Nigeria pursued multiple objectives throughout, with policy complicated by the importance of oil production and exports. It tried a variety of forex arrangements, none with great success. Meanwhile monetary policy shifted – from 2003, in particular – slowly (and erratically) from direct to indirect monetary instruments. In many years the central bank had monetary and/or inflation targets, but they were rarely attained in a consistent fashion.

YearsTargets and attainmentClassification
1974-2017after previous pegs to GBP and then USD, exchange rate managed (fixed) from April 1974 with frequent small adjustments aimed at controlling import prices and/or balance of payments and focused on USD and/or GBP (leading to periodic broken cross rates); fiscal revenue and exports dominated by oil production; substantial, growing but concentrated banking system, initially largely state- and/or foreign-owned but transformed by indigenisation and new private banks, plus other financial institutions, money market and capital market; central bank policy instruments include liquid assets ratios, special deposits, sectoral lending guidelines, moral suasion, interest rate controls and rediscount facilities; monetary policy goals include price stability, external balance, and growth;  monetary growth strongly affected by highly variable fiscal deficits and forex inflows in form of oil revenues, while commercial banks provide varying levels of finance to Federal government; 1975 certificates of deposit and Bankers’ Unit Funds (for investment in government stocks); 1976 stabilisation policies include ceiling on bank lending, cash reserve requirement and non-negotiable stabilisation certificates which banks had to buy and hold; from 1978 exchange rate set with reference to basket, plus other considerations; trade controls of varying severity also used, growing parallel market; after unsuccessful attempt at monetary targeting 1980-81, ceilings on growth of credit to private sector become main instrument, though not strictly imposed, supported by cash and liquidity ratios and interest rate controls; from mid-1986 stabilisation and liberalisation programme with second-tier forex market comprising central bank auction and interbank elements, as well as first-tier administered rate for official payments, which leads to reduction of longstanding overvaluation, then reunification with first tier market and exchange rate float 1987; 1987 interest rates largely liberalised; 1989 partial unification of forex market but in complex form, large parallel market premium re-emerges; 1989 auctions of treasury bills and certificates; short-lived reintroduction of interest rate controls 1991 (with aim of reducing rates); 1992 forex auctions scrapped in favour of exchange rate determined within interbank market, with further large depreciation and large fall in less regulated (bureaux de change, BdC) market premium, but auction and other controls reintroduced early 1993 followed by peg to USD at overvalued rate (leading to renewed rise in BdC premium); intensity of reform and stabilisation policies highly variable, but shift on average over time towards indirect monetary instruments, with lending ceilings (but not sectoral guidelines) lifted 1992 for banks complying with certain requirements and weekly OMOs in treasury bills from 1993, but central bank remains most important buyer, many government securities are non-marketable and monetary control remains weak; 1994 further forex regulations, along with interest rate caps; 1995 fiscal tightening and limited deregulation in form of dual exchange rate system, with official (federal government transactions) and heavily managed ‘autonomous’ rates; 1996 interest rate caps, sectoral credit guidelines ended; 1998-9 some moves towards freer and more unified forex market, some rise in central bank autonomy with respect to supervision; 2000-01 fiscal-monetary expansion, central bank returns to selling forex at predetermined rate, with other transactions undertaken freely on separate interbank market: parallel market depreciation leads to forex crisis April 2001; new price-setting forex auction system 2002, which restores some stability and lowers parallel premium; as of 2002 monetary policy objectives are price and exchange rate stability, instruments are partly indirect, operations focus on monetary base (given stable money multipliers), but policy is complicated by fiscal dominance and volatility, banking sector weakness, underdeveloped financial markets and an inappropriate forex regime; 2003-4 new economic team in government aims at wide-ranging liberalising reforms (including on fiscal policy, but little detail on monetary issues); daily OMOs from end-2003; 2004 oil-price-based fiscal rule puts end to longstanding procyclicality of fiscal policy and facilitates accumulation of reserves via stabilisation fund; 2004 central bank exits from primary government debt market and interest rates become market determined; 2006 convergence of auction and interbank forex markets, after major consolidation of banking sector; 2007 efforts to improve interbank money market including standing facility; increased transactions in government securities; central bank independence raised with price stability as primary objective; increasing focus on inflation, with talk of inflation targeting; various controls introduced in response to GFC but eliminated late 2009; some central bank interventions in specific banks; 2009 designated policy rate plus corridor of standing facilities, but transmission to banks’ interest rates weak and frequent recourse to changes in reserve requirements; 2010 fiscal rule not observed, return to procyclicality, with less weight on price and more on exchange rate stability; 2011 sovereign wealth fund with wider remit to replace previous stabilisation fund, but budget oil price still set annually and subject to political pressures; late 2014 steps towards more flexible and unified exchange rate, but market still segmented; ongoing improvements to bank supervision and regulation; in principle monetary policy uses policy rate to affect broad money and so inflation, but in practice policy relies heavily on OMOs and reserve requirements, and is also concerned with exchange rate vs USD and with economic growth, latter targeted via credit and lending schemes; 2014 devaluation and widening of band in response to oil-price fall, 2015 devaluation and end of auctions, official transactions (and intervention) now through controlled interbank market with growing premium on BdC market; late 2015 interest rate corridor asymmetric (with much lower bottom band), but broad money growth and inflation remain consistently above central bank’s targets; 2016 reforms in forex market, 2017 new Investor and Exporter window leads to lower parallel premium, but multiple exchange rates remain; special OMOs remove excess liquidity 2016; statistical data long inadequate, but substantially improved by end of periodloosely structured discretion LSD

Selected IMF references: RED 1974 pp44-51, 54-7, 68-70, 79; RED 1976 pp39-41, 55-6; RED 1977 pp42-3, 48 62; RED 1978 pp38-45, 62; SR 1978 p11; RED 1982 pp43-51; RED 1983 pp34-5; SR 1984 pp17-18; RED 1986 pp34-5; RED 1987 pp68-73; SR 1987 pp4, 8, 21-2; RED 1989 pp34-6, 56-9; SR 1989 pp7-9; RED 1991 pp52-4, 77-9, 92-8; SR 1991 pp11-12; RED 1993 pp16-18, 23-4, 28, 31-3; BPSA 1994 pp2-3, 4, 23-31; SR 1994 pp11-12; SR 1995 pp9-10, 16; SR 1996 pp11-12; SISA 1998 pp71-80; SR 1999 p60; SR 2001 pp6-9; SISA 2002 pp63-82; SR 2002 pp10-14, 28-9; SISA 2004 pp76-98; SR 2004 pp14-19, 21-4; SR 2005 pp6-7, 9-10, 20-1, 24; SR 2008 pp5, 10-16; SR 2009 pp14-18; SR 2011 pp9-11, 17, 35-6; SR 2012 pp8, 10-11; SR 2015 pp8-9, 14-15; SI 2016 pp17-29; SR 2016 pp5-7, 16-19; SR 2017 pp6-7, 15; SI 2018 pp84-5, 87-90; SR 2018 pp7, 17-20; SR 2019 pp15-19.

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