September 5th, 2014/CBN
Global output was estimated to have grown by 3.0 per cent in 2013, compared with the 3.1 per cent achieved in 2012. However, in the second half of the year, growth achieved was higher than the 2.9 per cent projected for the half year, driven mainly by growth in advanced economies. In Nigeria, real GDP growth was estimated at 6.7 per cent in 2013, compared to 6.6 per cent in 2012. In advanced economies, inflation decreased in 2013 owing to declining commodity prices caused by improved supply and reduced demand from major consuming nations, such as China. In Nigeria, headline inflation decelerated to 8.0 per cent at end-December 2013, from 8.4 per cent at end-June 2013.
In 2013, most advanced economies maintained a stable monetary policy stance. Among the BRICS, only Brazil and India reviewed their policy rates upwards.
The CBN maintained its policy rate at 12.0 per cent in the review period. However, lending rates in the banking industry trended upwards. On the fiscal side, the Federal Government operated at a deficit of 6.3 per cent of GDP, which was financed through domestic borrowings and privatization proceeds.
The CBN examined 21 banks and 14 foreign subsidiaries of Nigerian banks. The results showed that most banks had a stable outlook in their composite risk rating and improvements in their internal audit and financial analysis functions. In addition, the stress test conducted, based on their end-December 2013 call reports indicated that the banking industry was stable and resilient. The key challenges in the industry, however, remained corporate governance and risk management practices.
The Other Financial Institutions sub-sector witnessed several developments, including the establishment of the Nigeria Mortgage Refinancing Company Plc to provide liquidity in the mortgage market and promote availability and affordability of housing in Nigeria.
The Bank continued to promote financial inclusion during the review period in line with its Financial Inclusion Strategy. The geo-spatial mapping of financial services' access points and the Micro Small and Medium Enterprises Development Fund were launched.
The Bank also commenced financial literacy/enlightenment programmes through public workshops, secondary schools' outreach, road shows and engagement of the media.
Meanwhile, matured AMCON bonds, as at December 2013 were redeemed in line with the terms of the indenture.
The cash-less policy, earlier launched in Lagos, was extended to five additional States and the FCT.
The Nigerian economy is projected to remain strong, driven largely by increased growth in agriculture, trade and services, while activities in the oil sector are projected to recover in 2014. Although inflation is projected to decline, the 2015 electioneering activities would pose some threat.
This edition of the FSR is divided into five sections. Section one reviews global and domestic economic and financial developments, highlighting key stability issues.
Section two chronicles developments in the domestic economy, while section three covers regulatory and supervisory activities. Key developments in the payments system are highlighted in section four. Finally, section five provides the outlook for financial stability.
‘Financial stability’ is the resilience of the financial system to unanticipated adverse shocks, while enabling the continued smooth functioning of the financial system's intermediation process. A stable financial system contributes to broader economic growth and rising living standards. The financial system performs one of the most important functions in the welfare of citizens by supporting the ability of households and firms to hold or transfer financial assets with confidence. Thus, the stability of the financial system and its adequate analysis and reporting are important policy goals of the CBN.