CIBN Banking Principles
Past Questions
38+ verified Banking Principles past questions for CIBN. Step-by-step worked answers in 5 Nigerian languages.
Banking Principles topics (2)
Sample Banking Principles past questions
1. CBN's primary role:
- A. Tax collection
- B. Currency issue and monetary policy
- C. Police
- D. Education
Answer: B
AI Explanation
**The reasoning** The Central Bank of Nigeria (CBN) is Nigeria's **monetary authority** — it controls the country's money supply and ensures economic stability. Its two core functions are: 1. **Currency issue**: CBN has the exclusive right to print and distribute the Naira. You'll notice "Central Bank of Nigeria" written on every naira note. 2. **Monetary policy**: CBN controls interest rates, manages inflation, and regulates banks to keep the economy stable. Think of actions like adjusting the Monetary Policy Rate (MPR) or setting reserve requirements for commercial banks. This is the principle of **central banking** — one institution controls the nation's money to maintain economic order. **Why the wrong options tempt you** - **A (Tax collection)**: The Federal Inland Revenue Service (FIRS) handles this, not CBN - **C (Police)**: Nigeria Police Force does law enforcement — completely different ministry - **D (Education)**: Federal Ministry of Education manages this These mix up different government agencies. Students confuse them because they're all "government work." **Quick takeaway** Remember: **CBN = Currency + Control of Money** — if the question involves naira notes, interest rates, or banks, think CBN first.
2. Commercial banks accept:
- A. Only loans
- B. Deposits
- C. Insurance premiums only
- D. Tax
Answer: B
3. Monetary policy tool:
- A. Stamp
- B. Open market operations
- C. Subsidies
- D. Customs duty
Answer: B
AI Explanation
**The reasoning** Monetary policy refers to actions taken by a country's **Central Bank** (like the CBN in Nigeria) to control the money supply and interest rates in the economy. The key principle here is: *monetary policy = control of money and credit*. **Open market operations** is when the Central Bank buys or sells government securities (bonds, treasury bills) to banks. When CBN buys securities, it pumps money into banks → more lending → economy expands. When CBN sells securities, it pulls money out → less lending → economy cools down. This directly controls how much money flows in the economy. **Why the wrong options tempt you** - **Subsidies** and **Customs duty** are **fiscal policy** tools — government spending and taxation decisions (handled by Ministry of Finance, not Central Bank) - **Stamp** duties are also fiscal (tax collection) The trap: confusing monetary (Central Bank controlling money) with fiscal (Government controlling spending/taxes). They both affect the economy but use different tools. **Quick takeaway** If the Central Bank does it to control money supply, it's monetary policy; if the government does it through spending or taxes, it's fiscal policy.
4. A bank's main source of income is:
- A. Donations
- B. Interest on loans
- C. Government grants
- D. Share sales
Answer: B
5. The lender of last resort in Nigeria is the:
- A. Commercial banks
- B. Central Bank of Nigeria
- C. NDIC
- D. World Bank
Answer: B
6. A cheque that cannot be transferred is marked:
- A. Open
- B. Account payee only
- C. Bearer
- D. Order
Answer: B
7. A current account typically allows:
- A. No withdrawals
- B. Frequent withdrawals via cheque
- C. Only annual access
- D. No deposits
Answer: B
8. Liquidity refers to how easily an asset converts to:
- A. Gold
- B. Cash
- C. Shares
- D. Property
Answer: B
9. A savings account is designed to encourage:
- A. Spending
- B. Saving
- C. Borrowing
- D. Trading
Answer: B
10. The cash reserve ratio is set by the:
- A. Customers
- B. Central Bank
- C. Traders
- D. Auditors
Answer: B
11. Collateral is security pledged for a:
- A. Deposit
- B. Loan
- C. Salary
- D. Gift
Answer: B
12. Which CBN department handles inter-bank cheque clearing in Nigeria?
- A. Banking Supervision
- B. Banking Services
- C. Currency Operations
- D. Financial Markets
Answer: B
AI Explanation
Banking Services Department of CBN operates clearing through NIBSS for inter-bank settlement.
13. What does NUBAN stand for in Nigerian banking?
- A. National Universal Bank Account Number
- B. Nigeria Uniform Bank Account Number
- C. Nigerian United Bank Account Number
- D. Nigerian Unified Bank Account Numbering
Answer: B
AI Explanation
NUBAN (Nigeria Uniform Bank Account Number) is the 10-digit account number standard introduced by CBN in 2010.
14. Which is NOT a function of a central bank?
- A. Issuance of legal tender
- B. Banker to commercial banks
- C. Granting loans to individuals
- D. Lender of last resort
Answer: C
AI Explanation
Central banks do not lend directly to individuals. They issue currency, regulate banks and act as lender of last resort.
15. Minimum capital requirement for a commercial bank with international authorisation in Nigeria (2024 recapitalisation):
- A. ₦25 billion
- B. ₦50 billion
- C. ₦100 billion
- D. ₦500 billion
Answer: D
AI Explanation
Per CBN's 2024 recapitalisation circular, banks with international authorisation must maintain ₦500 billion paid-up capital (₦200bn national, ₦50bn regional).
16. RTGS in Nigerian payment systems is BEST suited for:
- A. Small retail payments
- B. Large-value time-critical inter-bank settlements
- C. Standing orders only
- D. USSD transfers
Answer: B
AI Explanation
Real-Time Gross Settlement (RTGS) is for high-value, urgent transfers, settled individually in real time.
17. A standing order is BEST defined as:
- A. Customer's instruction to pay fixed amounts on fixed dates
- B. Court order freezing an account
- C. Direct debit initiated by payee
- D. Periodic guarantor repayment
Answer: A
AI Explanation
Standing orders are customer-controlled fixed payments on fixed dates — e.g. monthly rent.
18. Primary difference between a standing order and a direct debit:
- A. Standing orders are fixed and payer-initiated; direct debits are usually variable and payee-initiated
- B. Direct debits are only for utility bills
- C. Standing orders need collateral
- D. Direct debits cannot be cancelled
Answer: A
AI Explanation
Standing orders are set up and controlled by the payer for fixed amounts; direct debits are initiated by the payee and amounts vary.
19. Which is a near-money asset?
- A. Cash in hand
- B. Treasury Bills
- C. Long-term loan
- D. Fixed assets
Answer: B
AI Explanation
Near-money assets are highly liquid and quickly convertible to cash with little loss — Treasury Bills are the classic example.
20. What is 'float' in banking?
- A. Interest on overdrafts
- B. Funds in transit between deposit and clearing
- C. Idle till cash
- D. Off-balance-sheet items
Answer: B
AI Explanation
Float is the amount of funds appearing in both payer and payee accounts during clearing time.
21. A 'crossed cheque' must be:
- A. Paid only into a bank account, not over the counter
- B. Paid in cash only
- C. Endorsed by two directors
- D. Drawn in foreign currency
Answer: A
AI Explanation
Two parallel lines on a cheque restrict payment to the payee's bank account; it cannot be cashed at the counter.
22. Bank Verification Number (BVN) primarily exists to:
- A. Replace ATM cards
- B. Authenticate identity uniformly across the banking industry
- C. Eliminate cheques
- D. Calculate credit scores only
Answer: B
AI Explanation
BVN gives each customer a single biometric identity used across all banks to prevent fraud and impersonation.
23. Which is a contingent liability of a bank?
- A. Customer deposits
- B. Vault cash
- C. Guarantees issued on behalf of customers
- D. Owed taxes
Answer: C
AI Explanation
Bank guarantees are contingent liabilities — they become real obligations only if the customer defaults.
24. Cash Reserve Ratio (CRR) is:
- A. Cash held by customers
- B. Percentage of deposits banks must keep with the central bank
- C. Total shareholding
- D. Branch cash limit
Answer: B
AI Explanation
CRR is the proportion of deposits CBN compels banks to maintain as reserves — a monetary policy tool.
25. USSD banking in Nigeria works because USSD uses:
- A. Mobile data only
- B. Voice channels
- C. GSM signalling channels
- D. Wi-Fi only
Answer: C
AI Explanation
USSD rides on GSM signalling channels, which is why it works on basic phones without internet.
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