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.
- Monetary
policy: This is concerned with the use of money supply
and credit control to change macro-economic activities.
- Discount
Rate: This is the rate of interest paid by banks to CBN when they borrow
from them.
- Research
requirement: This is the function of commercial
banks demand and time deposit that must be kept with the CBN.
- Open
Market operations: It is the selling and buying of
government and other eligible security by CBN in open market.
- Special
deposit: This means supplementary revenue that are used
by CBN to reduce the volume of commercial banks liquidity.
- 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.
- Direct
credit control: This involves imposition of
quantitative ceiling on the overall commercial banks credit y the CBN.
- Monetary
target: this is value that the monetary authorities shoot
at in determining their appropriate policies.
- 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.
- 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)
