APPRAISAL OF MONETARY POLICY IMPLEMENTATION IN NIGERIAN BANKS (A CASE STUDY OF CBN)

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TABLE OF CONTENTS

Title page                                                         i

Certification                                                     ii

Dedication                                                       iii

Acknowledgement                                            iv-v

Table of contents                                             v

CHAPTER ONE

1.0   Introduction                                             1

1.1   Statement of the Problem                        3

1.2   Objectives of the Study                            4

1.3   Significance of The Study                                4

1.4   Definition of Terms.                                 5

1.5   Limitation of The Study                           7

1.6   Plan of The Study                                    7

CHAPTER TWO

2.0   Literature Review                                     9

2.1   Conceptual Definition                              9

2.2   Monetary Policy in Nigeria                               14

2.3   Framework For Monetary Target In Nigeria               21

2.4   Inflation Targeting                                           24

2.5   The Rationale For Inflation Targeting               25

2.6   Requirment For Inflation Targeting                  26

CHAPTER THREE

3.0   Research Methodology                                     30

3.1   Sources of Data                                               30

3.2   Population of The Study                                  31

3.3   The Sampling Techniques                                       31

CHAPTER FOUR

4.0   Data Presentation And Analysis                       32

4.1   Data Presentation                                            32

4.2   Data Analysis                                                   33

CHAPTER FIVE

5.0   Summary Conclusion and Recommendations 39

5.1   Summary                                                         39

5.2   Conclusion                                                      41

5.3   Recommendations                                           42

        References                                                       44   

CHAPTER ONE

1.0   INTRODUCTION

        An appraisal of the banking industry show that the industry is determined by several factors, but the most influencing of all is director factor of regulatory frame work, under which the industry operator. This framework can be divided into two broad aspects of monetary and banking.

In all economics, the conduct of both policies are normally. Originated through banking institution who play an international process, the role of bringing lender and borrows together. Though in this process, the central bank play a crucial role in determine the price of money therefore monetary policy is important by its own right from the past view of monetary economics and policy maker and in term of its impact on the economy.

Of all the tools available to the government for directing the course of economy, monetary policy has proven to be the most feasible instrument for achieving medium term stabilization objectives (CBN guideline 2003) monetary policy formulation and implement emerge on a critical government responsibility if the economy is not to be a strayed. Policy are not made for their own sake, they are directed toward achieving a desired goal over a period of time

        Generally the primary objective of monetary policies concern with the discretionary control of monetary supply by the monetary authority in order to achieve the stated economy goals. The government uses the macroeconomic stabilization policy which is broad term that embraces a target family of economic policies.

These polices are designed in an attempt to change the trend of some monetary valuable in particular direction so as to include the desired behavioral change in monetary policy. The banks role is to conduct appropriate monetary policy that is consistent with the main economic objective of achieving real growth in gross domestic product low inflation rate and a stable balance of payment position. This is irrespective of whether the direct or indirect approach is put in place to control money and credit.

In this regard the CBN determine the amount of money supply that is consistent and manipulates the monetary instruments, instrument at its disposal in order to achieve the stated objective because there is a belief that there is a relationship between the variable and monetary variable.

1.1   STATEMENT OF THE PROBLEM

       What rule did draconian sent into banking sector

–       What roll did monetary authorities play in formulate policy guideline.

–       How can economy grow without the banking sector?

–       Why some policies been implemented by the commercial banks as stated by the CBN.

1.2   OBJECTIVE OF THE STUDY

1.     To analyze various monetary policy instrument that have been previously used and the extent to which this have contributed to the development of banking sector in Nigeria.

2.     To examine the operation of commercial bank and find out if they have strictly adhere to regulation of monetary authorities (CBN).

3.     To draw conclusion and make policy recommendation base of finding from the study.

1.3 SIGNIFICANCE OF THE STUDY

        This study will be of great benefit to bankers policy makers, investment analyst and the private and public sector, Moreover it will be useful to policy make in an attempt to fashion out dynamic and reliable monetary policy measure for controlling commercial banks in their ability to create money there y influence the performance of the economy.

        Also, this work will also add to the existing knowledge in banking professional.

1.4   DEFINITION OF THE TERMS

        Brief definitions of the terms relevant to this highlighted below.

  1. Monetary policy: This is concerned with the use of money supply and credit control to change macro-economic activities.
  2.  Discount Rate: This is the rate of interest paid by banks to CBN when they borrow from them.
  3. Research requirement: This is the function of commercial banks demand and time deposit that must be kept with the CBN.
  4. Open Market operations: It is the selling and buying of government and other eligible security by CBN in open market.
  5. Special deposit: This means supplementary revenue that are used by CBN to reduce the volume of commercial banks liquidity.
  6. Moral Suasion: This involve the employment of persuasion or public pronouncement or outright appeals on the part of monetary authorities to the bank regulating to operate in a particular direction for the realization of specified objective.
  7. Direct credit control: This involves imposition of quantitative ceiling on the overall commercial banks credit y the CBN.
  8. Monetary target: this is value that the monetary authorities shoot at in determining their appropriate policies.
  9. Monetary People: It simply the money stock of any moment in the economy on the other hand, it is defined as currency with the public and demand deposit with commercial bank.
  10. Gross Domestic Products: This measure the output produced factors of production in the domestic economy regardless it who own these factors within the nation.

1.5   LIMITATION OF THE STUDY

        This work aim at examining the effect of monetary policy on the development of banking sector.

        The problem encountered and the way forward. This study is restricted to the operation of monetary policy in Nigeria, between 1992 – 2008.

1.6   PLAN OF THE STUDY

        This research work consist of five chapters. Chapter one of this research works is made up of the introduction the statement of the study the objective of the study, the significance of the study the limitation of the study, the definition of terms and the plan of the study.

        Chapter three of this research work also includes research methodology.

Chapter four consists of data presentation and analysis.

Finally Chapter five of this research work includes summary conclusion and recommendation.

CHAPTER TWO

2.0   LITERATURE REVIEW

        The review of literature in this would reveals what is known and what remain to be investigated so the chapter provides an understanding and important frameworks of monetary policy in Nigeria can be organized around five element the legal basis of monetary policy, objective of the policy, the process and its coordination with other policies, policy formation process and its implementation.

        Therefore, the existing literature that inflects the view of various scholars and authors are examined and their contribution to the issue under discussion highlighted.

2.1   CONCEPTUAL DEFINITION

        Undigbunam (2004) defined monetary policy and fares searching financial polices that were formulated and executed during this period. A major financial policy was financial deregulation, which involves essential interest rate and exchange rate deregulation.

        Sanusi (2005) monetary policy was aimed at inducing the emergence of market – oriented in line with the general philosophy of economic management under structural adjustment programmed.

        The conduct of monetary policy relied on direct control measure which involve imposition of selective of sectoral control and credit lending, invest rate control, cash reserve requirement exchange rate control and cells for special deposits. The use of market based instrument was not successful due to the under development of the financial market in the early part of period under review.

        Nanna (2006) the general objective of monetary and financial sector policies over the year have been the attainment of internet and external balance as as the creation of sound and stable financial sector.

        Monetary policy is defined as the use of monetary instrument for regulating and stabilizing the economy. This are often carried out by the government the agent or the monetary authority.

        According to Oveselu (2004) on the other hand, the viewed monetary policy as package of factor designed to arrange the growth of money supply during a period of its optimal target the management of the supply of money in circulation is a very vital issue because its inadequate supply will lead to unemployment and its has the tendency regarding its growth and its extensive supply however the value.

        Therefore, it is worthy to comprehend that the area of boom left the economy with unacceptable development that economy stigmatized the macro economic management. Thus heavy dependence on the oil sector as have been metamorphosed into maintaining exchange rate stability, promoting sound financial system, high level of output grounder and development employment generation and to enhance the over all efficient allocation of national  resource to effect rapids economic performances in Nigeria. In pursuit of these monetary objectives, the CBN over the years employed direct and indirect policy measure of instruments. The direct measurement includes, the imposition of ceiling on interest rate and credit expansion on banks deposit ceiling exchange control restriction on the placement of public deposit, special deposit and stabilization securities value the indirect measurement liquidity ration market base interest rate policy minimum rediscount rate open market operation selective credit policy and moral suasion.

        As noted earlier direct monetary control techniques were in vique in the 1988.

        The main objective of monetary policy ere the maintenance of relative price stability and a healthy balance of payment position.

        Then, it was not feasible under the major sources of government revenue and foreign exchange earning and government expenditure.

        The implementation of monetary policy using tools to regulate the quality of money supply to achieve its objectives in an economy is based on the premise that there is correlation between the quantity of money supplied and economic activities that is, if money supplied and economic activities that is, if money is not regulated by CBN to match up with the level of productivity it would not produce desirable consequences on the end e,g inflation.

APPRAISAL OF MONETARY POLICY IMPLEMENTATION IN NIGERIAN BANKS (A CASE STUDY OF CBN)