With Nigeria’s private sector facing a significant credit shortfall as domestic lending to the sector is currently just 13% of Gross Domestic Product (GDP), far below the global average, banking sector recapitalisation is expected to increase this threshold above 13 per cent, says managing director of First City Monument Bank (FCMB), Yemisi Edun.
This credit gap, she said, presents a major challenge to the country’s economic growth, especially compared to countries with trillion-dollar economies, where private sector lending typically hovers around 80 per cent of GDP.
While affirming that the ongoing recapitalisation of Nigeria’s banks will help address this shortfall, Edun, who was speaking at the 17th Annual Banking and Finance Conference in Abuja, stressed the need for increased private sector credit to fuel economic development, particularly, for Small and Medium-sized Enterprises (SMEs).
“In the country, SMEs, which play a major role in employment and economic growth, are struggling with limited access to credit. With the recapitalisation of banks, there will be more capacity to offer affordable loans to SMEs, enabling them to grow and contribute more effectively to GDP,” she pointed out.
Edun further explained that, if Nigeria aims to reach a $1 trillion economy, the financial services sector must grow faster than the economy.
To her, “Financial services account for around 4.7 per cent of GDP. For the sector to hit a target of 5.5 per cent by 2030, it would need to grow by more than 18 per cent annually. The ongoing recapitalisation, expected to increase the banking sector’s shareholders’ funds by over 50 per cent, will be critical to this growth.
“With a larger capital base, banks will be better positioned to meet the financing needs of critical sectors like infrastructure and manufacturing, both of which are essential for Nigeria’s long-term economic growth.”
Beyond traditional lending, Edun advocated alternative financing mechanisms such as joint ventures, venture capital, and loan guarantee schemes to support high-potential SMEs. “Diverse funding options, including equity and debt partnerships, are essential for overcoming the capital constraints many businesses face,” she recommended.
Infrastructure financing, she noted, is another pressing issue, with Nigeria needing about $100 billion annually to address its infrastructure deficit. Edun recommended that banks collaborate on issuing long-term infrastructure bonds and forming public-private partnerships (PPPs) to make this happen.
Looking ahead, Edun stressed the importance of investing in technology and human capital. “Digital transformation and automation are critical for the future of financial services. Innovations like artificial intelligence will play a key role in enhancing efficiency and expanding access to underserved populations,” she said.
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