Central bank explained

The central bank is a country's highest bank. It regulates all other banks and serves as a bank to other banks as well as the government. The decision of the leader of the apex bank has a significant effect on the economy as a whole. In this article, we discussed this term in detail.

1. What's central bank

A bank responsible for the regulation of the money market and every institution under it. It is the highest bank of any country. Central banking involves managing the supply of money, regulates commercial banks, guides the country's reserves, and be the banker to the government.

In the United States, it is referred to as the Federal Reserves Bank. In Nigeria, we call it the Central Bank of Nigeria. While in the UK, it is The Bank of England. It is the responsibility of the governor of the central bank to manage money supply. This is done by holding a quarterly monetary policy meeting in which money market parameters such as the monetary policy rate are adjusted to meet current economic trends.

The Central Bank also regulated other areas of the banking system to ensure that those with economic power cannot gain from it. For example, banks are required to submit monthly and yearly returns. This helps the CBN to manage how banks operate and if they comply with various guidelines. They ensure that the banking system is not vulnerable to economic dangers, so that customers' money is not jeopardized.

Therefore, any failed banks are sold or merged with another bank to keep customers' funds intact. In addition, the apex bank is involved in recapitalization of commercial, merchant, and microfinance banks. The goal is to ensure that those banks can thrive and survive the current economic climate. In the last week of March 2024, the Central Bank of Nigeria revised the recapitalization requirement upward and set out deadlines for banks to meet up this requirement.

2. Conclusion

The highest bank in Nigeria is a foremost bank with the responsibility of managing the money supply of a nation's economy. From the foregoing we have read that this can be done via monetary policy meetings and regulations of banks.