It would be something between hyperbole and premature jubilation to describe the minimum capital requirements for banks announced by Mr Yemi Cardoso, Governor of the Central Bank of Nigeria (CBN), as a bombshell.
On the contrary, the Governor of the CBN deliberately and meticulously stuck to his well-choreographed strategy of sensitising the banking community in particular and the financial markets (both domestic and international) that the increase in minimum capital requirements for banks was a priority item on his agenda. Hence, there was no surprise element in the equation when the new policy was officially announced.
At the press briefing on March 28, 2024, the CBN Governor was lucid, intentional, professional, and focused. He skipped superfluous references to slogans, cliches, ambiguities, and catchphrases: “Game-Changer,” “Visionary,” “Ground-breaking,” etc. Instead (and rightly too), his main message was that the minimum capital requirements were the outcome of the main item on the economic and financial landscape: to build a U.S.$1 trillion economy by 2030.
Whether or not this is a realistic proposition is a subject for another day. KPMG has come out bluntly to declare it unattainable. To achieve that goal, the annual growth of our GDP (gross domestic product) would have to leap to a minimum of 11 percent per year.
The forecast for this year is 3.3 percent.
Front page report in “ThisDay” newspaper: “WORLD BANK PROJECTS 3.3 percent GROWTH FOR NIGERIA IN 2024, 3.4 percent FOR AFRICAN ECONOMIES”
“The World Bank has predicted that West Africa’s biggest economy, Nigeria, would grow at 3.3 percent this year, below its long-term average.
Also, it forecasted that economies in Sub-Saharan Africa would post a growth rate of 3.4 percent and 3.8 percent in 2024 and 2025, respectively, although not enough to lower the level of poverty on the continent.
According to the Bank’s latest Africa’s Pulse report, growth would rebound in 2024, rising from a low of 2.6 percent in 2023 to 3.4 percent in 2024 and 3.8 percent in 2025.
South Africa’s growth rate was projected to double in 2024, but just to 1.2 percent, while Angola’s was set to pick up to 2.8 percent from 0.8 percent last year, driven mainly by the non-oil sector amid falling oil production.
In contrast, the East African Community region was expected to grow 5.3 percent this year, due to strong growth in Kenya, Rwanda, Uganda, and the Democratic Republic of the Congo.
Zambia defaulted on its external debt in 2020, followed by Ghana in 2022 and Ethiopia late last year.
The Africa Pulse report underscored the fact that many countries in Sub-Saharan Africa were hit hard by the shocks of COVID-19 and Russia’s war in Ukraine, which pushed up inflation at the same time as rising global interest rates made borrowing prohibitively expensive, while drought and conflict have also affected swathes of the region.
“Growth is set to bounce back in Sub-Saharan Africa, but the recovery is still fragile.
Per capita GDP growth of 1 percent is associated with a reduction in the extreme poverty rate of only about 1 percent in the region, compared to 2.5 percent on average in the rest of the world.
In a context of constrained government budgets, faster poverty reduction will not be achieved through fiscal policy alone. It needs to be supported by policies that expand the productive capacity of the private sector to create more and better jobs for all segments of society,” said World Bank Chief Economist for Africa, Andrew Dabalen.
While noting the economic recovery in the region, the report stated that the recovery remains tenuous.
Just as inflation is cooling across most economies, falling from a median of 7.1 to 5.1 percent in 2024, it remains high compared to pre-COVID-19 pandemic levels.
Also, while the growth of public debt is slowing, more than half of African governments grapple with external liquidity problems and face unsustainable debt burdens.
Overall, the report explained that despite the projected boost in growth, the pace of economic expansion in the region remains below the growth rate of the previous decade (2000–2014) and is insufficient to have a significant effect on poverty reduction.
Moreover, due to multiple factors, including structural inequality, economic growth reduces poverty in Sub-Saharan Africa less than in other regions.
Sub-Saharan Africa’s public debt-to-GDP ratio was forecast to fall from 61 percent in 2023 to 57 percent this year, but more than half of the countries are still in or at high risk of debt distress, the report stated.
While increased private consumption and declining inflation are supporting an economic rebound in Sub-Saharan Africa, the report observed that the recovery remains fragile due to uncertain global economic conditions, growing debt service obligations, frequent natural disasters, escalating conflict, and violence.
It called for transformative policies to address deep-rooted inequality to sustain long-term growth and effectively reduce poverty.
