Market News

By Emeka Anaeto, Emma Ujah & Babajide Komolafe

•Nigerian banks should manage external reserves – UBA’s boss

 •Hints 1$trn target may be elusive

The Central Bank of Nigeria (CBN) has said that Nigeria would need strong, resilient and stable banks in its quest to achieve the $1 trillion economy target set by President Bola Tinubu against 2030 timeline.  

In an address at the 36th  CBN Seminar for Finance Correspondents and Business Editors, in Abuja, yesterday, the Deputy Governor, Corporate Services of the bank, Ms. Emem Usoro, said that the on-going banks’ recapitalization was aimed at achieving that goal.  

Represented by the Ag. Director of Corporate Communications, Mrs. Hakama Sidi-Ali, Usoro stated: “As we work towards building a One-Trillion Dollar Economy, we must consider the recapitalisation of our banks to be able to fund, finance and power the economy and favourably compete globally with its peers in other climes.

“We should particularly pay significant attention to bank recapitalisation to ensure that our banks are strong, resilient and stable enough to carry out financial intermediation, and the much-needed financing of development projects and programmes.

“Building a one trillion-dollar economy is not an easy task. It would require careful planning, robust and clear policy direction, dutiful implementation, and averred commitment from stakeholders that would galvanise the various sectors of the economy.

  “The push for a recapitalisation of banks would no doubt improve the strength and health of the financial system, deepen financial intermediation and promote healthier competition that would strengthen our payment system.”  

Usoro said that with the Nigerian economy currently valued at approximately $250billion, achieving $1 trillion economy by 2030 required that all hands must be on deck.  

Effects of trump’s tariffs

She noted that the global financial system and architecture have assumed a new dimension especially with the administration of President Donald Trump in the United States of America which required countries and their financial systems be prepared and ready to utilise opportunities created by financial globalisation through appropriate policy support and actions.

Meanwhile, speaking on his paper, “Banking Recapitalisation Towards a One Trillion Dollar Economy,” the Director of Banking Supervision, Dr. Olubukola Akinwumi, said that CBN had moved away from the past approach, and continued to move forward to ensure that “banks are properly positioned to address their CRR (Cash Reserve Requirement) obligations.”

He said that the incentives in the recapitalization exercise for banks lied with the fact that a stronger bank would be able to handle more large-scale or big-ticket transactions, such as infrastructure financing.

He added, “As you may know, the government has already begun talking about infrastructure concessions. So, the environment is being primed for banks to benefit from building appropriate capital bases that allow them to do more business.

“The incentive, therefore, lies in the value the economy offers—encouraging banks to continue lending and to earn better returns from their lending activities.”

Dr. Akinwumi said that CBN would continue to engage with the Deposit Money Banks to encourage them to lend more to the real sectors of the economy, especially, agriculture, manufacturing and the Small and Medium Enterprises, which are the engine of growth.

He stated: “Regarding whether agriculture, manufacturing, and infrastructure will be powered—those are critical sectors for us to achieve a trillion-dollar economy. That fact is not lost on the banks. We continue to engage with them to lend to these critical sectors of the economy.

“Those sectors are also being prioritized by the government.   If you look at the budget for this year, those sectors—health, education, infrastructure, agriculture—are prioritized. That, in itself, is a signal to the banks that when the government supports these sectors, they are ripe for business.”

However, speaking at the seminar, Mr. Oliver Alawuba, Managing Director of United Bank for Africa (UBA), who provided industry perspectives of the recapitalisastion exercise, urged the fiscal and monetary authorities to have confidence in Nigerian banks and allow them manage some of the nation’s external reserves, saying this was imperative in growing the economy to meet the $1trillion target.

He said, “We need to believe in Nigerians that we can do it.   We are managing the reserves of other African countries in some of the countries that we are present.   We want Nigerians to trust Nigerian banks.   We need to trusted with some of the nation’s reserves.   We can start with may be 10 percent or 20 percent and so on”.

He hinted that the quest for trillion dollar economy appears elusive giving the current growth rate at 3.8 percent compared to the required minimum 10 percent.