By buying treasury bills, the Central Bank of Nigeria intends to

  • A increase money supply in the economy
  • B reduce the cash reserve ratio for banks
  • C reduce money supply in the economy
  • D increase the capital base of commercial banks
jamb 2010economics

The correct answer is C. reduce money supply in the economy

By buying treasury bills, the Central Bank of Nigeria intends to reduce the excess money in circulation in the economy. When the CBN issue treasury bills, they are inviting the public to invest in debt security. This means people will buy the security for a maturity period of 0-3 months. 

By doing this, the excess money held by households is reduced. It is used to reduce money in supply and to control inflation.

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