…says focused lending is key
Recapitalisation of Nigerian banks is a crucial step, but it must be followed by strategic lending to sectors that can generate the highest economic returns, says Oliver Alawuba, group managing director/CEO of United Bank for Africa (UBA).
Speaking at the 2024 Annual Conference of the Finance Correspondents Association of Nigeria (FICAN) on Saturday, Alawuba, represented by Ugo Nwaghodoh, UBA’s executive director of finance and risk management, emphasised that while the Central Bank of Nigeria’s (CBN) recapitalisation efforts aim to bolster the banking sector’s resilience, it must be paired with focused lending to drive Nigeria towards its goal of becoming a $1 trillion economy.
Vision for a $1 trillion economy
“The $1 trillion economy vision is bold, yet achievable,” Alawuba said. “It requires not just incremental growth, but structural shifts in banking, financial innovation, and sectoral development. Nigeria’s economic future depends on strategic alignment in policy, investment, and technology.”
The recapitalisation process, initiated by the CBN, is more than a regulatory requirement. Alawuba stressed that it provides the banking industry with the financial stability necessary to withstand both external shocks—like the global pandemic and volatile oil prices—and internal challenges such as inflation and the depreciation of the Naira. This stability, he added, is essential to maintaining market confidence and ensuring sustained growth.
Expanding credit to the real sector
The focus, according to Alawuba, should now shift towards channelling funds into the real sector. He pointed out that industries like agriculture, manufacturing, and infrastructure development require expanded credit to close Nigeria’s productivity gap. The Nigerian Bureau of Statistics reported that the manufacturing sector contributed only 12.68 percent to the nominal GDP in the second quarter of 2024, down from 14.55 percent a year earlier.
“This is far below the level required to drive industrialisation and economic diversification. Banks must leverage their larger capital bases to finance long-term infrastructure projects and provide low-cost credit to businesses,” Alawuba emphasised.
Navigating global trends
Alawuba also urged Nigerian banks to stay attuned to global trends, including digitization, artificial intelligence (AI), and sustainable finance. As international banks capitalize on these developments, Nigerian financial institutions must adapt to remain competitive. He noted that offering products aligned with Environmental, Social, and Governance (ESG) criteria could attract foreign investments.
Read also: Banks’ recapitalisation: SEC guidelines makes process transparent – D-G
Fintech’s role in revolutionising financial services
Nigeria’s burgeoning fintech sector will play a pivotal role in the country’s economic future, Alawuba observed. With the largest fintech market in Africa, Nigeria is already seeing a transformation in how financial services are delivered, from mobile payments to lending platforms. Alawuba believes fintech can drive financial inclusion, especially for the 26 percent of Nigerians who remain unbanked or underbanked.
“Fintechs are uniquely positioned to bridge this gap with low-cost, innovative delivery models. They must now focus on developing products for rural populations, leveraging mobile technology and partnerships with microfinance institutions,” he said.
Collaboration between banks and fintech
Rather than viewing fintech companies as competitors, Alawuba encouraged Nigerian banks to embrace them as strategic partners. Banks offer established customer bases and trust, while fintechs bring innovation and agility. Together, they can develop hybrid solutions for mobile payments, SME financing, and cross-border transactions.
A conducive regulatory environment will be key to sustaining fintech growth, he noted, urging the CBN to continue fostering innovation while maintaining consumer protection.
Role of NDIC in safeguarding the financial system
As recapitalisation strengthens banks, the Nigerian Deposit Insurance Corporation (NDIC) must play a larger role in safeguarding depositors. Alawuba emphasised that as the economy grows, so too will the complexity of financial products, and the NDIC must evolve to protect depositors in this increasingly complex ecosystem.
Alawuba said, “Nigeria’s journey to a $1 trillion economy is not just a vision—it is a shared responsibility. The banking sector, fintech innovators, the real sector, and regulatory bodies must work together to drive this transformation.”
As Nigeria stands on the brink of a new economic era, collaboration and innovation will be the keys to ensuring that the country’s future is one of shared prosperity and sustainable growth.
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