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This study was intended to evaluate the independency of the central bank of Nigeria. This study was guided by the following objectives; to evaluate the independency of the Central Bank of Nigeria. To identify the benefits of the independency of the Central Bank of Nigeria. To determine the factors limiting the independency of the Central Bank of Nigeria. The study employed the descriptive and explanatory design; questionnaires in addition to library research were applied in order to collect data. Primary and secondary data sources were used and data was analyzed using the chi square statistical tool at 5% level of significance which was presented in frequency tables and percentage. The respondents under the study were 32 staff of central bank of Nigeria. The study findings revealed that there are factors limiting the independency of the central bank of Nigeria; Based on the findings from the study, efforts should be made by the Nigerian government in ensuring the independence of the CBN.




Central banks are essentially government banks. First and foremost, theygovern monetary policy, controlling how much domestic currency will circulate in a country’s economy at any given time. They also act as financial agentsfor governments, managing and disbursing liquid funds. Third, they may playan international role in setting a country’s exchange rate and/or managing itsforeign reserves. Finally, they also have a number of supervisory and regulatory duties to ensure the ongoing stability of the private banking sector.

Central bank independency refers to the extent to which the central bankcarries out these functions autonomously of executive and legislative control.

In recent years, central bank independency has assumed growing empirical andanalytical significance. On the one hand, the number of countries undertaking central bank reform has gradually increased over the last two decades,escalating dramatically in the early 1990s (Maxfield 1997). On theother hand, this more visible and powerful role for the central bank has beenaccompanied by a large literature in both economics and political science asto the causes and consequences of independency.

The Nigerian economy, on her adoption of democracy in 1999, therefore, started exploring themonetary anchor that is suitable for her economy particularly plague with high inflation and unemployment rate.As a result, the Central Bank of Nigeria (CBN) announced its intention to adopt Inflation Targeting regime inJanuary 2009 which was later shelved (Uchendu, 2009). According to Odoko (2008) the apex bank said ithas shelved the commencement of earlier scheduled inflation targeting expected to start in January, 2009 toenable it effectively fashion out the operational framework in the Nigerian economy. Also, the authority noticedthat in most countries across the world today, the consensus is to grant respective central banks instrument as well as financial and budgetary independence so as to ensure their effectiveness in the formulation and executionof monetary policy. Thus, the Central Bank of Nigeria was granted partial operational autonomy, making itindependent. By 2007, the CBN was given total autonomy (CBN Act, 2007). Hence, the Nigerian monetaryframework now combines operational independence with transparency. An important feature of the framework isincreased accountability through the frequent publication of the communiqué of the apex bank’s operation.

Recently, this autonomy was threatened by the move by the lawmakers to amend theCentral Bank of Nigeria’s Act. This has caused a lot of concern to stakeholders and researchers.

Hence, this study is out to investigate the independency of the Central Bank of Nigeria. This is especiallyimportant in view of the fact that the Central Banks of Nigeria economies has experimented with exchange ratetargeting and monetary targeting in the past. According to Martijn and Hossein (1999) and Dincer andEichengreen (2009) , the case for independence and transparency is based on the notion that it increases the credibility of monetarypolicy as policy becomes predictable by private agents. It also adds to political credibility of a country and theCentral Bank, especially if policy has been time inconsistent. Additionally, independency and transparency is associated with a lowinflation rate.

The Central Bank of Nigeria was established by the CBN Act of 1958 and commenced operations on July 1, 1959. The major regulatory objectives of the bank as stated in the CBN act of 1958 is to: maintain the external reserves of the country, promote monetary stability and a sound financial environment, and to act as a banker of last resort and financial adviser to the federal government. The central bank’s role as lender of last resort and adviser to the federal government has sometimes pushed it into murky regulatory waters. After the end of imperial rule the desire of the government to become pro-active in the development of the economy became visible especially after the end of the Nigerian civil war, the bank followed the government’s desire and took a determined effort to supplement any short falls in credit allocations to the real sector. The bank soon became involved in lending directly to consumers, contravening its original intention to work through commercial banks in activities involving consumer lending. However, the policy was an offspring of the ndigenization policy at the time. Nevertheless, the government through the central bank has been actively involved in building the nation’s money and equity centers, forming securities regulatory board and introducing treasury instruments into the capital market.


Central Bank Independence is closely associated with inflation targeting. Inflation Targeting is defined as aframework for policy decisions in which Central Bank makes explicit commitment to conduct monetary policyto meet a publicly announced numerical inflation targets within a particular time frame (Aliyu and Englama,

2009). Central Bank therefore endeavors to adopt a monetary policyframework that would ensure price stability which can only be achieved by the CBN’s independency. The independency of the Central Bank of Nigeria has been questioned recently by the action of the immediate past president of Nigeria, Mr. Goodluck Jonathan in the suspension of the CBN governor Sanusi Lamido Sanusi. However, the researcher is out to examine the independency of the Central Bank of Nigeria.


The following are the objectives of this study:

1.  To evaluate the independency of the Central Bank of Nigeria.

2.  To identify the benefits of the independency of the Central Bank of Nigeria.

3.  To determine the factors limiting the independency of the Central Bank of Nigeria.


1.  What is the level of independency of the Central Bank of Nigeria?

2.  What are the benefits of the independency of the Central Bank of Nigeria?

3.  What are the factors limiting the independency of the Central Bank of Nigeria?


The following are the significance of this study:

1.  The findings from this study will educate the general public on the need for the independency of the Central Bank of Nigeria with emphasis on the benefits of the independence of the nation’s economy.

2.  This research will be a contribution to the body of literature in the area of the effect of personality trait on student’s academic performance, thereby constituting the empirical literature for future research in the subject area.


This study on the evaluation of the independency of the Central Bank of Nigeria will cover the operations of the CBN with a view of identifying the level of independence of the apex bank.


Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.


Aliyu, S and Englama, A (2009), Is Nigeria Ready for Inflation Targeting?, MPRA Paper, no. 14870, Available Online

Martijn J and Hossein S (1999), ‘Central Bank Independence and the Conduct of Monetary Policy in the Uniited Kingdom’, IMF Working Paper, no 170.

Eichengreen, K. (2009). Measuring Central Bank Independence: Ordering, Ranking, or Scoring? In King Banaian and Bryan W. Roberts Jr., eds, The Design and Use of Political Economy Indicators. New York:Palgrave, 2008

Maxfield E, (1997), ‘Central Bank Independence and Transparency: Evolution and Effectiveness, IMF Working Paper, no.119.

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