The Chartered Institute of Bankers of Nigeria (CIBN) has hailed the recent move towards recapitalization in the banking sector, citing its potential to invigorate banks and drive investment into the real economy.
Ken Opara, President of CIBN, expressed his endorsement of the Central Bank of Nigeria’s decision to increase the minimum capital requirements for Nigerian banks. He emphasized that this initiative would enable banks to provide more substantial financial support to the productive sectors of the economy.
Speaking at the CIBN annual lecture themed “Improving Availability of Credit in the Nigerian Real Economy: The Critical Importance of Liquidity,” held in Lagos, Opara highlighted the transformative impact of previous consolidation and recapitalization efforts. He noted that these measures had facilitated banks’ ability to support significant transactions without the necessity of forming consortiums.
Opara underscored the crucial role of liquidity in driving sustainable economic growth and development. He emphasized that a well-liquidated banking system is paramount for fostering a robust real economy, comprising agriculture, manufacturing, construction, and various service sectors, which form the bedrock of the nation’s economic activity.
Despite the pivotal role played by the real sector, Opara lamented the comparatively low access to credit for deals in Nigeria. Drawing on data from Statista, he highlighted the vast disparity between credit volumes in advanced economies and emerging markets, signaling the need for improvement in Nigeria’s credit accessibility.
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Pointing to positive trends in liquidity within Nigeria, Opara referenced data from the Central Bank of Nigeria indicating a substantial increase in domestic credit, reaching N96.1 trillion as of December 2022. He emphasized the potential for further growth and development in the real sector, supported by this surge in credit availability.
However, Opara acknowledged the existing disparities in credit distribution across key sectors in Nigeria. He cited figures showing relatively lower credit allocations to crucial sectors such as agriculture, manufacturing, and infrastructure, underscoring the need for more balanced credit distribution.
Echoing Opara’s sentiments, Patrick Akinwuntan, former CEO of ECO Bank, emphasized the critical role of liquidity and credit in driving economic growth. He highlighted Nigeria’s comparatively low domestic credit to GDP ratio compared to other countries, emphasizing the imperative for increased credit accessibility to fuel economic expansion.
In summary, the move towards recapitalization in the banking sector, endorsed by CIBN, presents a significant opportunity to strengthen banks’ capacity to support the real economy. However, concerted efforts are needed to ensure equitable distribution of credit across sectors, thereby fostering inclusive and sustainable economic development.
