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Money, Banking and the Nigerian Financial System

💹 Economics 📋 SS2 📅 Second Term ⏱ ~20 min 📝 5 quiz questions
📖 Content 📝 Quiz (5)

Money

Money is anything generally accepted as a medium of exchange, store of value, and measure of value.

Functions of Money

  1. Medium of exchange: used to buy and sell goods
  2. Unit of account: measures the value of goods (prices)
  3. Store of value: savings hold value over time
  4. Standard of deferred payment: used to settle debts

Types of Money

  • Commodity money: items with intrinsic value (gold, cowries, kola nuts)
  • Fiat money: paper money declared legal tender by government (Naira notes)
  • Bank money: deposits that can be used via cheques, cards, transfers
  • Cryptocurrency: digital currency (Bitcoin, Ethereum)

The Nigerian Financial System

Central Bank of Nigeria (CBN)

The apex bank that regulates the financial system, issues the Naira, controls monetary policy, and manages government reserves.

Commercial Banks

Accept deposits from the public and make loans. Examples: Access Bank, GTBank, First Bank, UBA, Zenith Bank.

Functions of Commercial Banks

  • Accept savings and current account deposits
  • Grant loans and overdrafts
  • Transfer of funds (NEFT, RTGS, mobile banking)
  • Issuing ATM cards and bank statements

📝 Quiz — Test Your Understanding

Answer all 5 questions, then click Submit to see your result.

Question 1 of 5
Which function of money allows it to be used to purchase goods and services?
The medium of exchange function means money is widely accepted in exchange for goods and services, eliminating the need for barter.
Question 2 of 5
The Central Bank of Nigeria (CBN) is responsible for:
The CBN is the apex (central) bank of Nigeria. It issues currency (Naira), implements monetary policy, and regulates commercial banks.
Question 3 of 5
Cowries used as money in ancient Nigeria is an example of:
Commodity money has intrinsic value itself — cowries, gold, kola nuts, and salt were all used as commodity money in different societies.
Question 4 of 5
Which of these is NOT a function of commercial banks?
Only the Central Bank has the exclusive right to issue currency notes. Commercial banks accept deposits, grant loans, and transfer funds — but cannot print money.
Question 5 of 5
What is fiat money?
Fiat money has value because the government declares it legal tender — it is not backed by a physical commodity like gold. All modern currencies (Naira, Dollar, Euro) are fiat money.
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