Background

The Central Bank of Nigeria (CBN) has requested assistance on the resolution of eight banks that it has recently intervened, representing some 40 percent of total banking sector assets. Given this sizeable number of institutions and their proportion in the banking system, the CBN wishes to resolve these institutions promptly and efficiently so that they do not undermine the stability of the entire system.

Project

Background: 

The Central Bank of Nigeria (CBN) has requested assistance on the resolution of eight banks that it has recently intervened, representing some 40 percent of total banking sector assets. Given this sizeable number of institutions and their proportion in the banking system, the CBN wishes to resolve these institutions promptly and efficiently so that they do not undermine the stability of the entire system.

Project:

Goal:  The overall objective of the assistance is to help the CBN determine effective resolution options for the intervened banks, and to navigate the entire resolution process smoothly.

Purpose: In particular, the project aims to help the CBN: (i) determine the bank resolution structures that would allow for the effective recapitalization of the intervened banks; (ii) determine the potential tradeoffs resulting from government financing of the recapitalization, taking into account the government's overall fiscal position; (iii) effectively manage the actual resolution process, including provision for the legal and operational requirements for an AMC and a Recap Vehicle that the government plans to establish; and (iv) develop and implement an effective monitoring and reporting framework for informing stakeholders and the public on developments regarding the resolution efforts so as to maintain confidence in the banking system.

Outputs:

The project will supervised by the IMF. Three missions with IMF staff and short-term experts will provide advice on critical issues requiring urgent decisions, including agreement on the range of resolution options and the setting up of an AMC to address severe asset quality concerns and other mechanisms that will allow for a restructuring of insolvent banks.

Project LIFE TIME is 8 months, starting in May 2010

Project BUDGET is $186,450

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