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JAMB Economics 1982 Question 29

Question 29

Financial Institutions

Which is considered the most effective tool by which the Central Bank of Nigeria can control the activities of commercial banks?

  1. A.Open market operation
  2. B.Reserve requirements
  3. C.Bank rate
  4. D.Directives
  5. E.Special deposits.
Show the answer and explanation

Answer: B (Reserve requirements)

Explanation

Nigeria's money market was too small for open market operations to work well, so changing the cash and liquidity reserve requirements was the CBN's most effective control.