• Thursday, December 07, 2023
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Profit amidst poverty: Dissecting Nigeria’s banking sector windfall in a crumbling economy & the Afonomics antidote

Oyedele-Led tax reforms embrace Afonomics proposal as fourteenth point

In examining the H1 2023 financial disclosures of companies listed on the Nigeria Stock Exchange, a startling contradiction in the nation’s economic fabric becomes glaringly evident. With poverty at a record high, inflation reaching unprecedented levels, and the Naira hitting historic lows against the US dollar (currently at 1 USD to 1050 Naira), the notable profits reported by the banking sector appear misaligned with the broader grim economic reality engulfing the nation.

The Nigerian banking sector, seemingly insulated from these adversities, continues to post hefty profits. Seven of the top ten most profitable companies are banks, which collectively account for 75% of the total declared pre-tax profits, summing up to an astonishing 1.7 trillion Naira.

This striking discrepancy raises serious questions regarding the efficiency and focus of our economic regulators and policies. With my layman economic sense, it is easy to conclude that the past and current economic framework lacks genuine commitment towards fostering growth and development, inadvertently creating an environment where banks capitalise significantly on policy shortcomings. If not, why is it that the Banking Sector is the only sector doing well.

Read also: Nigeria banking sector loses ₦9.5 billion to electronic fraud

It’s within this context that the ‘Afonomics’ proposal merits urgent and serious consideration. Afonomics isn’t just a theoretical framework; it’s a practical, results-oriented approach designed to address these pressing economic issues proactively. This economic blueprint is meticulously crafted to counter entrenched challenges, providing a roadmap for achieving sustainable and inclusive economic growth.

Afonomics recommends implementing stringent measures to stem the tide of foreign exchange manipulations and the activities of speculative traders—practices that many believe are widespread within the banking sector. Furthermore, Afonomics calls for robust regulatory oversight on the operations within Domiciliary accounts. These measures are imperative for guiding the Nigerian economy towards meaningful development and averting the looming risk of full-blown dollarisation.

The benefits of adopting Afonomics are multifaceted. First and foremost, it promises to usher in an era of economic stability and predictability, creating an environment that’s conducive for investment. This stable economic climate is not just a magnet for foreign direct investment but also a catalyst for domestic entrepreneurial initiatives and investment. Stability fosters confidence among investors and entrepreneurs alike, creating a ripple effect that invigorates various sectors of the economy, from manufacturing and technology to the array of real sectors.

By curbing forex manipulations and speculative trading, Afonomics ensures that the financial sector operates transparently and fairly, contributing positively to the economy without exploiting systemic loopholes for disproportionate gain. This renewed financial integrity would inadvertently support small and medium-sized enterprises (SMEs), which are often the most vulnerable to economic volatility and predatory financial practices. With SMEs being the backbone of any economy, supporting them translates to strengthening the economy at its core, leading to job creation and poverty alleviation.

For comparative analysis, consider the economic landscapes of the US, China, Germany, India, and Brazil. In these nations, the profitability narrative isn’t monopolized by the banking sector. In the United States, the technology sector, epitomized by behemoths like Apple and Amazon, is a significant driver of economic output and GDP. These companies are not merely profit-generating machines; they are also harbingers of innovation, employment, and growth within the ancillary industries.

Similarly, in India, while the financial services sector is vital, substantial contributions to the economy also emanate from the energy, information technology, and pharmaceutical sectors. Leading corporations like Reliance Industries and Tata Consultancy Services are testament to the Indian government’s strategic endeavors to champion and reinforce manufacturing and technology as crucial elements of their economic growth narrative.

Read also: SMEs worried about rising cost of doing business in Nigeria Survey

Conversely, the economic tapestry in Nigeria tells a different tale, with the banking sector’s profitability not reflected in the performance of the real sectors, manufacturing, or technology. These sectors should, in theory, underpin the financial sector’s performance, serving as its foundational support.

Afonomics seeks to alter this narrative fundamentally. It isn’t just about reigning in the excesses of the banking sector; it’s about recalibrating and realigning the Nigerian economy towards a path of balanced, sustainable, and inclusive growth. Implementing the principles and practices outlined in Afonomics would synchronize the performance of the financial sector with the broader economy, laying the groundwork for a future where prosperity is not just visible but is also widely shared and inclusive.

Now more than ever, there’s a pressing need for decisive governmental action. It’s time to embrace innovative economic frameworks like Afonomics and commit to policies that are reflective of a genuine and unrelenting pursuit of national growth and development. The future of Nigeria’s economy hinges on the actions taken today, making the adoption and implementation of Afonomics not just necessary but absolutely imperative for the nation’s economic resurgence and revitalisation.