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Central Bank of Nigeria, Brief History
Central Banks worldwide simply refer to a central monetary authority or an apex financial institution within the entire financial structure promoting monetary stability and a sound financial system. The world of Central Banking is one of a variety of structures, functions and powers, which are in themselves by-product of the economic, political and other realities prevailing in a society.
The Central Bank of Nigeria, Lagos OfficeHistorically, prior to the establishment of Central Bank of Nigeria by the CBN Act of 1958, there existed a body known as the West African Currency Board (WACB). This Board, which was established by the then British Colonial Government, was intended to serve as a Central Bank for the Anglophone West African countries. Thus, the board was charged with the primary responsibility of issuing the West African Pound, which served as the legal tender currency in Ghana, Nigeria, Sierra-Leone and Gambia.
Another function performed by WACB was the management of the reserves held in trust for these colonies. Such reserves were invested by the board on behalf of the West African countries as instruments in the London Money Market. The weakness of the board for which it was criticized is as follows:
§ It carried on commercial banking activities alongside other commercial banks;
§ The board lacked the basic apparatus to control the supply of money;
§ The board got involved in physical distribution of currency from one point to another;
§ Its activities were considered discriminatory against indigenous West African industrialist;
§ It was not on the development of the colonies and most of its activities were based on commerce and trade.
These factors led to the widespread agitation for indigenous Central Banks in the area.
The Central Bank of Nigeria (CBN) is the apex regulatory authority of the financial system in the country. It was established by the CBN Act of 1958 and commenced operations on July 1ST, 1959. The promulgation of the CBN decree 24 and Banks and other financial institutions (BOFI) Decree 25, both in 1991 gave the bank more flexibility in regulation and supervision of the banking sector and licensing finance companies which hitherto operated outside any regulatory frame work.