Central Bank of Nigeria
Interbank Markets, Financial Stability, Contagion
The interbank market is an important platform for strengthening financial integration. It also represents a medium for risk sharing among banks through the linkages and common exposures. Exposure between banks leads to a direct asset relation through borrowing from each other at the interbank market while banks are associated indirectly through ownership and sharing of similar portfolio exposures, that connects them, through a web of transaction network. The paper analysed the systemic risk implied in the Nigerian interbank network, based on various network measures using data on individual banks' bilateral exposures. The findings showed that few banks featured prominently in the analysis, owing to their level of exposures and the effect of these varying exposures on their capital base. In addition, the linkages between two prominent banks and other banks were exposed. Moreover, a scenario of two banks failing was observed, which could spark up the chain of other failures with contagion second-round effects. The study could be useful in the development of a monitoring system by the supervisory authorities, as well as in strengthening the bank-internal stress tests of default contagion.
CBN Economic and Financial Review
Nakorji, M.; Ekeocha, P.; Nwosu, C. and Obikaonu, P. (2017). Assessing Systemic Risk in the Nigerian Interbank Money Market. CBN Economic and Financial Review. 55(2), 1-34.