Nigeria’s banking sector is quick to pass higher interest rates on to borrowers but much slower to deliver relief when monetary policy eases, according to a new International Monetary Fund (IMF) assessment that sheds light on one of the most important channels through which monetary policy affects households and businesses.
The finding comes as Nigeria undergoes one of the most significant transformations of its monetary and foreign exchange framework in decades following the unification of the foreign exchange market in June 2023 and the subsequent transition to a floating exchange rate regime.
While much attention has focused on the impact of the reforms on the naira and inflation, the IMF says a critical but less discussed development is the changing way monetary policy is transmitted through the financial system and, ultimately, to consumers and businesses.
In a Selected Issues Paper accompanying its latest Article IV consultation on Nigeria, the Fund
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