Abuja — The Central Bank of Nigeria has said the growth of Nigeria's economy in 2009 will be slowed down by the global financial crisis.

But the bank, in a statement made available to Leadership yesterday, asserted that, despite the global crisis, its policy on the foreign exchange rate is succeeding. It said: "The official exchange rate has ranged from N144-N150 to US$1 since mid-January 2009. This is the exchange rate for about 95% of legitimate foreign exchange consumption in Nigeria. The objective of the current foreign exchange rate policy is to conserve foreign reserves and ensure stability of the exchange rate. So far we are succeeding and the outflow of foreign exchange has reduced by more than 50 per cent. The policy will ensure that even if the global crisis lasts for the next three years, Nigeria will continue to meet all legitimate foreign exchange demand at a stable exchange rate. Other complementary ongoing reforms will significantly affect the parallel/black market exchange rate soon. Once the global crisis abates, the naira is expected to strengthen."

The crisis has already resulted in a recession in the industrialised economies.

The CBN Governor, Prof. Chukwuma Soludo, had said the Monetary Policy Committee (MPC) had observed that the nation's economy was already being impacted by "exogenous factors."

He said these include the deepening recession in the industrialised economies and the slow-down in the economic activity of emerging countries.

Others, he added, were the fall in capital flows into Nigeria through remittances and foreign investments and drying up of credit lines for banks.

On foreign exchange, the CBN governor said the apex bank had sent a circular to all the banks to streamline the buying and selling of foreign currencies to one per cent.

"The difference between the CBN buying and selling rates shall not be more than 1 per cent; while that of the banks and the Bureaux De Change will not be more than one per cent and two per cent respectively," he said.Soludo said the Monetary Policy Rate would be kept at 9.75 per cent.

The CBN governor said an Open Market Operation would be used to mop up excess cash in the economy.

Meanwhile, the CBN said it has summoned banks' chief executive officers to discuss the excess rates and charges on loans to customers.

Soludo gave the hint after the Monetary Policy Committee meeting (MPC) held at the CBN headquarters in Abuja."The CBN is seriously concerned about the rising lending rates and the re-pricing of existing facilities by banks, as well as the gulf between deposit and lending rates."

Although he did not disclose the date of the meeting, he said they would work out modalities to check the excesses.Meanwhile, the International Monetary Fund (IMF), in its first comprehensive survey on the global financial crisis released yesterday, held regulators and central banks across the world culpable and also identified key economic measures that must be urgently globally fixed to reverse the world economy from further collapse, just as it pinpointed three major lapses as responsible for the current economic meltdown.

The IMF survey specifically attributed the world economic failure to financial regulators who were not equipped to see the risk concentrations and flawed incentives behind the financial innovation boom; central banks which focused mainly on inflation, not on risks associated with high asset prices and increased leverage; as well as International financial institutions were not successful in achieving forceful cooperation at the international level.

Furthermore, IMF proffered five economic recipes that must be implemented to liberate the World from the devastating effects of the global crisis including that the regulatory perimeter, or scope of regulation, needs to be expanded to encompass all activities that pose economy-wide risks; market discipline needs to be strengthened; procyclicality in regulation and accounting should be minimise; information gaps should be filled and central banks should strengthen their frameworks for systemic liquidity provision.

The survey report maintained that regulation should also remain flexible to keep up with innovation in financial markets, and it should focus on activities, not institutions, just as risk concentrations should not be allowed to develop beyond the regulatory perimeter.

IMF equally noted that the failures of credit rating agencies to adequately assess risk had been criticised by many, and initiatives to reduce their conflicts of interest and improve investor due diligence were underway.

It canvassed that increasing the amount of capital required of banks during upswings would create a buffer on which banks can draw during a downturn, stressing that an international framework for provisioning is needed to reflect expected losses through-the-cycle rather than in the preceding period.

Again, the report stated that greater transparency in the valuation of complex financial instruments is needed while improved information on off-market transactions and off-balance sheet exposure would allow regulators to aggregate and assess risks to the system as a whole to strengthen market discipline.

IMF advised that central banks should strengthen their frameworks for systemic liquidity provision and that the infrastructure underlying key money markets should also be improved.

The report, which points to failures at three different levels, further said: "Financial regulators were not equipped to see the risk concentrations and flawed incentives behind the financial innovation boom. Neither market discipline nor regulation were able to contain the risks resulting from rapid innovation and increased leverage, which had been building for years. "Central banks focused mainly on inflation, not on risks associated with high asset prices and increased leverage. And financial supervisors were preoccupied with the formal banking sector, not with the risks building in the shadow financial system.

"International financial institutions were not successful in achieving forceful cooperation at the international level. This compounded the inability to spot growing vulnerabilities and cross-border links."

The IMF study on financial regulation notes how, over the past decade, the financial system expanded massively and created new instruments that appeared to offer higher rewards at lower risk and this was encouraged by a general belief in light-touch regulation based on the assumption that financial market discipline would root out reckless behavior and that financial innovation was spreading risk, not concentrating it.

Also, "A key failure during the boom was the inability to spot the big picture threat of a growing asset price bubble. Policymakers only focused on their own piece of the puzzle, overlooking the larger problem."

Both these assumptions proved wrong, and the result was a massive asset price bubble, especially in housing, and an enormous buildup of risk, both inside and outside the formal banking system.

Mr. Jaime Caruana, who is the head of the IMF's Monetary and Capital Markets Department, said, "What is clear from the crisis is that the perimeter of regulation must be expanded to encompass systemic institutions and markets that were operating below the radar of regulators and supervisors.

"We are suggesting a two-tiered approach to expand regulation: extending disclosure to provide enough information for supervisors to determine which institutions are big or interconnected enough to create systemic risk, and intensified functional regulation and oversight."