Financial Risk Management: A Review of the Role of the Central Bank of Nigeria

Abstract

This study  reviews the risk management  practices  among banks in Nigeria with particular reference to the role of the Central Bank of Nigeria .  Data were gathered through structured questionnaires, the banks’ annual reports and accounts, relevant CBN publications  and other related literature. The study revealed among others that poor risk awareness and management practices among banks  has  led to the intermittent turmoils  experienced  in Nigeria’s banking sector. It also revealed that many banks adopted a reactive approach to risk instead of being proactive and this has eroded to a reasonable extent depositors funds .  The study recommends that Central Bank of Nigeria and other banks'  managements should  establish proactive  risk management strategies while necessary infrastructure are put in  place to enforce them. There should also be adequate  provision of  the needed risk  infrastructures like the  state of the art  technologies, personnel and processes in the banks. The apex  regulators  should set out strategies that will sternly regulate the risk culture and appetite of the banks, conduct  periodic recertification of banks on risk management and put the neccessary framework that will ensure compliance .  The hitherto firebrigade approach to risk management should be eschewed as this sends an undeserved panic on stakeholders and erodes public's confidence in the banking system in Nigeria.

Keywords: Financial Risk, Risk Appetite, Risk Disclosure, Risk Management, Central Bank of  Nigeria.