Leverage Recapitalisation To Close $120bn Trade Finance Gap – Economist

Group Chief Economist and Managing Director, Research and Trade Intelligence at Afreximbank, Dr Yemi Kale, has said Nigeria must strategically deploy its ongoing bank recapitalisation drive to narrow Africa’s estimated $80 billion to $120 billion annual trade finance gap and reposition the country as a key engine of intra-African commerce.

Speaking at the Ecobank Customer Forum in Lagos on Tuesday, Kale noted that as Africa’s largest economy and consumer market, Nigeria’s capacity to mobilise capital and support domestic producers would significantly shape the continent’s trade outlook under the African Continental Free Trade Area framework.

“Nigeria is a very large economy. Not only do we have a big domestic market, but we also have a potentially large market that can benefit the entire continent. The policies introduced to stabilise the macroeconomic environment are helpful, and I would advise retaining them. We have to keep faith with the reforms,” he said.

He stressed that closing the wide trade finance shortfall across Africa would require stronger bank balance sheets, deeper capital buffers and more aggressive lending to exporters and small and medium enterprises.

“Recapitalisation of the banks is important. You cannot lend to businesses to grow, expand or import machinery if you do not have enough capital. How do Nigerian banks support deepening intra-African trade if they do not have enough capital?” Kale queried.

According to him, the intra-African capital base would expand banks’ ability to finance domestic industries, scale export-oriented production, and integrate SMEs into regional value chains.

“By increasing export orientation, you increase the ability of banks to lend more to domestic businesses and exporters. There are significant benefits for the Nigerian economy, especially in improving intra-African trade,” he added.

Kale linked the banking sector reforms to the Federal Government’s ambition of building a $1 trillion economy, noting that competitiveness and productivity must underpin growth.

“There are two ways to grow: you produce goods and services and sell them to consumers within Nigeria, across the continent, and preferably outside the continent. But the only way you can sell goods outside Nigeria is if they are competitive,” he said.

He maintained that addressing infrastructure gaps, regulatory bottlenecks and logistics constraints would lower production costs, moderate inflation and boost purchasing power.

“If you fix the ease of doing business, you reduce the cost of production. Goods become cheaper, inflation comes down and purchasing power improves. Higher demand leads to higher production, more jobs and more income. That is how you significantly grow the economy and move towards a one trillion dollar target,” Kale explained.

On trade structure, he decried Nigeria’s continued export of raw materials and importation of finished products, attributing it to weak domestic competitiveness.

“The reason we export raw materials and import finished goods is that we do not have a competitive production structure. If it is cheaper to ithatomething than toa competitive production structure,” he noted.

In his remarks, Managing Director of Ecobank Nigeria, Bolaji Lawal, said the forum was designed to explore practical pathways to accelerate exports and deepen regional integration.

“Our second customer forum in the series focuses on strengthening Nigeria’s economic transformation. We would like to explore how we can drive exports, promote regional integration and, most importantly, support Nigeria’s economic transformation as we work towards building a $1 trillion economy,” he said.