President Bola Tinubu has urged Nigerian banks to ensure that the gains from the recently completed recapitalisation exercise translate into cheaper and more accessible credit for businesses.
The President warned that increased bank capital would have little impact on the economy if businesses and other productive sectors continued to struggle with limited access to finance.
Tinubu made the remarks on Tuesday at the 19th Annual Banking and Finance Conference of the Chartered Institute of Bankers of Nigeria in Abuja. He was represented at the event by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele.
The President said the banking industry must move beyond its traditional focus on financing government and play a stronger role in funding businesses, investments and employment opportunities.
“A resilient banking system cannot exist indefinitely where businesses cannot obtain affordable credit, manufacturing that is struggling cannot expand, and millions of productive MSMEs remain outside of the formal financial system,” Tinubu said.
He added, “The recently concluded bank recapitalisation must produce more than bigger balance sheets. It must translate into capital formation in the real economy, financing Nigerian businesses as they expand across Africa and pursue our ambition of a trillion-dollar economy.”
“A bigger bank that does not finance a more productive economy is a suboptimal outcome.”
Tinubu said the Federal Government was strengthening financial support mechanisms, including guarantees, risk-sharing arrangements, blended finance and credit enhancement programmes.
He identified the National Credit Guarantee Company as a key component of efforts to minimise the risks faced by banks when financing productive sectors of the economy.
The President also advocated a gradual reduction in the banking sector’s reliance on government securities, encouraging greater lending to private businesses.
“For too long, attractive returns on government securities have made lending to the productive economy comparatively less compelling. As fiscal conditions improve, the government will progressively create space for more private-sector credit,” he said.
Tinubu explained that improved fiscal discipline would ease pressure on government borrowing, while declining inflation could help bring down lending costs and encourage investment, production and job creation.
He, however, acknowledged that improvements in key economic indicators had not yet been fully reflected in the living conditions of Nigerians.
“Stability has returned. Credibility is rising. Prosperity is coming. These improvements matter, but we must not mistake macroeconomic stability for economic prosperity. Stability is the foundation. Prosperity is the destination,” Tinubu said.
Meanwhile, the Chairman of the Body of Bank CEOs and Group Managing Director/Chief Executive Officer of United Bank for Africa Plc, Oliver Alawuba, said the recapitalisation programme had enhanced the capacity of Nigerian banks to finance economic growth.
According to him, banks raised N6.4tn through the exercise, strengthening their resilience, risk-management systems and capacity to fund major projects.
“Our task now, as banks, is how to convert this strong capital and smart systems we have built into affordable, productive credit to MSMEs, agriculture, manufacturing, infrastructure and exports, so that the banking industry resilience becomes national prosperity,” Alawuba said.
In his keynote address, the World Bank Country Director for Nigeria, Mathew Verghis, represented by the Senior Private Sector Specialist at the World Bank Nigeria office, Bertine Kamphuis, said access to credit remained heavily concentrated away from sectors that generate significant employment.
He said domestic private-sector credit stood at about 13 per cent of GDP, while MSMEs accounted for roughly one per cent of credit and agriculture received about six per cent.
“Credit is thinnest where job intensity is highest. MSMEs receive around one per cent of credit only. Agriculture gets about six per cent. This is where the jobs are,” he said.
Verghis further disclosed that fewer than one in 20 MSMEs had access to bank financing, despite an estimated three to four million young Nigerians joining the labour market every year.
