MANAGEMENT OF FOREIGN RESERVES BY CENTRAL BANK OF NIGERIA
MANAGEMENT OF FOREIGN RESERVES BY CENTRAL BANK OF NIGERIA
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Date
2000
Authors
GIMI, SANI H.
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Abstract
Developing countries are always faced with the problem of
mobilising, allocating, exchange rate stability and achieving
favourable balance of payment with the stock of their foreign
reserves.
In search for a lasting solution to the said problem the
researcher found that understanding the risks associated with
foreign reserves management of a country, a case of Nigeria,
there is no doubt that Nigeria will record a favourable
balance of payment and increase in foreign reserves where the
CBN will familiarises itself with the nature of the risks ar.d
obtain satisfactory answers to the question raised. Some of
the more important risks facing CBN in its foreign reserves
management include:
i. Liquidity risk, that is when assets are not liquidated at
a reasonable price.
ii. Interest rate risk, this may arise in causing a fall in
the market value of the portfolio,
iii. Currency risk, this is where exchange rates may move
causing an increase in the value of commitment and
decrease in the value of receivable income,
iv. Credit risk, This is the market value that would be lost
due to a counter party default.
Research findings reveals that, most Central Banks
continue to manage their national reserves themselves. However
over the last few years some have entrusted a modest part of
their reserves to one or more external fund managers. They do
so because of any of the following:-
External portfolio manager's performance is often used to
assess returns generated by Central Bank reserves manager.
The desire of Central Bank to benefit from the external
manager's expertise in portfolio management, risk management,
performance measurement, training facilities, market research
and more importantly the opportunity to profit from ongoing
dialogue about fund management with a from that is a major
player in the market.
Ideally, the Central Bank of Nigeria would choose an
external manager from among its existing correspondents with
portfolio management skills and expertise and an established
performance track record to enhance foreign reserves.
Description
BEING A PROJECT SUBMITTED TO THE DEPARTMENT OF BUSINESS
ADMINISTRATION, INSTITUTE OF ADMINISTRATION AHMADU BELLO
UNIVERSITY, ZARIA FOR THE AWARD OF MASTER DEGREE IN
BUSINESS ADMINISTRATION (MBA) 1 9 9 7 / 9 8.
Keywords
MANAGEMENT,, FOREIGN,, RESERVES,, CENTRAL BANK,, NIGERIA