The Central Bank of Nigeria and the payments system.

Abstract

The payments system of any country is the mechanism for the settlement of business and personal transactions, thus providing a link between the real sector and the financial sector. The Central Bank and the commercial (clearing) banks are the main participants in the payments system. In any modem economic society, the need for a functioning and efficient payments system is very obvious. Modem economies have developed or are developing multilateral payments systems in response to the sophistication in the development of economic activities, having developed beyond the stages of barter and bilateral systems of payments. This permits the settlement of financial obligations for economic operators no matter where such transactions are made. For the payments system to function efficiently, it is important that the financial system is properly developed and efficient, and other participants in the system support and promote its smooth and efficient functioning. In particular, the Central Bank must play a leading role by encouraging the introduction of appropriate payments instruments and formulating policies supportive of the efficient functioning of the payments system. The rest of this paper, limited to the Nigerian payments system, is divided into four main parts. Part II outlines the payment instruments in Nigeria. Part III examines the role of the Central Bank of Nigeria in the payments system while an attempt is made in Part IV to proffer solution to the problems. Part V contains the summary and conclusions.