History of Central Bank of Nigeria :Function and List of CBN Governors since 1958

Last Updated on July 1, 2024 by admin

The Central Bank of Nigeria (CBN) is the apex monetary authority in Nigeria tasked with regulating the country’s financial sector. Established in 1958, the CBN has played a crucial role in shaping Nigeria’s economic landscape over the years.

This Article aims to provide a detailed history of the Central Bank of Nigeria, its functions, and a list of its key roles and responsibilities.

The history of the Central Bank of Nigeria dates back to the colonial era when the country was under British rule. The need for a central bank in Nigeria was recognized as early as the 1920s, but it was not until 1958 that the CBN was formally established. The bank was set up to serve as the banker and financial adviser to the government and to regulate the country’s monetary and financial system.

Also read: The history and origin of banking in Nigeria

Table of Contents

Central Bank Act, 1958

The Central Bank Act, 1958 (as amended) and the Banking Decree 1969 (as amended) constituted the legal framework within which the CBN operates and regulates banks. The wide range of economic liberalization and deregulation measures following the adoption, in 1986, of a Structural Adjustment Programme (SAP) resulted in the emergence of more banks and other financial intermediaries.

The Banks and Other Financial Institutions (BOFI) Decrees 24 and 25 of 1991, which repealed the Banking Decree 1969 and all its amendments, were, therefore, enacted to strengthen and extend the powers of CBN to cover the new institutions in order to enhance the effectiveness of monetary policy, regulation and supervision of banks as well as non-banking financial institutions.

Unfortunately in 1997, the Federal Government of Nigeria enacted the CBN (Amendment Decree No. 3 and BOFI (Amended)] Decree No. 4 in 1997 to remove completely the limited autonomy which the Bank enjoyed since 1991.

The 1997 amendments

The 1997 amendments brought the CBN back under the supervision of the Ministry of Finance. The Decree made CBN directly responsible to the Minister of Finance with respect to the supervision and control of bank and other financial institutions, while extending the supervisory role of the bank to other specialised Banks and Financial Institutions.

The amendment placed enormous powers on the Ministry of Finance while leaving the CBN with a subjugated role in the monitoring of the financial institutions with little room for the Bank to exercise discretionary powers.

The 1998 amendments

The CBN (Amendment) Decree No. 37 of 1998 which repealed the CBN (Amended) Decree No. 3 of 1997. The Decree provided a measure of operational autonomy for the CBN to carry out its traditional functions and enhances its versatility.

You can also read: The Origin and History of Banking- Evolution of Bank in the world

The CBN Act, 2007

The current legal framework within which the CBN operates is the CBN Act of 2007 which repealed the CBN Act of 1991 and all its amendments. The Act provides that the CBN shall be a fully autonomous body in the discharge of its functions under the Act and the Banks and Other Financial Institutions Act with the objective of promoting stability and continuity in economic management.

In line with this, the Act widened the objects of the CBN to include ensuring monetary and price stability as well as rendering economic advice to the Federal Government.

The BOFI (Amendment) Decree, 1998

Furthermore, the regulatory powers of the CBN were strengthened by the Banks and other Financial Institutions (Amendment) Decree No. 38 of 1998 which repealed BOFI (Amendments) Decree No. 4 of 1997.

Through the amendments, the CBN may vary or revoke any condition subject to which a license was granted or may impose fresh or additional condition to the granting of a license to transact banking business in the country.

By the Decree, the CBN’s powers on banks, specifically those relating to withdrawal of licenses of distressed banks and appointment of liquidators of these banks, including the NDIC was restored.

The 1999 amendment
The BOFI (Amendment) Decree No. 40 of 1999 makes the provisions relating to failing banks applicable to other financial institution. It also empowers the Governor of the CBN to remove any manager or officer of a failing bank or other financial institution.

The main functions of the CBN include:

One of the primary functions of the CBN is the formulation and implementation of monetary policy. The bank uses various tools such as open market operations, reserve requirements, and interest rates to control the money supply in the economy and achieve price stability. By managing inflation and interest rates, the CBN aims to promote economic growth and stability.

Another key function of the Central Bank of Nigeria is the regulation and supervision of financial institutions in the country. The CBN is responsible for licensing and overseeing banks, insurance companies, and other financial institutions to ensure their solvency and soundness. This helps to safeguard depositors’ funds and maintain the stability of the financial system.

In addition to its regulatory role, the Central Bank of Nigeria also acts as the government’s banker and financial agent. The CBN manages the country’s foreign exchange reserves, advises the government on economic and financial matters, and facilitates the issuance of government securities. The bank also plays a crucial role in promoting financial inclusion and economic development in Nigeria.

The Central Bank of Nigeria operates through various departments and units that are responsible for different aspects of its functions. These include the Monetary Policy Department, Banking Supervision Department, Financial Markets Department, and Currency Operations Department. Each department plays a critical role in achieving the CBN’s objectives and ensuring the smooth functioning of the financial system.

Some of the key responsibilities of the CBN include maintaining price stability, managing the country’s external reserves, and promoting a stable and efficient financial system. The bank also plays a critical role in promoting financial literacy and consumer protection, as well as supporting the government’s economic development initiatives.

In recent years, the Central Bank of Nigeria has faced several challenges, including maintaining exchange rate stability, managing inflation, and addressing weaknesses in the financial system.

The bank has implemented various reforms and policy measures to address these challenges and support economic growth. These efforts have included tightening monetary policy, introducing new regulations for financial institutions, and promoting financial inclusion.

The objects of the CBN are as follows:

ensure monetary and price stability;
issue legal tender currency in Nigeria;
maintain external reserves to safeguard the international value of the legal tender currency;
promote a sound financial system in Nigeria; and
act as Banker and provide economic and financial advice to the Federal Government