Central Bank of Nigeria is one the banks in Africa that has been in existence for a very long time. Apart from its longevity, this financial institution is very effective when it comes to performing its duties.
Presently lead by Godwin Emefiele, current governor of the CBN, the bank has performed its primary functions effectively and has helped the government of the country financially.
10 of these major functions include:
1. CBN prints money
This is the first main function of the central bank is the printing of Nigeria’s currency. Not only to print but to also ensure that the money is evenly distributed throughout the country.
They ensure that the country must at least have printed currency at any time. Once this key responsibility is met, it gives room for the CBN to perform other functions
2. Regulates Naira’s value
Another function of the Central Bank is to ensure that there’s a normal value of the country’s currency when compared to foreign currencies. This can be achieved by making sure that the policies, environment and business or monetary atmosphere are favorable.
3. They make rules that guide commercial banks in the country
It’s the duty of central bank to ensure that there is normality when it comes to banking system in Nigeria. The CBN makes sure that citizens have total trust in the country’s banking system by creating rules and regulations to guide the activities of all commercial banks in the country.
4. CBN serves as government’s bank
It’s impossible for any government to partner with other commercial banks according to the country’s constitution. Thereby leaving government no option than to partner with CBN.
The government of the day does this by depositing all it realized from taxes collected from citizens and every other income realized from businesses it engaged itself in the bank.
5. Formulates monetary policies to regulate the country’s economy
A primary function of central bank of Nigeria with respect to monetary policy making guides the influx of money into the country. This requires a very high level of concentration from the management and decision-making segment of the bank.
This is because too much of money in circulation is not the best for any economy as it leads to deflation while shortage of money leads to inflation. Officials in charge of policy making must be aware of the country’s economic situation. They have to be intelligent to make brilliant decisions.
6. Supports government in budget preparation
Once the government makes budget for a year they look up to the central bank for help and for advice on what may be the outcome of its budget.
That is the main reason why the CBN governor must be brilliant enough to read what might be the outcome of government budgeting system at the end of each year. The central bank governor must be able to know the effect a budget can have on the country’s economy. It is also the role of the central bank to give out cash to the government so as to embark on the approved budget.
7. Provides loan to government
Should the government run out of cash while performing its duty, the central bank will give out loan to the government so as to conclude its project and work for the country.
This loan will be paid back by the government as soon as it gets the amount in its account.
8. CBN sets interest rates
As a financial institution, it is also their primary duty to set certain amount as interest on any citizen account. With this, commercial banks in the country must follow the instructions or directive given by the central bank of Nigeria before adding any interest to the amount of money borrowed by an indigene of the country.
9. Serves as apex bank to other commercial banks
Commercial banks always deposit money into their accounts with the CBN at the end of transactions. This will enable the central bank monitor the rate at which money is been released into the country.
10. Ensuring great relationship with foreign banks
This bank ensures that there is a cordial relationship between itself and foreign banks of other countries. Should there be any unwanted situation financially, the bank will feel free to borrow money from the foreign bank without any hitch.
These are the 10 most important functions of Central bank of Nigeria, but there are other roles that hasn’t been mentioned