Designing a Macroprudential Policy Framework for Systemic Risk Management in the Nigerian Banking System

Systemic risk in Nigeria's banking sector poses macroeconomic stability threats, and designing a professional macroprudential policy framework provides regulators with tools for pre-emptive risk containment adapted to Nigeria's financial system structure. This study designed a macroprudential policy framework for systemic risk management in the Nigerian banking system, drawing on assessment of systemic risk indicators, structured consultations with 20 CBN officials and 12 banking economists, and benchmarking against BCBS macroprudential frameworks and comparable developing country implementations in Ghana, South Africa, and Kenya. Assessment of the Nigerian banking sector confirmed pro-cyclicality in credit growth, significant concentration risk in the oil and gas sector (constituting 29 percent of total industry credit), and limited systemic risk monitoring infrastructure outside the CBN's Financial Stability Report. The framework developed specifies countercyclical capital buffer requirements, sectoral exposure limits for high-concentration sectors, domestic systemically important bank designations and enhanced requirements, and a structured systemic risk dashboard for monthly CBN monitoring. Liquidity-related tools including net stable funding ratio calibration for Nigerian market conditions are specified. Expert review by 12 financial stability and banking regulation specialists confirmed the framework's regulatory soundness. Recommendations include CBN adopting the framework in its 2025 Financial Stability Strategy, conducting annual system-wide stress tests using the framework's risk indicators, and establishing an inter-agency Financial Stability Committee to coordinate macroprudential policy.

Keywords: macroprudential policy, systemic risk, Nigerian banking, financial stability, CBN regulation