Functions of Money and the Role of Commercial Banks

What Is Money?

Money is anything generally accepted as a medium of exchange for goods and services, replacing the inefficiencies of trade by barter.

Functions of Money

• Medium of exchange: used to buy and sell goods.
• Unit of account: measures and compares the value of goods.
• Store of value: can be saved and used later.
• Standard for deferred payment: allows debts to be settled in the future.

Qualities of Good Money

Good money should be durable, divisible, portable, scarce, acceptable and of uniform/stable value.

Commercial Banks

Commercial banks accept deposits, grant loans, and provide payment services such as cheques, transfers and ATMs. They help mobilise savings and channel them into productive investment.

The Central Bank

In Nigeria, the Central Bank of Nigeria (CBN) regulates the banking system, controls the money supply, prints currency, and supervises commercial banks to keep the economy stable.