LAGOS: It has been established that for the proposed $1 trillion economy by the Federal Government to come into reality, the banking sector and others should collaborate.
This was the consensus opinion of stakeholders and financial experts at the recently held 2024 Annual Conference of the Finance Correspondents Association of Nigeria (FICAN), with the theme: Nigeria’s Journey Towards a $1 trillion Economy: Impact of Banks’ Recapitalization, Opportunities for Fintechs and Real Sector.
While speaking at the event, the Executive Director, Finance and Risk Management, United Bank for Africa Plc, Ugo Nwaghodoh said Nigeria’s journey to a $1 trillion economy is not just a vision – it is a shared responsibility.
His words, “The banking sector, Fintech innovators, the real sector, and regulatory institutions must work hand-in-hand to drive this transformation. We are on the cusp of a new era, one that will be defined by innovation, resilience, and sustainable growth.
“Let us take this opportunity to collectively shape the future, ensuring that the Nigeria of tomorrow is one where prosperity is shared, opportunities abound, and our economy stands as a beacon of growth on the global stage.”
He added, “As we gather to explore the theme of this conference – Nigeria’s Journey Towards $1tn Economy: Impact of Banks’ Recapitalization, Opportunities for Fintechs, and the Real Sector – we must reflect deeply on where we stand today, and the deliberate steps required to reach this ambitious milestone.
“The $1 trillion economy vision is bold, yet achievable. However, it requires not just incremental growth, but structural shifts in how we approach banking, financial innovation, and sectoral development. As we embark on this journey together, let us recognize that the future of Nigeria’s economy rests on the strategic alignment of policy, investment, technology, and, most importantly, our collective will to innovate and grow.”
Speaking on the banking sector recapitalization, he said, the 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.
Insightful points for the banking industry, he noted, include stabilizing the financial ecosystem, expanding credit to the real sector, and helping the banks to navigate global trends as the Nigerian banking sector must remain attuned to global trends such as digitization, application of artificial intelligence, ESG (Environmental, Social, and Governance) criteria, and Sustainable Finance.
Managing Director/Chief Executive of the Nigeria Deposit Insurance Corporation (NDIC), Mr. Bello in his speech at the event, said the current recapitalization initiative of the Central Bank of Nigeria (CBN) must be implemented effectively, adding that this is necessary towards enhancing the resilience, solvency and capacity of Nigerian banks to absorb shocks and continue to support economic development of the nation by efficiently performing their function as the fulcrum of financial intermediation.
According to him, relevant players in the financial sector must appreciate the role of strong and well-capitalized banks in supporting the current administration’s bold vision of growing Nigeria’s economy to $1 trillion.
“The opportunities and potentials for growth of the real sector depend, among others, on the availability and affordability of financing the economy. To achieve the desired level of financing required by the real sector, the window offered by banks in partnership with Fintechs, must be adequately harnessed,” he said.
He, however, stressed on the need for supervisors to understand the interconnection among the various financial services providers and how their policies and actions can affect the efficiency and optimality of the overall financial system.
He noted that many Nigerian banks have focused almost exclusively on large corporations, underserving small and medium enterprises as well as the financially excluded active poor unlike the Fintechs that have the potential of closing this gap through deployment of innovative financial services, using new technology and reduction of bottlenecks associated with traditional financial institutions.
“Notwithstanding the opportunities for growth and the benefit that the system stands to gain through the exploration of Fintechs in the financial services ecosystem, we must, as stakeholders, be conscious of the additional risks and complexities that the system may be further exposed, particularly in the area of privacy, personal information, customer protection, transparency, and cyber-security.
“This no doubt has made regulatory oversight increasingly more complex. Financial regulators must evaluate existing rules and consider adoption of new regulations to better address the opportunities and challenges presented by these new technologies,” Hassan said.
On the role of stakeholders, he emphasized that the vision of growing Nigeria’s economy initiated by President Bola Tinubu, is the starting point for the national policy rethink, stakeholder engagement and realignments of efforts and policies toward achieving the objective.
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He stated that the CBN and NDIC have collectively through their respective mandates repositioned the banking industry to better serve its intermediation role for the benefits of real sector and in fact all other sectors of the economy.
He said the CBN foreign exchange rate unification and banks recapitalization are some of the key initiatives necessary for propelling national economic growth.
Hassan highlighted that the foreign exchange rate unification policy has the potential for promoting foreign direct investment, foreign portfolio inflows, increased investor confidence, reduction of budget deficit, and improved sovereign credit ratings.
“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 productive sectors of the economy. This is crucial in Nigeria’s journey towards the $1 trillion economy that we all aspire to attain,” he added.
In his contribution, the Managing Director/CEO of Parthian Partners of Parthian Partners, Mr. Oluseye Olusoga said that the ongoing banking recapitalization would be successful.
In the new Central Bank of Nigeria (CBN) capital requirement, international banks are expected to raise their capital base to N500 billion, national banks N200 billion and regional banks N50 billion. The purpose of this is to strengthen the banks and position them to play pivotal roles in driving development across all sectors of the economy.
The CBN is also seeking to ensure the emergence of stronger, healthier and more resilient banks to support the achievement of a $1 trillion economy by 2030 and promote financial stability.
Olusoga was represented by the company’s Chief Finance Officer (CFO), Mr. Olayinka Arewa
Olusoga noted that “We are very optimistic on the successful outcome of the exercise. We have done it before with the 2004 banking recapitalization.”
He added that in 2004, Nigeria had 89 banks and a fragmented industry with a minimum capital base of N2 billion, translating to about $250 million dollars back then.
“Then somebody came up and said, we can build a world-class institution that can survive shocks with a longer-term perspective of the industry. The exercise which lasted for 18 months created uncertainties; despite all the odds, we got it right,” he said.
Olusoga, noted that “with today’s industry outlook, we have banks that compete favourably in spaces; that were hitherto unimaginable. We have banks that operate internationally. This was not so in 2004.
“In 2004, public sector funds were pulled out systematically from the banks. Banks were made to go after deposits, and that was how retail banking grew. With today advancement in technology, and in terms of consumer appetite, the current exercise will be successful.”
He declared, “I did a comparison between 2004 and 2024 banking recapitalization. The minimum benchmark that was set in 2004 was about using the dollars as a benchmark of $250 million minimum. Now, translating what we have today, plus or minus the exchange rate, it comes to about $300 million. So, we are pretty much on the same platform. But we have something different. Back then, it was a flat-out N25 billion”.
He noted that “over the last 15 years, we have created a kind of tier system of banking, and we can absorb it.”
“Let us not forget that we have a youthful population, with the average age in the Nigerian population today being 19 years. That means we have more youth than the older generation. So, the appetite has changed. Even if we did not want to change, we would have been forced to change.”
According to him, we have tiers of banks, tiers of microfinance banks, tiers of fintechs. With this recapitalization that has started, I am hopeful, as a country, that what happened in 2004 gave us institutional capacity.
Also, the National Chairman of FICAN, Mr. Chima Titus Nwokoji said that Nigeria’s ambition to become a $1 trillion economy by 2025 or 2026 requires bold reforms.
He noted that “this is critical especially now that the country has been ranked the number four biggest economy in Africa by the International Monetary Fund (IMF). A critical step in the recapitalization of banks is the enhancing of their capacity for financial intermediation, to support fintechs and the real sector.
“Already, there are estimates that the recapitalization of these banks will bring in about N3.3 trillion into the banking system. This comes with its multiplier effects on the economy.”
