CHAPTER ONE
1.0 INTRODUCTION
According to the stallion, a quarterly publication of union bank of Nigeria Plc, (anniversary edition 1998).The earliest support for establishment of the central bank of Nigeria goes back to the period of the banking failures of’ the early 1950’s following which the power of control of banking was vested on the financial secretary. Many Nationalists’ leaders at that time urged for the creation of a central bank of perform this and other traditional functions which includes the following:
1. Float, buy and sell Government bonds and securities.
2. To act as lender of idle resources to banks for who, the bank would also maintain reserves.
3. To acts as financial agent for the government.
4. Acts as a monetary authority to promote price and economic stability,
5. To undertake currency production.
However, the ordinance for the establishment of the Central Bann of Nigeria (CBN) was passed by the House of Assembly on 17th March, 1958 and was brought partially into force in 15”‘ September when those sanctions necessary for carrying out the initial function become law. The Act was fully implemented on 1Ist July 1959 when the Central Bank of Nigeria came into full operation. The following are the main provision of the Central -Bank Act.
a) Bankers to other banks in Nigeria.
b) Banks and financial advisor to the Federal Government.
c) Maintenance of external reserves in order to safeguard the international value of currency.
d) Implementation of monetary policies to promote monetary stability and a sound financial structure.
e) Issuance of legal tender currency in Nigeria.
1.1 BACKGROUND TO THE STUDY.
As it is clearly stated in the. Bank Act listed above, one of the principle objectives in function of the Central Bank is to promote monetary stability and soundness in the financial system by implementing monetary policies
Thus, monetary policy may be said to be the combination of measure designed to regulate the value, supply and cost of money in an economy in consonance with the level of economic activity.
There are two major techniques through which monetary policy try to achieve its objectives. These are the direct in portfolio control approach and indirect market intervention approach.
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