As part of the Development of a New framework for monetary policy implementation in Nigeria , the Central Bank of Nigeria has introduced a New Real -Time Gross Settlement (RTGS) System and replaced the minimum rediscount rate with a New monetary policy rate.

The RTGS System , which replaces the Nigerian Interbank Settlement System , is being instituted in response to the growing need to automate the existing Settlement process within the Nigerian Financial System . RTGS is an Online System for settling Transactions of Financial institutions, especially banks. Both the Processing and the final Settlement of Funds transfer instructions within the Financial System take place continuously Online in Real time and on a transaction-by-transaction basis.

Given its capacity to allow for final Settlement of individual Funds transfers on a continuous Daily basis, RTGS provides a strong Platform for limiting Settlement and systemic risks in the Interbank Settlement process. Credit risks due to Settlement lags Are eliminated. The RTGS provides for transparency in transaction flows due to the full automation of the Settlement process. RTGS eliminates the error-prone procedure of netting debits against credits.


The New System began on December 11 2006 after test runs with All the banks, with the exception of a few that did not have the requisite infrastructure for take-off. All banks within the Financial System provide Credit in the RTGS as opening balance (collateralized by treasury bills). On receipt of a Fund transfer order, the RTGS tests for Fund availability and settles confirmed orders on a First -in, First -out basis within operating hours. All 26 Central Bank Clearing zones Are now live on RTGS, as banks have been electronically linked to the RTGS.


The fundamental objective of the New monetary policy, as stated by the Central Bank , is \"to achieve a stable Value of the domestic currency through stability in short-term interest rates\". The monetary policy rate, a New nominal anchor or operational target rate for All interest rates in the economy, will replace the minimum rediscount rate. In this regard, the monetary policy rate will serve as an indicative rate for Transactions in the Interbank money market, as well as other Bank interest rates. Specifically, the monetary policy rate will serve to influence the Central Bank \'s rate of repurchase agreements with banks and other Financial institutions.


The New monetary policy also aims to ensure that Real returns on money market instruments remain positive. Therefore, the monetary policy rate will be set at 100 basis points above the prevailing rate of inflation at any point in time.