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Central Bank of Nigeria
- HQ
New Currency - Notes.
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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.
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 corner stone
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. The Act
was fully implemented on
July 1, 1959, when the
Central Bank of Nigeria
came into full
operation.
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.
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