When Emperor Menelik II opened the first Bank of Abyssinia, it marked the commencement of banking in Ethiopia on February 15, 1906. Shares of the private bank were sold in Addis Ababa, New York, Paris, London, and Vienna. Harar, Dire Dawa, Gore, and Dese branches were opened between 1906 and 1912. (1920). The Franco-Ethiopian Railway, which reached Addis Ababa in 1917, was one of the first projects the bank funded. In 1920, the bank subsequently established a transit office in Djibouti.
Ethiopia’s central bank, the National Bank of Ethiopia (NBE), is in charge of overseeing the nation’s financial and monetary systems. In January 1964, the National Bank of Ethiopia officially opened for business after being founded in 1963 by Proclamation 206 of 1963, which describes its duties and operations. Earle O. Latham, the first Vice President of the Federal Reserve Bank of Boston, served as an emissary for the US Department of State and assisted in the formation of the new organization.
The bank had engaged in both commercial banking and central banking before this proclamation. The decree gave the bank broad administrative autonomy as well as legal identity and increased its capital to ten million Ethiopian dollars.
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Functions and responsibilities
They are entrusted with the following responsibilities:
Formulating and implementing monetary policy
The formulation and execution of monetary policy are one of their main responsibilities. The financial institution controls the amount of money in circulation, establishes interest rates, and maintains the exchange rate to manage the nation’s money supply. The financial institution also oversees the nation’s foreign exchange reserves, making sure there are enough funds on hand to cover the nation’s debts.
Regulating the financial sector
In Ethiopia, the NBE is in charge of overseeing the financial industry. All financial institutions, insurance companies, microfinance organizations, and other financial institutions functioning in the nation are under its supervision and regulation. The financial institution establishes the laws and rules that control the financial industry, as well as standards for lending, investing, and risk management.
Issuing currency
The Ethiopian Birr, the country’s official currency, is issued by the board. The financial institution makes sure that there is a sufficient amount of currency to match the demand for it in the nation. Additionally, it controls how money is distributed and used, ensuring that it is accessible across the entire nation.
Providing banking services to the government
The board manages the government’s accounts and processes transactions for the Ethiopian government as part of its banking services. To fund government expenditures, the bank also issues treasury bills and bonds.
Promoting financial inclusion
To ensure that all Ethiopians have access to financial services, the NBE is dedicated to fostering financial inclusion in the country. The financial institution has put in place some efforts to encourage financial inclusion, including the creation of microfinance organizations and the promotion of mobile banking.
Conducting research and analysis
The board carries out investigations and analyses on various monetary and economic matters in Ethiopia. The bank’s research assists in guiding its policy choices and offers insightful information about the economic and monetary health of the nation.
Representing Ethiopia in international financial institutions
At some international monetary organizations, including the World Bank and the International Monetary Fund, the NBE represents the country. To protect Ethiopia’s interests in the international community, the bank participates in discussions and negotiations on its behalf.
Conclusion
Finally, it should be noted that the National Bank of Ethiopia (NBE) is crucial to the administration of Ethiopia’s monetary and financial system. Formulating and carrying out monetary policy, overseeing the monetary industry, conducting research and analysis, and representing Ethiopia in international monetary institutions are just a few of its duties and responsibilities. To maintain Ethiopia’s economic stability, encourage monetary inclusion, and promote economic growth and development, the NBE is crucial.
