Impact of Central Bank of Nigeria in Nigeria’s Economic Growth

Published on International Journal of Economics & Business
ISSN: 2717-3151, Volume 1, Issue 1, page 170 – 177
Date: 14 October 2018
© Copyright International Journal of Zambrut

Alhaji Umar Lawal Aliyu

Alhaji Umar Lawal Aliyu
Faculty of Management, Department of Business Administration
LIGS University Hawaii, United State of America – USA

Abstract
This paper examines and assesses the effects of Central Bank of Nigeria’ (CBN) economic growth. The traditional functions of a central bank include formulating and implementing monetary policy, determining interest rates and directing money supply – to achieve price stability; regulating and supervising the banking and financial systems, managing foreign reserve and ensuring the stability of financial markets. The empirical works of King and Levine (1993) who, in a cross country study comprising data from 77 countries over the period 1960-1989, found that the level of financial development stimulates economic growth. Consequently, the Central Banks of Nigeria (CBN) have considered ways by using both traditional and unconventional monetary policy instruments to foster growth in Nigeria. The findings from the study revealed that the state of economic development in Nigeria is invariably associated with extent of the growth and development of the Central Bank of Nigeria’s Development finance. According to R.S. Sayers ‘The Central Bank is the organ of Government that undertakes the major financial operations of the Government and by its conduct of these operations and by other means influences the behaviour of financial institutions so as to support the economic growth. The findings from the study revealed that the state of economic development in Nigeria is invariably associated with the roles the Central Bank of Nigeria’s plays in promoting economic growth and development.

Keywords: Central Bank, Development, Economic Growth, Instruments, Monetary Policy.

1. Introduction
1.1 Background of the Study
It is well acknowledged in economics literature that Central Bank of a country irrespective of the country’s economic or political policies play a major role in promoting economic development through trying to achieve price stability; regulating and supervising the banking and financial systems, managing foreign reserve and ensuring the stability of financial markets. In this regard, for an economy to grow, it should have a well-developed and stable banking system that is resilient to external shocks, which will effectively play the role of financial intermediation. However, enabling healthy financial sector evolution entails the CBN reviewing the basic one-size-fits-all model of banking. This has made possible the emergence of international, national, regional, mono-line and specialized banks such as non-interest banks, etc., with different capital requirements commensurate to the depth of their operations.
Economic growth has long been considered an important goal of economic policy with a substantial body of research dedicated to explaining how this goal can be achieved. One of the earliest works on banking performance and economic growth was ……

1.2 Statement of the Research Problem
The current liquidity issue and the inadequate lending to the real sector that could result to economic growth have generated considerable discussions. The Central Bank of Nigeria (CBN) has risen up to these challenges by ensuring that liquidity in the banking system is adequate and that sectoral credit allocation to the sensitive sectors of the economy (Agriculture, Power, Aviation and SMEs) that will impact on the real sector for growth are handled with all the attention required. In Nigeria, empirical works that focused explicitly on banking sector performance and economic growth have yielded mixed results. Some of these works suggest that banking sector performance has affected positively and significantly on economic growth (see; Adelakun, 2010) while others reported an insignificant relationship between banking sector performance and economic growth ……..

2. Literature Review
2.1 Theoretical Framework
In Nigeria, the financial system is the hub of productive activity, as it performs the vital roles of financial intermediation and effecting good payments system, as well as assisting in monetary policy implementation. According to Ofanson et al. (2010) the process of financial intermediation involves the mobilization and allocation of financial resources through the financial (money and capital) markets by financial institutions (banks and non-banks) and by the use of financial instruments (savings, securities and loans).
This paper adopts classical theory of political economy and development in evaluation the relationship between Central Bank and economic growth and development ………

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