Economy
Maintaining banking system safety amid the COVID-19 crisis—IMF
Today we face economic upheaval potentially more severe than we witnessed during the global financial crisis. The coronavirus pandemic is a different kind of shock. Never before have modern economies shut down at the drop of a hat. From one week to the next, many workers lost their jobs and pay checks. Restaurants, hotels, and airplanes all emptied. And consumers and businesses now face steep losses in income—and potentially widespread bankruptcies. Pressure on the banking system is growing and higher defaults on debt are imminent. And many now expect a shock to the financial sector similar in magnitude to the 2008 crisis.
The question on the minds of policymakers is how they should prepare for this. Just over a decade ago, global policy makers came together in an unprecedented display of coordination to launch the development of a revamped regulatory framework for the financial sector. They significantly raised the minimum standards for the quality and quantity of bank capital and liquidity and succeeded in building a more resilient banking system designed to hold buffers above the minimum that could be safely drawn down in stressed conditions. In the current crisis, national authorities are taking a host of measures to provide fiscal support, and central banks are opening new liquidity lines. How should bank supervisors respond to ensure continued trust and confidence in the banking system?
Banking system prescription
Like the health experts, bank supervisors are responding to a fast-moving and extraordinary situation. Supervisors must combine the tools from their playbooks for dealing with natural disasters, operational risk events, and bank stress episodes. With its global vantage point, and drawing from past experience, the IMF can offer some additional guidance on the way forward:
Don’t change the rules. Doing this in the midst of a crisis will likely cause more confusion. Likewise, be prepared to give banks time to meet rules if they fall short, and hold off on implementing new initiatives—banks should remain focused on maintaining ongoing operations, given the increased difficulties of conducting such operations remotely.
Use the buffers. Regulators have to communicate clearly that capital and liquidity buffers should support continued bank lending, without adverse consequences for bank management. Banks built these buffers well above Basel minimum standards to manage strains on liquidity and revenue loss from missed loan repayments.
Encourage loan modification. Supervisors should clearly communicate to banks to be proactive in rescheduling their loan portfolio for those borrowers and sectors that have been hard hit by the severe, but temporary, shock. They should also remind banks about flexible credit risk management and the accounting standards for impairment in these situations. Accounting bodies have helpfully stepped in to clarify to auditors how such modifications should be viewed once the economy begins to recover. Don’t hide the losses. Banks, investors, shareholders and even taxpayers have to bear them. Transparency helps prepare all stakeholders; surprises only worsen their response, as was proven during the 2008 crisis.
Clarify regulatory treatment of support measures. Clarifying upfront how banks and regulators should treat fiscal measures, including measures directly targeted at borrowers, credit guarantees, payment holidays, direct transfers and subsidies—beyond any current guidance in the Basel capital framework—would help with overall transparency.
Strengthen communication. Encourage continuous dialogue between supervisors and banks, especially in this unprecedented situation of working remotely with colleagues, customers, and supervisors. Typically, reporting requirements in key areas, such as liquidity and creditor positions, are enhanced in a crisis, but given operational disruptions, deferring other reporting requirements less material to assessments of financial health may make sense.
Coordinate across borders. Banking is a global business. Broad coordination among national regulators at the international level is imperative. This crisis will pass eventually, and the effects may take time to dissipate, but preserving the integrity of the international framework will be crucial for the credibility and integrity of the global financial system. International bodies like the Financial Stability Board and the Basel Committee on Banking Supervision are working night and day to do just this.
Will it be enough?
Simply put, it may be too early to tell. At this point, conditions in many countries are as severe as the adverse scenario of the stress tests that banking regulators commonly use to assess the strength of their banking systems. And it might get worse. All of this assumes that economic activity could restart later this year, but we have to also consider more adverse scenarios. Under more severely strained circumstances, we will have to rethink our playbook substantially. Some banking systems might have to be recapitalised or even restructured. The IMF has deep experience in helping countries rebuild distressed banking systems through its technical assistance programs, and will stand ready to help.
Culled from IMF blog
The Arab Africa Trade Bridges (AATB) Program and the Federal Republic of Nigeria formalized a partnership with the signing of the AATB Membership Agreement, officially welcoming Nigeria as the Program’s newest member country. The signing ceremony took place in Abuja on the sidelines of the 5th AATB Board of Governors Meeting, hosted by the Federal Government of Nigeria.
The Membership Agreement was signed by Eng. Adeeb Y. Al Aama, the CEO of the International Islamic Trade Finance Corporation (ITFC) and AATB Program Secretary General, and H.E. Mr. Wale Edun, Minister of Finance and Coordinating Minister of the Economy, Federal Republic of Nigeria. The Agreement will provide a strategic and operational framework to support Nigeria’s efforts in trade competitiveness, promote export diversification, strengthen priority value chains, and advance capacity-building efforts in line with national development priorities. Areas of collaboration will include trade promotion, agribusiness modernization, SME development, businessmen missions, trade facilitation, logistics efficiency, and digital trade readiness.
The Honourable Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, called for deeper trade collaboration between African and Arab nations, stressing the importance of value-added Agribusiness and industrial partnerships for regional growth. Speaking in Abuja at the Agribusiness Matchmaking Forum ahead of the AATB Board of Governors Meeting, the Minister said the shifting global economy makes it essential for African and Arab nations to rely more on regional cooperation, investment and shared markets.
He highlighted projections showing Arab-Africa trade could grow by more than US$37 billion in the next three years and urged partners to prioritize value addition rather than raw commodity exports. He noted that Nigeria’s growing industrial base and upcoming National Single Window reforms will support efficiency, investment and private-sector expansion.
“This is a moment to turn opportunity into action”, he said. “By working together, we can build stronger value chains, create jobs and support prosperity across our regions”, Edun emphasized. “As African and Arab nations embark on this journey of deeper trade collaboration, the potential for growth and development is vast. With a shared vision and commitment to value-added partnerships, we can unlock new opportunities, drive economic growth, and create a brighter future for our people.”
Speaking during the event, Eng. Adeeb Y. Al Aama, Chief Executive Officer of ITFC and Secretary General of the AATB Program, stated: “We are pleased to welcome Nigeria to be part of the AATB Program. Nigeria stands as one of Africa’s most dynamic and resilient economies in Africa, with a rapidly expanding private sector and strong potential across agribusiness, energy, manufacturing, and digital industries. Through this Membership Agreement, we look forward to collaborating closely with Nigerian institutions to strengthen value chains, expand regional market access, enhance trade finance and investment opportunities, and support the country’s development priorities.”
The signing of this Agreement underscores AATB’s continued engagement with African countries and its evolving portfolio of programs supporting trade and investment. In recent years, AATB has worked on initiatives across agribusiness, textiles, logistics, digital trade, export readiness under the AfCFTA framework, and other regional initiatives such as the Common African Agro-Parks (CAAPs) Programme.
With Nigeria’s accession, the AATB Program extends it’s presence in the region and adds a key partner working toward advancing trade-led development and fostering inclusive economic growth.
Federal Executive Council (FEC) has approved the 2026–2028 Medium-Term Expenditure Framework (MTEF), a key fiscal document that outlines Nigeria’s revenue expectations, macroeconomic assumptions, and spending priorities for the next three years. The approval followed Wednesday’s FEC meeting presided over by President Bola Tinubu at the State House, Abuja. The Minister of Budget and Economic Planning, Senator Atiku Bagudu made this known after the meeting.
The Minister said the Federal Government is projecting a total revenue inflow of N34.33 trillion in 2026, including N4.98 trillion expected from government-owned enterprises. Bagudu said that the projected revenue is N6.55 trillion lower than earlier estimates, adding that federal allocations are expected to drop by about N9.4 trillion, representing a 16% decline compared to the 2025 budget.
He said that statutory transfers are expected to amount to about N3 trillion within the same fiscal year. On macroeconomic assumptions, FEC adopted an oil production benchmark of 2.6 million barrels per day (mbpd) for 2026, although a more conservative 1.8 mbpd will be used for budgeting purposes. An oil price benchmark of $64 per barrel and an exchange rate of N1,512 per dollar were also approved.
Bagudu said the exchange rate assumption reflects projections tied to economic and political developments ahead of the 2027 general elections. He said the exchange rate assumption took into account the fiscal outlook ahead of the 2027 general elections.
The minister said that all the parameters were based on macroeconomic analysis by the Budget Office and other relevant agencies. Bagudu said FEC also reviewed comments from cabinet members before approving the Medium-Term Fiscal Expenditure Ceiling (MFTEC), which sets expenditure limits. Earlier, the Senate approved the external borrowing plan of $21.5 billion presented by President Tinubu for consideration The loans, according to the Senate, were part of the MTEF and Fiscal Strategy Paper (FSP) for the 2025 budget.
The spot rate on Nigerian Treasury bills has been increased by 146 basis points by the Central Bank of Nigeria (CBN) following tight subscription levels at the main auction on Wednesday. The spot rate on Treasury bills with one-year maturity has now surpassed Nigeria’s 16.05% inflation by 145 basis points following a recent decision to keep the policy rate at 27%.
The Apex Bank came to the primary market with N700 billion Treasury bills offer size across standard tenors, including 91-day, 182-day and 364 day maturities. Details from the auction results showed that demand settled slightly above the total offers as investors began to seek higher returns on naira assets despite disinflation.
Total subscription came in at about N775 billion versus N700 billion offers floated at the main auction. The results showed rising appetite for duration as investors parked about 90% of their bids on Nigerian Treasury bills with 364 days maturity. The CBN opened N100 billion worth of 91 days bills for subscription, but the offer received underwhelming bids totalling N44.17 billion.
The CBN allotted N42.80 billion for the short-term instrument at the spot rate of 15.30%, the same as the previous auction. Total demand for 182 days Nigerian Treasury bills settled at N33.38 billion as against N150 billion that the authority pushed out for subscription. The CBN raised N30.36 billion from 182 days bills allotted to investors at the spot rate of 15.50%, the same as the previous auction.
Investors staked N697.29 billion on N450 billion in 364-day Treasury bills that was offered for subscription. The CBN raised N636.46 billion from the longest tenor at the spot rate of 17.50%, up from 16.04% at the previous auction.
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