The Nigeria Deposit Insurance Corporation (NDIC) has said that the ongoing banking recapitalization would play a key role in the country’s journey to becoming a $1 trillion economy, an ambition recently declared by President Bola Tinubu.
The Managing Director of the NDIC, Mr. Hassan Bello, stated this on Saturday during his keynote presentation at the Finance Correspondents Association of Nigeria (FICAN) Annual conference held in Lagos.
According to him, recapitalized Nigerian banks would be in a better position to fund the real sectors and impact all other sectors of the economy.
He added that recapitalization exercise would also promote a more stable financial system that is less susceptible to shocks, losses, and bank runs.
Attracting FDIs
While highlighting efforts being put in place by the financial industry regulators including the Central Bank of Nigeria (CBN) to strengthen the financial system, Bello said the recapitalization process is also expected to attract significant foreign direct investments in Nigeria and boost the capital market.
“In all these, the objective of the CBN and NDIC is to promote a safe, sound, and stable banking system that is capable of providing the required financing for our productive cycles of the economy.
“This is crucial in achieving the $1 trillion economy that we all aspire to attain,” he said.
Also speaking on the theme of the conference ‘Nigeria’s Journey Towards a $1 Trillion Economy: Impact of Banks’ Recapitalization, Opportunities for Fintechs, Real Sector,” the Managing Director of United Bank for Africa, Oliver Alawuba, said $1 trillion economy aspiration requires not just incremental growth, but structural shifts in how the industry approaches banking, financial innovation, and sectoral development.
- According to him, the recapitalization initiative is not just about compliance with regulatory requirements, but about equipping the banking sector with the financial strength to be a reliable engine for economic transformation.
- He also noted that with a stronger capital base, banks will have the push to withstand both external and internal shocks.
- A robust capital base, he said, also attracts foreign investors as global investors seek stability and growth opportunities.
Expanding credit to the real sector
Alawuba, who was represented by the Executive Director, Finance & Risk Management at UBA, Ugochukwu Nwaghodoh, said the recapitalization policy must lead to a significant expansion of the provision of credit to the real sector, particularly in agriculture, manufacturing, and infrastructure.
- He noted that currently, Nigeria’s economy faces a productivity gap.
- Citing Nigerian growth statistics, he said the manufacturing sector, for example, contributed about 20.68% to the nominal GDP as of Q2 2024, down from 14.5% in Q2 2023, and lower than 14.79% recorded in Q1 2024, and 16.04% recorded in Q2 2023.
“With a larger capital base, Nigerian banks should be well-positioned to finance long-term infrastructure projects and provide low-cost credit facilities to businesses that would drive the long-term growth,” he said.
Meanwhile, in his welcome address, the National Chairman of FICAN, Mr Chima Nwokoji, raised concerns about fluctuations in exchange rates and regulatory pronouncements, particularly the exclusion of retained earnings from capital calculations.
- Nwokoji also drew comparisons with global best practices, noting that a robust banking system is vital for economic growth. He cited Singapore’s banking sector as an example of how a well-capitalized banking system can facilitate economic development.
- He further explained that banking sector recapitalization would increase lending to MSMEs, driving entrepreneurship and job creation.
- He believed this would also attract foreign direct investment, helping to accelerate Nigeria’s journey toward a one trillion-dollar economy.
What you should know
President Bola Tinubu last October at the 29th Nigeria Economic Summit in Abuja, had told business leaders and Nigerians that Nigeria’s economy can grow to $1 trillion by 2026.
Part of the ambitious target is to also take it further to a $3 trillion economy by 2030 with an assurance that his government can ensure “double-digit, inclusive, sustainable and competitive growth.”
