EFFECTIVENESS OF MONETARY POLICY ON THE BANKING SECTOR IN NIGERIA
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EFFECTIVENESS OF MONETARY POLICY ON THE BANKING SECTOR IN NIGERIA
1.1 INTRODUCTION TO CHAPTER ONE OF THE EFFECTIVENESS OF MONETARY POLICY ON THE BANKING SECTOR IN NIGERIA
Monetary policies in Nigeria and the United Kingdom, the central banks of Nigeria and the Bank of England serve as monetary policy advisers to the government.
The authorities make the final call on the issues. In Germany, the difference is that the German central bank, the Bundesbank of Germany, enjoys constitutional independence in formulating monetary policies.
The central bank of Nigeria lender the federal ministry of finance (FMF), we have the central bank of Nigeria, and this is the top of the Nigeria financial sector regulatory organisation.
The bank supports and maintains monetary stability in Nigeria while also issuing a solid and efficient financial system. It issues legal tender in Nigeria,
such as currency notes and coins, and maintains the Nigerian external reserve to protect the national value of legal currency. The CBN is responsible for developing and implementing Nigeria’s monetary and exchange rate policies, as well as a variety of other functions.
Through its monetary policies and developmental mission in ensuring monetary and economic stability, Nigeria’s central bank has been able to exercise its statutory power.
In Nigeria, for example, by managing the quality and direction of credits, monetary policies, and the optimal quality of money supply, economic stability has been enhanced.
Its development function promotes the formation of necessary development banks and financial institutions to aid economic development.
The ability of any central bank to promote monetary stability is critical to its effectiveness. Monetary stability is dependent on the central bank’s capacity to enact effective monetary policies and implement them efficiently.
Nigerian banks and other banks were operated without any supervision over the availability and supply of money and circulation, which had an impact on our economic development as well as financial distress.
As time passed, the central bank of Nigeria chose to implement a new policy known as monetary policy in the banking sector, and the implementation of that monetary policy in the banking sector assists many banks as well as our economy in stabilising the value of money.
The Nigerian Central Bank implements this policy through the use of the following instruments in banking operations:
1.public market operation
2. Section on Morals
3. Legal reserve, and so on.
So monetary policy is an important tool used by monetary authorities to control the availability of money in circulation, which benefits both our economy and our banking sector.
1.2 STATEMENT OF THE PROBLEM
Although the CBN has made significant progress towards fixing the recognised structure imbalance in banking operations (Akinni 1986), there are still certain issues regarding the execution of monetary policy in the banking sector.
There is the issue of monetary policy’s usefulness as a tool for banking management. The discount rate, legal reserve ratio, and open market operation are among the techniques available, and these are expected to be useful.
Meet the challenges of the unusual and unexpected demand deposition for deposit repayment.
Articulate method of accessing liquidity for the credibility of inflation.
To direct and guide the financial institution towards the type of lending policies pause.
To be effective and efficient in limiting banks’ lending capacity in the economy.
1.3 OBJECTIVES AND PURPOSE OF STUDY
The following are the reasons for conducting this research:
1. To ensure that the flow of money corresponds to the total banking activity.
2. Changing the quantity of money supply on a regular basis in order to alter the degree of banking activity.
3. It is intended to balance and control the amount, cost, and direction of money and credit in banks.
4. It is intended to bring the bank back into line by checking and limiting the bank’s high level of inflation.
1.4 SIGNIFICANCE OF THE STUDY
The following people will benefit from the research:
1. To the banking industry.
The study will assist Nigeria’s central bank in assessing the impact of its attempts to regulate banks through the instrument of monetary policy.
It will assist the central bank in determining whether or not there are still gaps in the policies. It serves as a comparison of different policies throughout time, assisting Nigeria’s central bank in deciding on new measures to implement.
2. Addressed to the government:
The study will assist the government establish policies that are consistent with the overall economic trend – activity that is present at any moment.
3. to the lending institution
It enables financial institutions, as the central bank of Nigeria’s intermediaries, to examine their involvement in policy implementation. It also assists them in correcting or avoiding their own mistakes.
4. In relation to the economy in general:
The study will be extremely beneficial to the economy’s constituents by assisting each sector or part to make judgements in accordance with the current economic trend at the time.
5. The manufacturing sector:
Because of the significant increase in manufacturing costs, this sector bears the majority of the burden of inflation. As a result of the study, it will be able to alter its costing and evaluation methods to match changes in the economy.
6. GNP in foreign interest:
This project allows anyone from outside Nigeria to learn about the workings of the Nigerian financial system. It will also assist him in understanding the worth of the national currency in terms of purchasing power and the overall economic trend.
1.6 DEFINITION OF TERMS
1. The Apex Bank:
This refers to Nigeria’s central bank, sometimes known as “the bankers bank.” It has authority over the activity of other banks.
2. Inflationary pressures:
This is a persistent rise in the general price level that causes nominal money’s buying power to diminish; its rate is assessed by the consumer price index.
3. Index of consumer prices:
A simple number indicating how the average price of a given number of commodities compares to some base year price.
4. Fiscal policy:
This is a credit control measure implemented by a country’s central bank. It is used to consume the supply of money as a tool for archiving the broader economic policy target.
5. Payment balance:
This word refers to a country’s trading positions with another country with which it does trade.
REFERENCES 1.7
The banking sector’s identified instrument imbalance (Akinni – 1986)
Whitman, D., An Introduction to Monetary Policy (New York: Free Press, 1976).
Akinni (1986) observed an instructional imbalance in the banking sector.
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