NDIC: Strongly Capitalised Banks will Support Attainment of $1tn Economy

*Tinubu’s quest for $1tn economy bold, achievable, says UBA

Nume Ekeghe, Dike Onwuamaeze and Kayode Tokede

The Managing Director/Chief Executive of Nigeria Deposit Insurance Corporation (NDIC), Mr. Bello Hassan, has stated that strongly capitalised banks will support President Bola Tinubu’s quest to raise Nigeria’s Gross Domestic Product (GDP) to $1trillion.
This is just as the Group Managing Director/CEO of United Bank for Africa Plc (UBA), Mr. Oliver Alawuba, has declared that Tinubu’s quest to raise the country’s GDP to $1trillion is achievable but would require structural shifts in banking, financial innovation and sectoral development.
Delivering his keynote address yesterday at the 2024 annual conference of the Finance Correspondents Association of Nigeria (FICAN), which had as its theme: ‘Nigeria’s Journey Towards $1 Trillion Economy: Impact of Banks’ Recapitalisation, Opportunities for Fintechs, Real Sector,’ Hassan stated that the banks are pivotal in promoting growth through intermediation function by mobilising financial resources from the surplus units to productive sectors of the economy.

The NDIC boss, however, noted that discharging this important role might expose the banks to some risks, which they would not seamlessly accommodate with their normal operational profits but would require strong capital to absorb.  
Hassan said: “The role of strong and well-capitalised banks in supporting the current administration’s bold vision of growing Nigeria’s economy to a one trillion-dollar must be appreciated by the relevant players in the financial sector.

“The opportunities and potentials for growth of the real sector depend, among others, on the availability and affordability of financing.
“To achieve the desired level of financing by the real sector, the window offered by the banks in partnership with Fintechs must be adequately harnessed.
“Supervisors must 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.

“For sustainable and inclusive growth, policymakers must create an enabling environment that supports innovation, financial inclusion and growth while simultaneously protecting the markets, consumers, and investors,” he explained.
Also speaking, the Deputy Director of Banking Examination Department, NDIC, Mr. Emeka Udechukwu, said that without a vibrant real sector, the economy might not grow fast enough to hit the $1 trillion target.
He said: “If there is challenge in the real sector of any economy, that economy is already challenged.
“So, we should resuscitate our real sector through policies that encourage more Nigerians to go into the real sector such as the loan-to-deposit ratio policy of the CBN,” Udechukwu added.

Meanwhile, the UBA CEO, Alawuba, who was represented by the bank’s Executive Director of Finance and Risk Management, Mr Ugo Nwaghodoh, noted that the quest for a $1 trillion economy vision was bold but 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 recognise 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,” he said.

Alawuba stated that the ongoing banking recapitalisation should facilitate significant expansion in the provision of credit to the real sector, particularly in agriculture, manufacturing and infrastructure to close the current productivity gap in Nigeria’s economy.
The productivity gap, according to Alawuba, was noticeable from the declining contributions of the manufacturing sector to the GDP, which went down from 16.04 in Q4 2023 to 14.79 and 12.68 in Q1 2024 and Q2 2024 respectively as reported by the National Bureau of Statistics (NBS).  
“This is far below the level required to drive industrialisation and economic diversification.

“With larger capital bases, Nigerian banks should be well-positioned to finance long-term infrastructure projects and provide low-cost credit facilities to businesses that will drive industrial growth,” Alawuba said.
He added: “For Nigeria to achieve its $1 trillion economic goal, the real sector must become the true engine of growth.
“A vibrant real sector will drive employment, foster innovation, and strengthen the overall economy by reducing dependency on the oil sector,” he added.
According to him, agriculture remained one of Nigeria’s largest employers of labour, adding that its productivity levels are among the lowest in Africa.
He argued that agriculture should be made more efficient and technologically driven while the banking sector, along with the fintech innovations, facilitate easier access to credit and technological inputs like precision farming tools.  

Alawuba also stated that the journey to a $1 trillion economy would require more proactive interventions from the Central Bank of Nigeria (CBN) through the deployment of growth-focused monetary policies.  
He said: “While inflation management is crucial, the CBN must ensure that its monetary policies support sectors that are critical to economic expansion.
“This means maintaining a careful balance between interest rates, exchange rates, and inflationary pressures to support the real sector without stifling growth.
“The CBN should continue to encourage banks to lend more to sectors like agriculture, manufacturing, and infrastructure.
“Recapitalisation alone is not enough; it must be followed by focused lending to strategic areas that promise the highest economic returns,” Alawuba added.