Business
Financial Markets Remain Shallow- IMF
Nigeria’s money and capital markets still lack the depth of lifting the economy out of the doldrums, the International Monetary Fund (IMF) has said.
Also in the league of markets with shallow profit, according to IMF are most of the other sub-Saharan African countries, despite reports of reforms in the respective economies.
IMF, in a recently released report, noted that the domestic money and capital markets in Nigeria and most sub-Saharan African countries remain underdeveloped and shallow offering mostly short term instruments.
According, stock market capitalisation remains low, while private securities markets are largely underdeveloped.
The IMF stated that the shallowness and lack of versality of hedging instruments in African financial markets likely accentuated short-term exchange rate movements.
Therefore, foreign exchange markets offers a limited array of forward hedging instruments, reflecting a part the concentration of foreign exchange receipts in the hands of the public sector, through aid or commodity exports.
Nabil Ben Ltaifa, Stella Kaendera and Shiv Dixit of the African Development IMF, in their submission, “Impact of the Global Financial Crisis on Exchange Rates and Policies in Sub-Saharan Africa” observed that the currencies of many sub-Saharan African countries, like those of many emerging and developing economies, offered large depreciation with onset of the global financial crisis.
Nigeria’s currency, as one of the countries under study, was said to depreciate by at least 20 per cent between June and March 2009.
After April 1, 2009, while some currencies reversed their depreciating trend with respect to the United States dollar, the Nigerian Naira continued almost unchanged.
Although, while in most countries above-trend inflation mitigated the real effect of nominal depreciation, Nigeria registered a significant (over five per cent) real depreciation in its currency over the whole period.
The trio observed that exchange rate volatility increased significantly compared to the pre-crisis period.
Volatility was generally higher with respect to the United States dollar but broadly less vis-à-vis the euro. The naira experienced significant increases in the volatility with respect to the three major currencies.
In contrast, the Rwandan and Tanzanian currencies displayed similar or lesser volatility before the crisis with respect to the U.S. dollar.
Talking about the factors that affected the value of exchange rates, the experts noted that the first factors were external, reflecting the transmission of the global crisis through the trade and financial channels as well as the volatility of the U.S, the main international reserve currency.
“The impact was commensurate with the extent and nature of each country’s exposure to trade and global financial markets. At the same time, domestic policies played a role in shaping the nature and magnitude of the impact,” they said.
Concerning the external environment, the IMF officials observed that trade had, as expected, an adverse impact on the region’s currencies, but that the magnitude of this impact seems to have varied significantly across countries.
According to them terms-of-trade movements were likely the main factor underlying movements in the exchange rates of Nigeria and Zambia, the two large commodity exporters in the sample.
Conversely, the rebound in copper and oil prices in the later part of the period supported the recovery of the Zambian Kwacha and a stabilisation of the naira.
The IMF officials also attributed policy choices of countries to the depreciation of their currencies.
Nigeria operated a managed floating system, which tended to depreciate more, the economy consequently, registered large depreciation, reflecting the limit of currency management in the face of large charges in the external environment.
It was observed that the domestic policy mix adopted in response to the external crisis also played a role in explaining exchange rate dynamics.
According to them, most countries in the sample intervened in their foreign exchange markets in an effort to stem the shock to their currencies.
\however, they said, managed floating regime like Nigeria intervened in a more regular and extensive manner to halt the depreciation.
“As a result, nominal exchange rates in these countries have tended to be more stable. But intervention by the Nigeria’s Central Bank was however, unsuccessful in preventing a large step depreciation of the currency by the end of 2008, in the large turnaround in trade and capital flows.
The Central Bank of Nigeria (CBN) yesterday said 33 banks have met new minimum capital requirements under its recapitalisation programme, raising a combined N4.65 trillion to strengthen the financial system.
The apex bank disclosed this in a statement marking the end of the exercise, which commenced in March 2024 and drew participation from domestic and foreign investors.
The statement was jointly signed by the Director of Banking Supervision, Olubukola Akinwunmi, and the Acting Director of Corporate Communications, Hakama Sidi-Ali.
The statement said “Over the 24-month period, Nigerian banks raised a total of N4.65tn in new capital, strengthening the resilience of the financial system and enhancing its capacity to support the economy.”
The regulator said local investors accounted for 72.55 per cent of the funds, while international investors contributed 27.45 per cent, reflecting continued confidence in the sector.
Commenting on the outcome, the CBN Governor, Olayemi Cardoso, said in the statement, “The recapitalisation programme has strengthened the capital base of Nigerian banks, reinforcing the resilience of the financial system and ensuring it is well-positioned to support economic growth and withstand domestic and external shocks.”
It added that while 33 banks have complied with the new thresholds, a few others are still undergoing regulatory and legal processes.
The statement noted, “The CBN confirms that 33 banks have met the revised minimum capital requirements established under the programme.
“A limited number of institutions remain subject to ongoing regulatory and judicial processes, which are being addressed through established supervisory and legal frameworks.
“All banks remain fully operational, ensuring continued access to banking services for customers.”
The apex bank stressed that the exercise was executed without disrupting banking operations, ensuring uninterrupted access to services nationwide.
It further stated that key prudential indicators have improved, particularly capital adequacy ratios, which remain above global Basel benchmarks.
The minimum ratios were set at 10 per cent for regional and national banks and 15 per cent for banks with international licences.
The bank also said the recapitalisation coincided with a gradual exit from regulatory forbearance, a move it said improved asset quality, strengthened balance sheet transparency, and enhanced overall stability.
To preserve these gains, the CBN said it has reinforced its risk-based supervision framework, mandating periodic stress tests and adequate capital buffers for banks.
It added that supervisory and prudential guidelines would be reviewed regularly to strengthen governance, risk management, and resilience across the sector.
“The successful completion of the programme establishes a stronger and more resilient banking system, better positioned to support lending, mobilise savings, and withstand domestic and global shocks,” the statement said.
The Tide learnt that foreign capital inflows into Nigeria’s banking sector rose by 93.25 per cent year-on-year to $13.53bn in 2025, up from $7.00bn recorded in 2024, amid the ongoing recapitalisation drive by the Central Bank of Nigeria.
Data from the National Bureau of Statistics capital importation report showed that the banking sector remained the dominant destination for foreign capital, accounting for $13.53bn of the total $23.22bn recorded in 2025, representing 58.26 per cent of total inflows, up from 56.81 per cent in 2024.
The surge reflects heightened investor interest in Nigerian banks as they raised fresh capital to meet new regulatory thresholds introduced by the apex bank, with industry-wide recapitalisation activities driving large-scale inflows across all quarters of the year.
However, the Centre for the Promotion of Private Enterprise (CPPE) recently raised concerns over weak credit flows to small businesses despite recent banking sector reforms.
The CPPE, led by a renowned economist, Dr Muda Yusuf, acknowledged that the ongoing bank recapitalisation exercise by the CBN has strengthened the financial system, but warned that the benefits have yet to translate into meaningful support for the real economy.
The facility will be disbursed through participating Microfinance Institutions (MFIs), which will in turn extend the loans to their customers, particularly SMEs, as they directly interface with businesses at the grassroots level.
The Executive Director of COMCIN, Mr. Micheal Ogbaa who represented the Chairman, Dr. Iredele Oyedele (FCA, FCCA), said the initiative is designed to strengthen micro-lending institutions and expand access to finance for grassroots entrepreneurs, particularly women and youths in the informal sector.
Ogbaa explained that COMCIN does not lend directly to individuals but works through its network of microfinance and cooperative institutions, which in turn provide loans to end users.
“We came together to advocate for the microfinance ecosystem. Commercial banks often exclude people at the grassroots, but our members are positioned to reach them. This facility will empower them to do more,” he said.
He noted that the loan scheme offers low interest rates and flexible repayment plans, making it more accessible to small business owners.
According to him, about 90 percent of beneficiaries are expected to be women, who play a key role in sustaining families and driving economic activities at the local level.
“Our focus is on traders, service providers, and players in the informal sector. These are the real movers of the economy. By supporting them, we are strengthening families and contributing to national development,” he added.
Ogbaa disclosed that eligible SMEs with proven integrity and business track records could access up to N5 million each through participating micro-lending institutions. The rollout has commenced in Lagos and will extend to Abuja, Enugu, and other regions, including the South-West, South-East, and North-East.
He said 12 micro-lending institutions have already benefited from the scheme, while 85 applications are currently being processed under the pilot phase.
“Our target is to reach at least 100,000 SMEs nationwide. We are building a platform that connects funding partners with credible micro-lending institutions, creating a reliable channel for financial inclusion,” Ogbaa said.
He added that COMCIN is also working to attract larger funding pools from development finance institutions and private investors, noting that successful implementation of the pilot phase would boost confidence and unlock more capital for SMEs.
“We have seen encouraging testimonies from early beneficiaries. As we demonstrate transparency and efficiency, more institutions will be willing to channel funds through us,” he said.
