Central Bank of Nigeria
From Wikipedia, the free encyclopedia
The
Central Bank of Nigeria was established by the
CBN Act of 1958 and commenced operations on July 1, 1959.
[1]
The major
regulatory objectives of the bank as stated in the CBN act of 1958 is to: issue legal tender, maintain the external reserves of the country, promote monetary stability and a sound financial environment, and to act as a banker of last resort and financial adviser to the federal government. The central bank's role as
lender of last resort and adviser to the federal government has sometimes pushed it into murky regulatory waters. After the end colonial rule, the desire of the government to become pro-active in the development of the economy became visible especially after the end of the
Nigerian civil war, the bank followed the government's desire and took a determined effort to supplement any short falls in credit allocations to the real sector. The bank soon became involved in lending directly to consumers, contravening its original intention to work through commercial banks in activities involving consumer lending. However, the policy was an offspring of the indigenisation policy at the time. Nevertheless, the government through the central bank has been actively involved in building the nation's money and equity centers, forming securities regulatory board and introducing treasury instruments into the capital market.
[1]
[edit] History of the CBN
[edit] Authorizing legislation
In 1948, an inquiry under the leadership of G.D Paton was established by the colonial administration to investigate banking practices in
Nigeria. Prior to the inquiry, the banking industry was largely uncontrolled. The G.D Paton report, an offshoot of the inquiry became the cornerstone of the first banking legislation in the country: the banking ordinance of 1952. The
ordinance was designed to prevent non viable banks from mushrooming, and to ensure orderly commercial banking. The banking ordinance triggered a rapid growth in the industry, with growth also came disappointment. By 1958, a few number of banks had failed. To curtail further failures and to prepare for indigenous control, in 1958, a bill for the establishment of Central Bank of Nigeria was presented to the
House of Representatives of Nigeria. The Act was fully implemented on July 1, 1959, when the Central Bank of Nigeria came into full operation. In April 1960, the Bank issued its first
treasury bills. In May 1961 the Bank launched the Lagos Bankers Clearing House, which provided licensed banks a framework in which to exchange and clear checks rapidly. By July 1, 1961 the Bank had completed issuing all denominations of new Nigerian notes and coins and redeemed all of the West African Currency Board's previous money.
[2]
[edit] Policy implementation and criticism
The CBN's early functions were mainly to act as the government's agency for the control and supervision of the banking sector, to monitor the
balance of payments according to the demands of the federal government and to tailor monetary policy along the demands of the
federal budget. The central bank's initial lack of financial competence over the finance ministry led to deferment of major economic decisions to the finance ministry. A key instrument of the bank was to initiate credit limit legislation for bank lending. The initiative was geared to make credit available to neglected national areas such as agriculture and
manufacturing. By the end of 1979, most of the banks did not adhere to their credit limits and favored a loose interpretation of CBN's guidelines. The central bank did not effectively curtail the prevalence of short term loan maturities. Most loans given out by
commercial banks were usually set within a year. The major policy to balance this distortion in the credit market was to create a new Bank of Commerce and industry, a universal bank. However, the new bank did not fulfill its mission. Another policy of the bank in concert with the intentions of the government was direct involvement in the affairs of the three major
expatriate commercial banks in order to forestall any bias against indigenous borrowers and consumers. By 1976, the federal government had acquired 40% of
equity in the three largest commercial banks. The bank's slow reaction to curtail inflation by financing huge deficits of the federal government has been one of the sore points in the history of the central bank. Coupled with its failure to control the burgeoning trade arrears in 1983, the country was left with huge trade debts totaling $6 billion.
[citation needed]
[edit] Governors
Governors of the Central Bank since independence:
[3]
Currently, under the leadership of Lamido Sanusi, the bank's recent success is partially due to the rise in
crude oil prices.
[citation needed] The bank's use of
capitalization has given more strength to the banking sector against an earlier failure by the central bank to control the fall of many
merchant banks and commercial banks in the early 1990s. By 1990, the liberalizing agenda of an adopted
Structural Adjustment Programme led to unprecedented growth in the banking sector.
[edit] Advance Fees Fraud (419)
The name of the Central Bank of Nigeria has been used in a series of so-called 'Nigerian 419 Scams'. The fraudster sends an e-mail that appears to come from a Central Bank employee to millions of people saying the Bank has found an excess of money, or a debt owing to, a person or persons who have since died, and they wish to export it. The victim submits his own bank account so that the money may be placed therein, however this information is only used to add credibility to the scam, in order to lure the victim in further.
Bank details and other personal information is used to create fake certificate or document that are allegedly from the Bank. Contrary to popular belief, the victim's bank account cannot be emptied in this fashion. And, if money was taken from an account, it could be reimbursed as it can be traced Instead, the fraudster will ask the victim to send money via
wire transfer services such as
Western Union or
MoneyGram. A wire transfer sent abroad is untraceable, and unreversable. The bank is in no way associated with such scams.
[4]
[edit] See also
- ^ a b History of CBN, retrieved 8 September 2006 from http://www.cenbank.org/AboutCBN
- ^ Nigeria Year Book 1962. Daily Times of Nigeria. 1962. p. 107.
- ^ "Past And Present Governors". Central Bank of Nigeria. Retrieved 2010-02-28.
- ^ "Advance Fees Fraud (419)". Central Bank of Nigeria. Retrieved 2010-04-02.
[edit] References
- E. O. Oloyede, The Bank Customer and Banking Law in Nigeria, Journal of African Law > Vol. 19, No. 1/2, Spring, 1975
- G. O. Nwankwo, Bank Lending in a Developing Economy: The Nigerian Experience, Journal of African Law > Vol. 19, Spring, 1975
- "Foreign reserves down, bank lending up as economy falters", Financial Times, November 29, 1982
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