2013年-IMF国际货币组织全球_Nigeria_Publication_of_Financial_Sector_Assessment_Program_Documentation––Technical_Note_on_Strengthening_Monetary_and_Liquidity_Management_25页_1mb

Summary of Nigeria: Publication of Financial Sector Assessment Program Documentation—Technical Note on Strengthening Monetary and Liquidity Management

Core Content

This document is a Technical Note from the International Monetary Fund (IMF) on Strengthening Monetary and Liquidity Management in Nigeria. It was prepared in July 2013 as part of the Financial Sector Assessment Program (FSAP), providing background for the periodic consultation with the Nigerian government. The note outlines the monetary policy framework, liquidity forecasting and management mechanisms, and recommendations to improve the effectiveness of monetary policy and liquidity management in the Nigerian financial system.

Main Views

• Monetary Policy Objectives: The Central Bank of Nigeria (CBN) has multiple objectives, including monetary and price stability, issuing legal tender, maintaining external reserves, promoting a sound financial system, and acting as the government's banker. However, the lack of prioritization among these objectives can lead to confusion in the market.

• Monetary Policy Framework: The CBN has transitioned from monetary targeting (using broad money as the target) to a gradual inflation targeting approach. The Monetary Policy Rate (MPR) is used to guide market interest rates, but its transmission to lending rates has been weak, limiting its effectiveness.

• Liquidity Management Challenges: The Nigerian financial system has faced structural excess liquidity, mainly due to oil-related inflows and unpredictable fiscal spending. This volatility complicates liquidity forecasting and management.

• Institutional Arrangements: The CBN has a robust institutional framework, including the Monetary Policy Committee (MPC) and Monetary Policy Implementation Committee (MPIC), which work together to design and implement monetary policy. The Liquidity Assessment Group (LAG) is responsible for daily liquidity management, supported by the Fiscal Liquidity Assessment Committee (FLAC).

• Operational Instruments: The CBN employs various monetary policy instruments, including the interest rate corridor, Cash Reserve Requirement (CRR), Government securities auctions, Standing Deposit Facility (SDF), and Standing Lending Facility (SLF). These instruments help manage liquidity, but their frequent and abrupt use has raised concerns about credibility and market stability.

• Volatility in Financial Markets: The money markets in Nigeria are characterized by high volatility in both interbank rates and Open Buy Back (OBB) rates, reflecting the instability of the underlying liquidity base. The spread between secured (OBB) and interbank rates has also been wide, partly due to perceived credit risks among market participants.

• Policy Transmission Weakness: The weak transmission of the MPR to lending rates and the heavy reliance on direct controls (like CRR) have limited the effectiveness of monetary policy. The CRR has been used frequently, leading to increased interest rate spreads and volatility in financial markets.

Key Recommendations

1. Rationalize the Use of CRR: The frequent and abrupt changes in the CRR should be minimized. The CRR is best used to create stable demand for reserves and should be adjusted only when necessary and with a strong rationale.

2. Improve Liquidity Forecasting: The forecasting template should be enhanced to include breakdowns by Ministries, Departments, and Agencies (MDAs) and state and local government operations. This would improve the accuracy and reliability of liquidity forecasts.

3. Extend Forecasting Horizon: The forecasting horizon should be extended beyond the current one-week window to better anticipate long-term liquidity trends and fiscal shocks.

4. Use of Reserve Averaging: The Reserve Averaging (RA) mechanism should be reinforced to reduce daily volatility in liquidity management and allow banks to comply with CRR more smoothly.

5. Partial Averaging: The CBN should consider partial averaging, which requires banks to maintain a minimum ratio of reserves at all times while using the average over a longer period to align with the distribution cycle of oil revenue.

6. Strengthen Market Integration: The CBN should reduce segmentation in the money markets by addressing credit risk concerns and improving transparency in the interbank market.

7. Enhance Market Instruments: The use of repos and reverse repos should be expanded, and foreign exchange swaps and forward contracts should be utilized more effectively to manage liquidity and stabilize the naira.

Key Information

• Structural Excess Liquidity: Common in oil-exporting countries like Nigeria, due to sustained foreign currency inflows and pegged exchange rates.

• Oil Receipts and Fiscal Operations: The Nigerian National Petroleum Corporation (NNPC) and the Federation Account Allocation Committee (FAAC) play a significant role in liquidity flows. Oil revenues are often used for extra-budgetary spending, which makes liquidity management unpredictable.

• Monetary Instruments:

  • MPR Corridor: The MPR ± 2 percentage points is the tolerable range for the OBB rate.
  • CRR: Increased from 1% in 2010 to 12% in 2012, leading to higher interest rate spreads and increased costs for banks.
  • Reserve Averaging: Introduced in 2011, but suspended in 2012, to allow banks to manage liquidity over a longer period.

• Foreign Exchange Operations: The CBN is the main supplier of foreign exchange in the market, selling around $2.5 billion per month. These operations help sterilize liquidity from oil receipts.

• Market Segmentation: Banks with higher credit risk face higher interbank rates, leading to inefficient pricing and limited market participation.

• Recent Improvements: The volatility in interbank rates has declined since the 2009 banking crisis, due to CBN guarantees and improved collateral availability.

• Price Stability and Inflation Targeting: The CBN has been gradually moving towards inflation targeting, using the MPR to guide market rates. However, the transmission mechanism remains weak, and sterilization costs are a concern.

Conclusion

This technical note highlights the challenges in Nigeria's monetary and liquidity management systems, primarily due to oil-driven liquidity, fiscal volatility, and policy implementation inconsistencies. It emphasizes the need for more stable and predictable monetary policy instruments, improved liquidity forecasting, and greater integration of financial markets to support price stability and economic growth.