Which of the following is a function of the central bank?

Step 1: Analyze the question The question asks which option is a function of the central bank (in Nigeria, the Central Bank of Nigeria, CBN). We need to separate central bank functions from those of commercial banks and other financial institutions.

Step 2: The concept Main functions of a central bank:

• Issuing currency (notes and coins), as the sole authority
• Banker to the government
• Banker to commercial banks (the "bankers' bank")
• Lender of last resort
• Implementing monetary policy (controlling money supply and credit)
• Managing foreign exchange and external reserves
• Regulating and supervising banks

Step 3: Check each option

• A. Accepting deposits from the public: This is a commercial bank function. The CBN does not take deposits from the general public. ❌
• B. Agent of payment for individuals: This is a commercial bank service (standing orders, cheques, transfers). ❌
• C. Discounting bills of exchange: Commercial banks and discount houses do this routinely. The central bank may rediscount bills as part of its lender-of-last-resort role, but plain discounting is not its distinguishing function. ❌
• D. Issuing of currency: Only the central bank has the legal authority to issue legal tender. ✅
• E. Provision of short term housing loans: This is a function of mortgage banks (such as the Federal Mortgage Bank of Nigeria) and commercial banks. ❌

Step 4: Answer The correct option is D, Issuing of currency.

Exam tip: Whenever a question mentions the central bank, look for words like "sole issuer of currency," "banker to government," "bankers' bank," or "lender of last resort." Anything involving the public, such as deposits, loans to individuals, or payments, usually points to commercial banks.