Bank recapitalization key to achieving Nigeria’s $1 trillion economic aspirations – NDIC

The Nigerian Deposit Insurance Corporation (NDIC) has said the ongoing recapitalization of banks will play a key role in the country’s path to achieving a $1 trillion economy, an ambition recently declared by President Bola Tinubu.

The Managing Director of NDIC, Mr. Hassan Bello, stated this on Saturday during his keynote presentation at the annual conference of the Financial Correspondents Association of Nigeria (FICAN) held in Lagos.

According to him, recapitalized Nigerian banks would be in a better position to finance real sectors and influence all other sectors of the economy.

He added that recapitalization will also foster a more stable financial system that will be less susceptible to shocks, losses and bank panics.

Attracting FDI

Highlighting efforts by 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 investment in Nigeria and boost the capital market.

“In all this, 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 to our economic production cycles.

“This is critical to achieving the $1 trillion economy we all strive to achieve,” he added. he said.

Also speaking on the conference theme: “Nigeria’s Journey towards a $1 Trillion Economy: Impact of Bank Recapitalization, Opportunities for Fintechs, Real Sector”, Managing Director of United Bank for Africa, Oliver Alawuba, said that the $1 trillion economic aspiration is not require only incremental growth but structural changes in the industry’s approach to banking, financial innovation and sector development.

According to him, the recapitalization initiative is not only about meeting regulatory requirements, but about equipping the banking sector with financial strength to be a reliable engine of economic transformation.

He also noted that with a stronger capital base, banks will have the strength to withstand both external and internal shocks.

A solid capital base, he said, also attracts foreign investors as global investors seek stability and growth opportunities.

Extending credit to the real sector

Alawuba, represented by the Executive Director for Finance and Risk Management at UBA, Ugochukwu Nwaghodoha, said the recapitalization policy must lead to a significant expansion of credit supply to the real sector, particularly in agriculture, industry and infrastructure.

He noted that the Nigerian economy is currently facing a productivity gap.

Citing Nigerian growth statistics, he said the manufacturing sector, for example, contributed about 20.68% to nominal GDP in the second quarter of 2024, down from 14.5% in the second quarter of 2023 and lower than 14 .79% recorded in the first quarter of 2024 and 16.04% recorded in the second quarter of 2023.

“With a larger capital base, Nigerian banks should be well positioned to finance long-term infrastructure projects and provide businesses with low-cost credit facilities to fuel long-term growth,” he added. he said.

Meanwhile, in his welcome speech, FICAN National Chairman, Chima Nwokoji, expressed concerns over currency fluctuations and regulatory pronouncements, particularly the exclusion of retained earnings from capital calculations.

Nwokoji also made comparisons with global best practices, noting that a sound banking system is crucial to 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 recapitalization of the banking sector will increase lending to small and medium-sized enterprises, stimulating entrepreneurship and job creation.

He believed it would also attract foreign direct investment, helping accelerate Nigeria’s path to a trillion-dollar economy.

What you should know

President Bola Tinubu last October at the 29th Nigeria Economic Summit in Abuja told business leaders and Nigerians that Nigeria’s economy could grow to $1 trillion by 2026.

Part of the ambitious goal is to further achieve a $3 trillion economy by 2030 while ensuring his government can deliver “double-digit, inclusive, sustainable and competitive growth.”