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CBN Role in Nigerian Payment System Payment Systems
Introduction | Roles | Modes | Clearing & Settlement | Framework | Achievements | RTGS
The role of Central Bank in National Payment System
There are six major responsibilities of the Bank that were derived from the Act establishing the CBN as amended. They include:
- Act as Banker to banks and provide the smooth operation of payments, clearing and settlement systems.
- Act as Banker and adviser to, and as fiscal agent of the Government.
- Issue currency notes and coins
- License and supervise authorized dealers. (except stock brokers that are licensed by Securities and Exchange Commission and supervised by Nigerian stock Exchange)
- Formulate and implement foreign exchange reserves
- Hold and manage its foreign exchange reserves.
- See more on CBN Mandate
CBN objectives
Based on its broad responsibilities, the overall objective of the CBN is to
ensure that risk control procedures are put in place, through operation of;
- Clear rules and procedures
- Technology standard
- Legal standard
The objective of the CBN in the payments system is therefore classified into
three main areas:
- Exchange of value:
- Accessibility: Access by individuals and businesses to appropriate mechanism in all parts of Nigeria
- The cost of providing payments services would be Reasonable so that cost does not become a barrier to access.
- Efficient Payment mechanisms to protect consumers as well improve popularity and usage.
- Payments and settlement finality:
- CBN would ensure that payments and settlements are executed with finality and irrevocability.
- Settlement procedures that operate on the principles of DVP and PVP would be encouraged.
- Oversight objective:
- Providing a secure and efficient payments system that meets the needs of the economy and international standards.
- Addressing the risks that jeopardize the efficiency of the payment systems, and manage, reduce and contain them.
- Ensuring that fraud prevention and detection methods are in place and that fraud occurrences are low
- Ensuring that a sound legal framework exists.
- Overseeing creation of national payment standards, and ensuring that the requisite infrastructures are in place.
- Serve as lender of last resort in situations of liquidity problems.
The role of the CBN in National Payment Systems
General responsibilities
The Bank is empowered by the CBN Act to formulate and implement monetary policy, to achieve and maintain stability in the general level of prices and make regulations for the proper functioning of a stable market. It is also charged with responsibility to oversee the operations of deposit monetary banks, financial institutions.- Provision of Settlement and Operations Accounts
- Provides settlement and operations accounts for Deposit Money Banks to facilitate inter- bank settlement and other obligations
- maintain accounts for financial institutions
- keeps accounts for government
- facilitates the clearing house operations
- lender of last resort
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The risk reduction measures.
- Settlement arrangement for cheque clearing, where by only settlement banks are allowed to maintain settlement accounts with the Bank, provided they meet the minimum requirements of N15 billion in treasury bills and FGN bonds. The non-settlement banks maintain settlement accounts with their respective settlement banks in line with the agency agreement. However, they maintain operations accounts with the CBN for treasury and foreign exchange operations as well as to meet their statutory cash reserve requirements.
- All settlement accounts must be funded otherwise holdings in government securities/the clearing collateral would be rediscounted to fund the account.
Responsibility of the Nigeria Deposit
Insurance Corporation (NDIC)
The corporation is saddled with the responsibility of ensuring all deposit liabilities of banks in order to protect the depositors against bank failure and enhance public confidence in the banking system. It essentially complements the supervisory function of the CBN. The core responsibilities include:
- Insuring deposit liabilities of licensed banks and such financial institutions operating in Nigeria, so as to engender confidence in the Nigerian banking system.
- Giving assistance in the interest of depositors, in case of imminent or actual financial difficulties of banks particularly where suspension of payments is threatened; and avoiding damage to public confidence in the banking system.
- Guaranteeing payments to depositors, in case of imminent or actual suspension of payments by actual insured banks or financial institutions up to the maximum amount as provided for in the Act.
- Assisting monetary authorities in the formation and implementation of banking policies so as to ensure sound banking practice and fair competition among banks in the country.
- Undertakes the liquidation of failed insured banks when so appointed by the CBN
Click here to go to the NDIC website (will open in another window)
($450,000)
