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The topic of this research effort is open market operation as an instrument of monetary policy in Nigeria. A case study of Central Bank of Nigeria (C.B.N). As the title suggest the overall object of the research is to critically examine the Open Market Operation as an Instrument of Monetary Policy in Nigeria growth of economic taking into cognizance. Central Bank of Nigeria (C.B.N). The caller co-operating body (private and public) have detained Open Market Operation in different perspectives. According to Britannica encyclopedia open market operation (O.M.O) is the process which involve the purchase or sales of government securities and some commercial paper by the Central Bank for the purpose of regulating the money in supply and credit conditional basis. Nevertheless, Open Market Operation involve the buying and selling of security from and to commercial bank in other to reduce the volume of money in circulation, if the Central Bank feel that the money in circulation in the country is too small and they want to increase it, they will buy security from the commercial bank, that will increase the volume of money in possession of the public which will be part of money in circulation.

On the other hand, if the Central bank feel that the amount of money in circulation is too surplus and they want curtail it, it will sell security to commercial bank and the same time reduce their landing power and thereby decreasing the amount of money in circulation in the country. Special attention is paid in the study to the evolution of open market operation in Nigeria. The central bank of Nigeria contribute towards the economic growth and the role of the central bank of Nigeria (C.B.N) set aside towards the creating balance in the money circulating within the country for economic growth and development and the problem facing the open market operation and more shall be examine. However, research of this kind call for a heavy reliance of a number of source, primary and secondary source.


Title page





Table of contents


1.0   Introduction

1.1   Objective of the study

1.2   Justification of the study

1.3   Scope of the study

1.4   Limitation of the study

1.5   Plan of the study

1.6   Research hypothesis

1.7   Definition of terms of research hypothesis


2.0   Review of related literature

2.1   An overview of monetary policy

2.2   An overview of C.B.N

2.3   Organization of central bank of Nigeria

2.4   Structure of central bank of Nigeria


3.0   The design and implementation of monetary

policy instrument under economic crisis

3.1   The economic and policy strategies

3.2   Monetary policy objective and instrument

3.3   Monetary and credit development

3.4   Organization chart of the central bank of Nigeria

3.5   The implementation of indirect monetary control

3.6   Research methodology


4.0   The design and implementation of monetary

policy under economic adjustment

4.1   The C.B.N discount window before November 1989

4.2   The liquidity crisis of 1989 C.B.N support

4.3   The discount window post 1989

4.4   Sources of C.B.N economic and financial

review vol. 23 ND1

4.5   O.M.O and other monetary policy instrument


5.0   Summary

5.1   Conclusion

5.2   Reference





Prior to the introduction of structural adjustment programme in September 1986, the main instrument of monetary policy employed by the Nigeria monetary authority were mainly direct control which comprise the imposition of credit allocation supplement to varying degrees by each and liquidity ration requirement.

The prolong use of these direct control generated considerable problems and become counter productive some of the negative effect of the direct control include reduced competition in the financial system leading to inefficiency and misallocation of resources in the banking system or section credit ceiling generated arbitrary and high lending ratio link of transparency in transaction and the employment of various plans to circumvent the control by window dressing the use of balance sheet item and channeling of transaction through uncontrolled institution especially mushroom finance house. In her effort at selling lasting solution to these problem of structural implementation balance.

Nigeria embarked on a structural adjustment progarmme (SAP) the major aspect of the deregulation of appropriate pricing policy in all major sector with greater reliance on market force and reduction in complex administration control. But due to the unreliability of the economy, the objective of this programme could not in any way be achieved due to this, the apex of direct control to open market operation in one form or another is the main instrument of monetary control to open market operation in one under the direct or market based system of monetary management. The use of one is typically supported by reserve requirement and discount window operation by central bank.

OMO essentially in the sale or purchase of eligible bill or securities in the open market by central bank for the purchase altering the supply of bank reserve balance the level of primary money and consequently monetary and financial condition by allowing the price of securities offered in the market to move in line with prevailing condition.

The central bank tries to elicit the banks and other institution which participate in OMO.

In the open market sale of example the bank subscribing to the offer down on their reserve balance at the CBN thereby reducing the overall liquidity of the banking system to creative credit which currently are the biggest investors in government treasury bill, makes their subscription through the discount houses which have been active in promoting a secondary market in these securities pillowing the modest initial offering of 250 at the maidan one session in June 1993.

Twenty subsequent session were conducted in 1993 at which a total of 44.950m federal government treasury bill have offered for sale and total of 49.965m were sold to subscriber qualitative control anchored on the use of open market operation (OMO)


        The aims of this study is to review revolution and performance of open market operation in Nigeria monetary policy instrument objective remained broadly the same which are:

  1. Maintaining of healthy balance of payment
  2. Promoting an adequate and sustainable level of economic growth and development
  • Promoting of stable prices and support of external equilibrium
  1. To trace the historical development of open market operation
  2. To put forth suggested solution in solving the identify problem


        A policy may be simply defined as a course of action embarked upon by government or management to achieve stated objectives monetary policy is concerned with effort by the monetary authorities to influence the direction of economize activities by varying in the level of money supply and the cost availability of credit.

The instruments by which the monetary authority attempt to achieve the stated objective are the direct instrument of monetary control.

Therefore, the main purpose of this study is to economize the general effort both positive and negative that the introduction of open market operation has no monetary policy in Nigeria and to provide reliable solution to the problem emanated from the instrument.

Also, this work is of importance to the parties of monetary authority in Nigeria in various field to provide more efficient and reliable information on the instrument.

The study would also assist the upcoming management to know the challenge of them in filling the loopholes of former instrument.




This project focuses on open market operation as an instrument of monetary policy in Nigeria. Since the effect of it differ from one country to another due to the level of advancement and technological know-how, it was impossible to cover all monetary authorities in Nigeria. Thus, the sample of finance used was that of central bank of Nigeria being the apex of monetary authority. The finding obtained was then generalized to the Nigeria situation since all parties concern operates within the same legal framework.


        It was only a sample that was selected and the findings generalized due to the limited financial resource.

The time factor was also another limiting factor. However, the limitation did not in anyway have adverse effect on the study since the monetary authority in Nigeria have the same guiding principle objective approach and unified body (CBN) every effort was therefore made to see that the objective of the study were achieved.



        This research work comprise of five chapters, on the introduces the introduction, chapter two contain the historical background of monetary policy and review on CBN then research methodology was also treated in chapter one, chapter three consist of the design and implementation of monetary policy under economic adjustment was treated in chapter four, summary conclusion and recommendation are treated in chapter five.


        The research through literature review explores the effect of this consolidation on both the bank and the Nigeria economy and found that induced (CBN) reform has change the market structure of the banking sector increased the efficiency and reliability of the banks and created opportunities for financial institution. The research points further that reforms of this nature such as consolidation of banks are one of the ways to improve the banking sector for financial stability and sustainable development. Hence, recommend that further bank reforms be worked on so as to improve efficiency in the industry for the sale of economic development.


The definition of related term of research hypothesis are the 4ps which are the product price, place and promotion. Product can be defined as substance that is manufactured or refined for sale. Also, as anything that produced by human or mechanical effort or by nature process. Price is the amount of money expected required for product. It’s equivalent for which product is bought, sold or offered for sale. Place where you can expect of fined your customer and consequently where the sale is realized. Knowing this place, you have to look for a distribution channel in order to reach your customer. The last one is promotion, the promotion the function of promotion is to affect the customer behavior in order to close a sale promotion include mainly three topics which are:

  1. Advertisement
  2. Public relation
  • Sale promotion





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