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… Spurs low investor confidence, others. As efforts to beat the  global financial  crisis gather momentum, ultraconservative lending; low investor confidence, among others, have been identified as some of its effects on developing economies like Nigeria. According to experts in the World Bank, the impact of the crisis on local financial systems may be worse than previously thought. This is because popular opinions on African countries being safe from any impact may not hold much water anymore.
According to a senior financial sector specialist in the World Bank’ s Africa Finance and Private Sector Unit, Samuel Munzele, the impacts include losses arising from central bank reserve management practices, renewed debate on the role of governments in the financial system, and weakened balance sheets from a downturn in the real economy.
Already, low investor confidence is evident in the continued fall of stock prices at the Nigerian Stock Exchange (until recently when some stocks are beginning to look up), and experts have attributed this to high supply for sale as against low demand to buy.
Banking stocks, which were the toast of the Nigerian Stock Exchange (NSE), raising its shares in the market substantially from 30 percent in 2003 to 63.5 percent as of June 2008, have suffered greatly by losing more than 50 percent of their former price.
Meanwhile, experts have said that in a bid to hedge against direct impact and learn lessons from the crumbling of big financial institutions in the developed market, most banks have reviewed their lending practices by taking on measures to check defaults on high-risk loans.
This, no doubt, prompted the Central Bank of Nigeria’s (CBN) recent release of the credit bureau guidelines mandating all banks to obtain a credit report of borrowers before lending. The belief is that this move will check borrowers from taking loans from other banks when they have defaulted in a particular bank. Thus, credit risk management which may involve conservative measures has taken center stage in most banks’ lending practices. 
Already, in the face of the current state of financial institutions in the USA and the UK, for instance, many central banks and governments globally have reacted by loosening their financial grips on the economy, guaranteeing inter bank loans and directly funding some banks.
On this basis, the apex bank has also loosened its financial grips through reductions in the Monetary Policy rate and the Cash Reserve Ratio, including other policy measures to ensure liquidity in the system and further strengthen banks in the country.
However, most of these central banks’ measures are not without costs, as experts note that there are trade-offs in form of costs to the economy. For instance, in maintaining a strong foreign reserve, often used as a benchmark for the strength of the financial system, experts observe that the country is losing in terms of investments that will generate employment and create goods and services.
While instruments (such as a Treasury Bills) are often used as reserves management benchmarks as they represent the funding (opportunity) cost of managing the reserves portfolio, they are unlikely to be representative of the range of instruments available to central banks.
They posit that because it is relatively easy to achieve, it is not likely to represent the highest portfolio return that the CBN could reasonably expect to achieve, thus revealing that central banks face challenges of portfolio composition, benchmark and duration to manage interest rate risk and other variables.
Also, governments worldwide have asserted a major role in trying to bring stability to the financial system, which before now was frowned at. This is because the free market was believed to be efficient enough to allocate resources and run the system with minimal government supervision and control.