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This is the first comprehensive book on the politics and economics of financial sector consolidation in an emerging market in West Africa. It draws on the author's twenty years experience working with multinationals in this oil-rich zone, to address key issues and examine banking reform in one of the world's fastest-growing economies.
For the large number of developing countries undergoing significant structural transformations, one of the most important and controversial adjustment areas is that of the financial markets. Focusing on the role of the institutional and enabling environment within which financial reform occurs and on the integration of principles of finance with more macroeconomic approaches to the subject, the book contains case studies of reform experiences in Argentina, India, Nigeria, Turkey and Uruguay. Themes studied include the 'go slow' versus 'big bang' approach and the particular problem of bank-firm inter-linkages in Eastern Europe.
This Technical Note focuses on strengthening of monetary and liquidity management in Nigeria. The Central Bank of Nigeria (CBN) has robust institutional framework in place to design and implement monetary policy. The CBN has also sufficient instruments for short-term liquidity management. The Monetary Policy Rate (MPR) corridor serves as a signaling device for the monetary policy stance. Although use of the overnight facilities is at the banks’ discretion, the CBN is able to use repo operations and outright transactions to manage day-to-day liquidity and guide short-term interest rates toward the MPR.
This Selected Issues paper examines the role of lower oil prices in the recent deterioration in Nigeria’s macroeconomic indicators, the impact on corporate and financial sector performance. and the forward-looking aspects of promoting job-intensive growth and strengthening state and local government finances. Although the slump in oil prices contributed to sluggish growth, the lack of foreign exchange weakened corporate performance, setting the stage for nonperforming loans. Structural reforms to improve the business environment can have a positive impact on growth, while fiscal reforms would help strengthen finances of subnational governments.
The paper empirically examined the impact of financial sector reforms on Bank growth in Nigeria and data spanning a period of thirty four years (i.e. 1971-2005) was analysed using the Panel Data Model. Earnings per Share (EPS), Returns on Capital Employed (ROCE) and Returns on Equity (ROE) were used as proxies for Bank growth (i.e. the dependent variables) while Interest Rate, Real Financial Savings and Exchange Rates were used as the proxies for financial sector reform (i.e. the independent variables).A number of diagnostic tests were also conducted on the residuals to evaluate the models; these include the Breuch-Godfrey Serial Correlation Lagrange Multiplier (LM) Test, the Ramsey REST Test of Specification Error (i.e. to test for omitted variables, incorrect functional form, correlation between exogenous variables and error term) and the Cumulative Sum (CUSUM ) tests of parametric stability, the LM test of Serial Correlation showed that there was an absence of first order serial correlation in the residuals and cumulative sum tests also showed that observations are more stable during Pre-S.A.P (Structural Adjustment Programme) period than the Post-S.A.P era.The result obtained showed that though the impact of financial sector reforms on bank growth in Nigeria for the period of study was significant, especially as measured by the proxies of Earnings per Share and Return on Equity, it was not significant enough to transform the nations' economy to the desired level.Given the foregoing therefore, the study suggests among other things that what is needed is for financial sector reform to achieve its purpose, a stable macroeconomic environment is a prerequisite and it is germane to ensure that government fiscal policies are crafted to complement monetary policies.
This First Review Under the Policy Support Instrument (PSI) for Nigeria reports that structural reforms are proceeding in line with the National Economic Empowerment and Development Strategy. The authorities’ commitments under the PSI primary objectives of the economic reform program include entrenching macroeconomic stability, strengthening public financial management, and reducing the costs of doing business. The Central Bank of Nigeria has developed plans to invest some of its international reserves in higher yield financial assets, and allow domestic banks to bid to be custodians for the investments.