hypothesis 23 -24CHAPTER FIVE5.0 Summary, Conclusion, and Recommendation 275.1 Summary 27 5.2 Recommendation 28 - 295.3 Conclusion 29 Reference 30 Questionnaire CHAPTER ONE1.1 INTRODUCTIONManaging an economy entails articulating well-meaning strategies and devising various policies and measures that ensure efficient utilization of a nation’s resources with a view to promoting economic growth and employment and maintain domestic and external sector stability.The role of the money on the financial sector in promoting the rapid development of the sector of the economy cannot be over-emphasized. The 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 PROBLEMIn 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: Reduction in the level of unemployment Reduction in the level of inflation The enhancement of rapid economic growth and economic development Increase in industrializationThe Central Bank of Nigeria is therefore set up to coordinate and supervise Federal Government monetary policy. 1.3 PURPOSE OF THE STUDYThe purpose of this study, therefore, is to highlight the contribution of the Central Bank of Nigeria in the management of an economy in terms of the performance of its functions with an emphasis on its monetary management role. To examine how successful is the Federal Government and Central Bank of Nigeria are doing in their bids to control money in the economy. Must especially check credit creation of commercial banks.In addition, it is the aim of this study to point out, how these policies been adhered to by financial institutions such as commercial banks, merchant banks, and non-banking institutions. SFurthermore, 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 STUDYIt 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 guidance to the managers of the Nigerian economy regarding the application of the relevant policy measures for more effective and greater results. It is hoped that the research findings will be relevant to the following sub-sector of the economy.Federal Government: It will be beneficial to the Federal Government if an appropriate policy is put in place towards achieving the desired result. This is the desire to checkmate the rate of inflation in the economy through various monetary policies.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 within the nation's 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 the resultant effect of an improved standard of living for the entire populace.Private Sector: The fining where well utilized will bring about the efficient implementation of the various policies tools and would come to inform of the adjusted price of raw materials for production. Leading to an overall reduction in the cost of production. Leading to an overall reduction in the cost of production through elimination of or reduction in the inflationary rate would eventually result in inefficient utilization of the resources in the private sector and this would bring about an improved economy.1.5 THE SCOPE OF THE STUDYThe write-up restricted to describe in general the Nigeria financial system with special emphasis on the 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, its objectives and functions with responsibility. The Central Bank of Nigeria's present predicament was discussed and special recommendations in minimizing and or eliminating these problems were shown.1.6 DEFINITION OF TERMSIt will be important to define some keywords in this project for the benefit of non-financial students who might need to read this project for a purpose and inability 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 the 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 at 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).