Central Bank of Nigeria: History, Purpose, and Functions

Nations around the world strive for a stronger banking sector to boost their gross domestic product.

From time immemorial, banks have played a pivotal role in offering investment opportunities as well as credit facilities to varying entrepreneurs and corporations.

For a stable economic outlook, nations all agree that banks must be under some form of regulation or another.

Such regulations eventually create a stronger and more stable banking sector that can be trusted by the general public. This is where central banks come in to stabilise the general economy.

In this post, we take a look at the Central Bank of Nigeria, its history, its purpose, and others.

What is the Central Bank of Nigeria (CBN)?

The Central Bank of Nigeria is the apex bank in Nigeria, created and fully owned by the Federal Government of Nigeria, and tasked with the responsibility of regulating the Nigerian banking sector for increased growth.

History of the Central Bank of Nigeria

The Central Bank of Nigeria was founded in 1958, just two years before the independence of Nigeria in 1960. The CBN was established to improve and sustain the general economy of Nigeria.

From the start, the creators of the Central Bank designed the CBN after the Bank of England with the sole aim of being a bank for the government and managing the nation’s currency distribution. 

Therefore, the CBN was tasked with distributing the official currency, aiding economic growth, and also stabilising the monetary stability of the country.

Over the years, the CBN’s aims and objectives have been challenged following a considerable collapse in the prices of crude oil, which is Nigeria’s major government income source. 

Nonetheless, the Central Bank has always, at some point, proved strong by further strengthening the nation’s economy.

This strategic move by the Central Bank of Nigeria attracted her additional duties in 1980, which included regulating the country’s financial system as well as supervising banks and other numerous financial institutions in the country. This increased the nation’s financial stability greatly.

Another challenge to the CBN was seen in the 1990s, when the Central Bank and the nation were faced with the issues of falling naira, reduced foreign exchange earnings, and increasing inflation. 

Nonetheless, the Central Bank stood true to its name by introducing policies that aided a bounceback in the country’s economic growth. 

Some of these policies include the devaluation of the naira, adjusting the interest rate, and providing credit facilities to production companies.

To this day, the Central Bank is essential to Nigeria’s economic growth track and keeps on undertaking a significant role in the economy of Nigeria, with a greater aim at promoting productivity and general economic growth. 

Over the years, the CBN has shown adaptability, efficiency, and strength in handling economic issues, as well as maintaining a stabilised structure for Nigeria’s growth.

Purpose and Functions of the Bank

The Central Bank of Nigeria’s duties have evolved from simply being a central bank to being a driver of economic growth for the nation. Here are some of the current duties of the bank:

Regulate the money supply

This is perhaps one of the most significant duties of the CBN. The Central Bank controls and regulates the way money is supplied in the country. 

The CBN achieves this regulatory style by purchasing and selling government securities, managing the naira and regulating its supply in circulation, and also fixing the interest rates payable on loans by banks in the country. 

Through the regulation of the supply of money in the country, the Central Bank can further control inflation and the fall of the naira.

Stabilise the financial system in the country

The CBN has the primary duty of stabilising the financial system in the country today. 

The Central Bank guides banks and other financial institutions in the country to maintain a stable economic outlook. 

This regulatory function involves the CBN setting capitalization structures for banks, fixing policies and strategies that banks can adopt in the long and short run, as well as ensuring best bank practices.

Ensuring Fiscal and Monetary Policies

The CBN is the major body in charge of ensuring adherence to the fiscal and monetary policies of the nation. 

These varying policies include steps aimed at ensuring inflation is managed, the naira is stable, and there is increased economic growth.

The bank deploys numerous techniques, including increasing interest rates, issuing policies and frameworks, and also sanctioning banks to ensure this.

Lender to banks

The Central Bank of Nigeria acts as a lender to banks and government institutions in Nigeria. 

The CBN provides financing options that ensure banks maintain their efficiency and stay stabilised.

Bank to the Government

The CBN acts as a bank for the governments of the federation. Every state government and the federal government maintain accounts with the Central Bank. 

The CBN provides all the services that conventional banks provide to individual citizens, governments, and government institutions.


The Central Bank was created by an Act of the National Assembly and has since its creation maintained the economic outlook of the country, with significant concerns being placed on the protection of the naira and the overall growth of the economy.

Frequently Asked Questions

Who is the current CBN governor?

The present governor of the CBN is Yemi Cardoso.

Where is the CBN’s headquarters located?

The CBN’s headquarters are located in Abuja, Nigeria.