Chartered Institute of Bankers of Nigeria (CIBN) has said that the recapitalization exercise of banks is a welcome development as it will empower banks to finance the real sector.
“The recently announced upward review of the minimum capital requirements of Nigerian banks by the Central Bank of Nigeria further empower banks to extend credit to the economy, especially with the productive sector,” Ken Opara, President CIBN said.
He said this at the CIBN annual lecture themed “Improving availability of credit in the Nigerian Real Economy: The critical importance of liquidity” in Lagos on Tuesday.
“I’m a witness to the fact that before the last consolidation that took place a decade ago that for banks to fund a major deal of transactions you needed to have a consortium of banks, but following that consolidation and recapitalization we saw banks supporting mega transactions”.
Opara said it has become increasingly evident that ensuring adequate liquidity within the banking system is very fundamental to fostering sustainable economic growth and development.
The real economy comprises the agricultural sector, manufacturing, construction of and indeed services sectors as tangible foundations of the nation’s economic activity.
“Despite the significant impact of the real sector, access to credit for deals is relatively low compared to what is attainable in other climes.
According to Statista nearly $141 trillion has been lent out to the real sector in advanced countries in the second quarter of 2023.
He said the figure is twice as high as the volume of credit in the same sector for emerging markets.
“It’s worth highlighting the notable improvements in liquidity within Nigeria with the data from CBN domestic credit to N66.4 trillion as at December 2022 showcasing substantial credit extended financial institutions to the real sector economy this figure experienced a significant surge to N96.1 trillion highlighting potential for growth and development to the real sector.”
“However, the volume of credit to the key sectors in Nigeria can be shown as follows: The cultural sector 5.8 trillion, which represents 6 percent of the total credit, manufacturing sector 19.7 trillion representing 21 percent of total credit, sovereign sector 36 trillion representing 37.4 percent.
Also, Patrick Akinwuntan former CEO ECO bank mentioned that liquidity and credit to the private sector is a critical engine for driving the economy and that’s why the weight of the economy is on banks.
He said that Nigeria’s domestic credit to GDP is low compared to that of other countries.
“The percentage of credit to GDP within Africa, Egypt is 30.85 percent according to the World Bank, in the year 2022, South Africa, it’s 92.2 percent, China is 185 percent, the United States is 216 percent, and Nigeria is 14.79 percent.
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