Monetary Policy Between Germany and Nigeria

Monetary Policy between Germany and Nigeria

MARIA JULIAN

Monetary Policy

Nigeria Major producer of crude oil Central Nigerian Bank (CNB) –

governs the monetary policy 4 monetary committees to sustain

price stability

Germany Strongest economy in the euro-

zone European Central Bank (ECB)

since 1999 No longer decides own monetary

policy –domestic needs

Germany

Prior to the monetary policy implementation Consists of 16 federal states, which is a part of the federal republic

called Lander. In order for Germany to maintain its financial stability, the

Bundesbank is a constant presence in all of the national and international institutions.

Monetary policy obtains monitoring through macro prudential supervision.

Germany Cont…..

Germany cont….

Germany has been a supporter in the Nigerian power industry and their micro to medium sized enterprises.

Issued a $200 million credit along with a €5 million

Removal of physical barriers

Germany cont….

ECB setting compulsory minimum-reserve requirements at banks

Unprecedented actions to combat to financial crisis

Stimulation of the credit marketsPurchase of Euro dominated bonds

Nigeria

Monetary policy committees Review economic and financial conditions in the economy Determine appropriate stance of policy in the short to medium term Review regularly, the CBN monetary policy framework and adopt

changes when necessary. Communicate monetary/financial policy decisions effectively to the

public and ensure the credibility of the model of transmission mechanism of monetary policy

Nigeria cont….

Nigeria cont…..

Partnerships with Germany Education Energy Culture Poverty reduction Human rights

Nigeria cont….

Reserve management Payment System Vision 2020 initiative

Implementation of Bank Verification Number Issuance of Guidelines on International Money Transfer services in

Nigeria Issuance of revised Guidelines for card issuance and usage in Nigeria Industry e-reference portal Abolishing fees on cash deposits above the cash-less policy threshold

Analysis and Conclusion

Both Germany and Nigeria’s goal is to maintain price stability Germany’s price stability strategy is carefully managed and supervised

by the ECB. In contrast, Nigeria is not a member of such a union and decides its own directions that dictate its price stability.

Germany is a member of the EMU, its monetary policy comes from the ECB and its Governing Council, which decides monetary policies for all member countries. Nigeria on the other hand decides its own monetary policy and is governed by the CBN’s Monetary Policy Committee, one of four committees that dictate Nigeria’s financial/economic sector.

Analysis and Conclusion

Germany is a model for which modern monetary policies are tailored for because of its highly developed and competitive financial system.

Nigeria and Germany are worlds apart when comparing its monetary policies. Germany has the economic infrastructure to carefully manage its monetary policy. Nigeria is a developing economy that has great potential if the proper processes are put in place to minimize both the ongoing corruption and lower its inefficiencies.

Both countries are at different stages of development and with that come different operating priorities.

Analysis and Conclusion

The sum up the comparison of these two countries is simply put like this, Germany’s efficiency and effectiveness is what any country would like to achieve and in Nigeria’s case emulate it as close as possible.

Questions – none – Thank you