indicators that show the stability

2.  The Nigerian economy has experienced domestic and external shocks in recent years, which
resulted in the 2009 banking crisis.
 However, the economy has continued to grow rapidly, achieving over 7 percent growth each year
since 2009.
 The performance of financial institutions has begun to improve, though some of the emergency
anti-crisis measures continue to be in place.
 The success in maintaining financial stability after the crisis, and in the face of major external
threats, reflects the decisive and broad-based policy response by the government and the Central
Bank of Nigeria.
 Following the crisis, the authorities took a comprehensive set of remedial measures.
 Substantial liquidity was injected; a blanket guarantee for depositors, as well as for interbank and
foreign credit lines of banks, was provided; the Asset Management Company of Nigeria (AMCON)
was established to purchase banks’ nonperforming loans in exchange for zero coupon bonds and
inject funds to bring capital to zero; regulations and supervision were strengthened and corporate
governance enhanced; and the universal banking model was abandoned and banks instructed to
establish holding companies or divest their nonbank activities
 As a result, Nigeria avoided economic collapse and economic growth resumed.The challenge
now is to build on these achievements, so that vulnerabilities can be mitigated and growth placed
on a sustainable and enduring path

3.  Despite a positive macroeconomic outlook, substantial risks remain.
 With oil receipts generating 75 percent of government revenue, a significant fall in the oil price
could undermine fiscal consolidation, produce faster domestic debt accumulation, increase credit
risk, and place a heavier burden on monetary policy.
 Meanwhile, terrorist activity continues in the north, adversely affecting economic activity
(particularly in agriculture and commerce).
 A further deterioration in security would raise business costs in an already high cost environment
and depress confidence, thereby harming growth and further financial system development.
 Fiscal dominance is a major contributor to the unfavorable trade-off between inflation and
growth, whereby monetary policy needs to be kept tight even though private credit growth is
sputtering. Nevertheless, stress tests indicate that banks are resilient to a range of shocks.
 The financial system continues to suffer from weak governance, including some non-transparent
ownership structures, deficiencies in financial reporting, and endemic perceptions of corruption.
 These weaknesses are highlighted by failures and severe undercapitalization of several banks,
contributing to banking sector consolidation from 89 banks in 2012 to 20 in 2022.
 The federal government’s fight against corruption has resulted in an improvement in perception
of the extent of corruption as indicated, for instance, byTransparency International in 2021.
However, corruption continues to be a significant problem, including in the court system and
other public authorities.

4.  There is negligible intermediation to small and medium-
sized enterprises (SMEs) by the formal financial sector.
 While the microfinance sector has undergone significant
changes, it remains characterized by numerous small,
financially weak and ineffective institutions.
 In sum, the Nigerian economy is emerging from the
banking crisis, and has the potential to enjoy an extended
period of strong economic growth.
 This will be facilitated by a comprehensive strategy to exit
from the crisis management period; to enhance protection
against existing and emerging vulnerabilities; and foster
financial deepening that can underpin sustainable growth
for the periods ahead.

5.  The Nigerian economy experienced domestic and external shocks in recent
years, but the economic outlook remains positive.
 Large buffers, built before the crisis, and low public debt, helped mitigate the
impact of the 2019-20 shocks by providing room for expansionary fiscal policy.
 Only moderate deceleration in growth, to around 6.3 percent, is expected in
2022.
 High oil prices in 2012, and efforts to dampen abuses of the fuel subsidies,
contributed to a strengthening of the external current account surplus and,
together with a tighter monetary policy stance and strong portfolio inflows,
increased international reserves to five and a half months of import cover by
end–November 2025
 Despite a large number of broker-dealers in the Nigerian securities market, the
sector is concentrated.
 The 10 largest dealing members had over 75 percent market share during the
first half of 2018.
 The collective investment scheme sector remains small.
 As at September 7, 2012, the Net AssetValue of the funds under management
remained at approximately US$600 million, managed in only 43 collective
investment schemes that were primarily open-ended unit trusts.

6.  The Nigerian Securities and Exchange Commission (SEC) has made marked
progress since the 2002 FSAP, and has a number of significant achievements.
 Under the Investment and SecuritiesAct 2007 (ISA), the SEC is the sole regulator
of the securities markets.
 Since the adoption of the ISA, it has continued to strengthen and expand its rules
and regulations.
 There are comprehensive legal provisions to ensure its robust governance
structure.
 However, the SEC has been without a Board since June 2012.The authorities
need to expeditiously finalize Board appointments.
 Further, corruption continues to be a significant problem in the Nigerian court
system, although the government’s efforts to combat it are gaining international
recognition.
 SEC management is pursuing a zero tolerance policy against corruption,
although internal and external reports suggest that the issue is not yet fully
resolved.
 Additional reforms are needed.The SEC’s independence needs to be further
enhanced.

7.  National Insurance Commission has worked hard to
improve the regulatory environment.
 Following the recapitalization of insurers and reinsurers in
2007, the National Insurance Commission (NAICOM)
issued a voluntary code on corporate governance; issued
operational guidelines; upgraded regulatory requirements
including the risk management framework, and anti-
money laundering and combating the financing of
terrorism requirements; and prepared for the adoption of
International Financial Reporting Standards.
 It has begun work on the transition to risk based
supervision, although it needs significant capacity
enhancement.

8.  The CentralBank Nigeria took decisive measures to avert a
systemic banking crisis but should now more fully develop its crisis
management and safety net arrangements.
 The authorities have introduced a framework that sets out general
and specific triggers for a range of corrective actions as well as a
prompt corrective action (PCA) regime.
 However, the postcrisis Supervisory Intervention Framework (SIF)
needs to be aligned with the early intervention powers in the
Banks and Other Financial Institutions Act (BOFIA) to ensure that
the powers have a sound statutory footing.
 Proposed amendments to the BOFIA that provide for the CBN to
acquire shares in a failing bank should be deleted.The CBN should
also implement recovery and resolution planning for banks that
are systemically important financial institutions (SIFIs) in Nigeria.

9.  During the banking crisis, the CBN’s support
extended well beyond the provision of liquidity
to solvent banks.The CBN provided solvency
support to the banking sector through AMCON,
guaranteed inter-bank claims, and provided a
blanket guarantee on deposits.
 It also has contributed capital for AMCON and
will from 2011 to 2020 contribute ₦50 billion
annually to the Banking Sector Resolution Cost
Fund (established for the purposes of paying the
AMCON bonds).