CHAPTER ONE
INTRODUCTION
1.0 BACKGROUND OF THE
STUDY
The goal of every
government of nay economy is to archive equilibrium in the economic system. It
is therefore important that the authorities concerned must regulate the system
indirectly with policies. This necessitates that government of any country
adopting certain economic policies in order to consolidate specific
macro-economic goal or objective. Some of such major economic policies include
the monetary policies, fiscal policies, exchange rate policies, most of this
policies can only be administered thorough the agent of commercial bank which
is the pivot of this research work. In Nigeria for instance. Monetary policies
have been conducted under wiled ranging economic environment since the
establishment central bank of Nigeria (CBN) over many years ago. Basically,
monetary and finical polices serve as one of the vital and strategic economic
policy adopted by the government of the country in posturing the economic
development with a view of consolidating certain economic goals such as
acceleration of the economic growth, sustainable balance of payment,
maintaining a stable exchange rate of international competitive level,
combating inflation, price stability and full employment.
Monetary policy is
defined according to the CBN briefs 1994 as the combination of measures design
to regulate the values supplied and cost of money in an economy. In consonance
with the level of economic activity. Anyanwu (1993, VS 140) refer monetary
policies as major stabilization weapon involves measure designed to regulate
and control the volume, cost, and availability and direction of money and
credit in an economy to archive some specified macro-economic policy
objectives. Fiscal policy on the other hand is an attempt by the government
using expenditure and tax policy to shift the aggregate demand and aggregate
expenditure functions towards desired position. According to Anyanwu (1997, VS
241) fiscal policy is taking to refer to that part of government policy is
concerning the raising of revenue and deciding on the level and pattern of
expenditure fore the purchase of influencing economic activities or attaining
some desirable macro-economic goods. The intricacy in handling the monetary and
fiscal policy to consolidating the desired macro-economic objective necessitate
that needs for an independent authority so in Nigeria today. The federal
government is the sole monetary authority, but it has delegated some aspect of
implementation to both the ministry of finance and the central bank of Nigeria
is to formulate and execute monetary policy, to promote financial system. To
archive a desired policy objective, the CBN is empowered to use monetary policy
techniques or instrument and the CBN dose most of its function through he
commercial banks. This techniques can be classified into group, the direct
portfolio control and the indirect portfolio approaches. Indirect portfolio
includes the open market operation (OMO), reserve requirements, discount rate
mechanism. While direct instrument includes; selective credit control, credit
selling and moral suasion. Furthermore monetary policy presupposed that there
is some relationship between the supply and the demand for money on the one
hand economic aggregate such as output, income, savings, general price level
and investment. The mix of monetary policy instrument to be used and its
effectiveness depends on this relationship. Monetary policy involves monetary
management. Monetary management according Ojo (1992, VS 3) is defined as the
act of controlling the movement of monetary and credit aggregate in the
issuancxce of stable price and sustainable economic growth. Therefore the
Central bank or the central monetary authorities must attempt to keep the money
supply growing at an appropriate rate o insure sustainable economic growth,
domestic and external stability. Howe ever, in Nigeria the role of monetary and
fiscal policy has increased tremendously since after independence. Both
civilians and minitry government has adopted this policies consolidate macro
objectives. But despite this measure to suit the constant changes in the
economic situation of Nigeria, still a lot of problem be deviled the economy
ranging from high unemployment, inflation and balance of payment. This prompted
me to research on examination of the roles of commercial banks in consolidating
stability in foreign exchanges.
1.1 STATEMENT OF PROBLEMS
The application on the
monetary and fiscal policies by the monetary authorities using the monetary
instrument such as open market operation (OMO), bank reserves etc. in
consonance with the prevailing economic situation is aimed at consolidating the
macro-economic good of the country such as full employment, low level of
inflation, favorable balance of payment. But in Nigeria, inspite of this
numerous monetary policy measures adopted, the economy still suffers the
problem of high rate of unemployment, inflationary pressure, balance of payment
deficit and unstable foreign exchange.
The question that
follows the effective are monetary and fiscal policies are in controlling some
of this variables, inflation in particular. Why have monetary policies and
fiscal policies late in ore economy inspite that they have work in other
country. What may be the reason militating against the effectiveness of the
monetary policies? As the commercial are the enzymes used by
the CBN in administering economic measures, what can they do to aid in
consolidating foreign exchange stability. In view of the above outlined
question, this research work will try as much as possible to proffer some
answers.
1.2 OBJECTIVE OF THE
STUDY
The study aims on
finding the following;
1. To reexamine
the instrument of monetary and fiscal policy and there performance
2. To examine
the major policy objective and their achievement in the country
3. To
appraise some monetary and fiscal policy measures in Nigeria and see how
commercial bank respond to there instruction
4. To make
recommendation to policy members
1.3 SIGNIFICANCE OF THE
STUDY
This research work is
significance because it tries to establish the relationship of monetary and
fiscal policy and the role commercial bank plays in the economic stabilization.
It is hoped that this work will enhance and improve the use of monetary and
fiscal policy in the realization of macro-economic goals associated with
economic growth and development
1.5 DEFINITION OF TERMS
Commercial bank: the
first set of banks to appear in the Nigeria banking area is the commercial
bank. The African banking cooperation with head office in Liver Pool opens a
branch in Lagos in 1892. It has some problems and later metamorphosize into
what is currently known as first bank of Nigeria. The first sets of bank to
operate in Nigeria were expert rate banks. They dominated the scheme until 1933
when the first sovereign indigenous bank joined them. The bank and other
financial institution decree No.25 of 1991 define a commercial bank as any bank
in Nigeria whose business include acceptance of deposit withdrawal by cheque.
Department | Banking and Finance |
Project ID Code | BFN0134 |
Chapters | 5 Chapters |
No of Pages | 41 pages |
Reference | YES |
Format | Microsoft Word |
Price | ₦4000, $15 |
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Contact Us On | +2347043069458 |