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PROJECT TOPIC AND MATERIAL ON PROBLEMS OF MONETARY POLICY IMPLEMENTATION BY CENTRAL BANKS OF NIGERIA (CBN)
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- Name: Problems Of Monetary Policy Implementation By Central Banks Of Nigeria (Cbn)
- Type: PDF and MS Word (DOC)
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- Length:  Pages
1.1 BACKGROUND OF THE STUDY
A policy is a statement of basic principles that provides a framework in which performance is measured. One of the principal responsibilities of the central bank of Nigeria (CBN) is the formulation, monitoring and execution of monetary stability and economic development as well as ensuring sound financial system.
The central bank of Nigeria employs various instruments in caring out these responsibilities. Before 1992, the CBN was under the federal ministry of finance. This has change presently, central bank reports directly to the presidency under the central bank of Nigeria degree. The CBN carries out this responsibilities on behalf of the federal government of Nigeria under the status of the central bank of Nigeria Act of 1958 and banking Act of 1967 which have been replaced with CBN Degree No. 24 of 1991 and Bankers and other financial institutions Decree (BOFID) NO. 25 of 1991.
In formulating executing monetary policy, the government of the CBN is required to make proposals to the president of the federal republic of Nigeria who has the final power to accept or amend such proposals. It is after the presidency has approved it that the CBN is monetary policy proposals are made as an integral part of the federal government annual budget which combines to approve monetary policy.
The aim of monetary policy may be to check inflation or to stimulate production to aid recovery from a recession. The method adopted to achieve the designed aim is through changes in the monetary supply. A policy aiming at increasing the quantity of money is inflationary, and one that aims at a contradiction of the supply of money is deflationary.
Monetary policy is mainly the concern of the central bank, but the consequences of monetary policy can be so far – reacting for the whole community that no modern government can leave the choice of policy entering to its central bank.
The paper will therefore examine the various instruments of monetary policy measures introduced by CBN since inception in 1959. It will therefore evaluate the effectiveness of the instruments taking into consideration the major constraints the CBN have to grapple with.
The instruments used by the central bank of Nigeria to implement its monetary policy objectives can be classified broadly as direct or portfolio control approach and indirect or market interaction approach (CBN research departments). The direct control instruments place restrictions on the freedom to acquire more assets to insure liabilities. This is employed essentially because of the poor infrastructure based and low development of money (financial) and capital market over the years. The central bank has employs the following direct monetary controls.