The growth and development of international trade along west African coast played a major role in extending the medium of exchange beyond trade by barter in the nineteenth century.
The ‘’native currency’’ system which relied on item such as manila, cowries, brass and copper rods had to accommodate foreign currencies such as Maria Theresa dollar and British silver coins increased trade motivated the setting up of the Bank of British West African [BWA] in 1894, thereby drastically reducing the barter system and ushering in a rudimentary form of commercial banking.
The issue of legal tender currency for the West African region was however deferred till 1912 when the west African currency Board [WACB] was established. The WACB was an offshoot of the recommendation of the EMMOE committee set up by the then secretary of state the Rt. Ifon. Lewis Harcourt. The WACB retained the services of the BBWA as its currency distribution agent. It set up four currency centers in Lagos [Nigeria] and Bathurst, now Banjul [the Gambia].The currency in circulation in West Africa increased steadily through the 1950s in response to the growing demand and increase in the World price for west African primary products such as cocoa, groundnuts and palm oil.
The WACB, however, did not have discretionary control over the money stock of the territories under the money stock of the territories under its sphere of influence. It was set up primarily to promote the influencing of export trade. Specifically, it was changed with the issue of a west African currency, the repatriation of such currencies and the investment of reserves. There was a fixed parity between the local currency and the British pound while the currency had 100 percent sterling banking. The reserves were invested in British and this way facilitated Nigeria’s international payment. As the WACB was automatically linked to the British system , the investment policy was rather conservative in the sense that sterling reserves were invested only in Britain. Moreover, the WEACB could not engage in monetary management, neither were Nigeria’s trained in the art. In order to eliminate this deficiency and promote the growth of the domestic money and capital markets, especially as the country marched toward political independence in 1960, the CBN was established by the central Bank Of Nigeria Act of 1958.
The bank commenced business on 1st July 1959 with an initial capital equivalent to N30 million. The legal f framework of the central bank has been strengthened over time to address lapses in financial system prior to the enactment of 1958 central Bank act the banking system in Nigeria was largely unregulated. Initial attempt in 1952 at streamlining the practice to banking to ensure monetary stability through the enactment of the banking ordinance did not quite address the problem. The spate of bank failures could not be stemmed, thus the central Bank Act of 1958 was enacted to formally establish a central monetary authority that would perform the traditional roles of a central bank. The 1969 Banking Act and its amendment which defined the business of banking and stipulated penalties for banking malpractes further strengthened legal framework.
To further strengthen the supervisory capacity of the bank, the central bank of Nigeria decree No24 and Bank and other financial, Institutions [Bofi] Decree N.25 of 1991 were promulgated. The Bofi Decree among other provisions centralize the functions of licensing as well as regulation of banks and other financial institution in the bank.
The current legal framework within which the CBN operates in the central Bank growth in economics development is one of the many problems facing the Nigerian economy through these problems manifesting themselves in most developing countries and yet this gets worsened with the military rule, Nigeria is a typical area in point. Hence the essence of this research is to examine the topic ‘’THE ROLE OF CBN IN STABIBILISING NIGERIA ECONOMY’.
1.2 OBJECTIVE OF THE STUDY..