Nigeria’s private sector faces a significant credit deficit, with domestic lending to the sector at around 13% of gross domestic product (GDP), which is below the global average.
This gap poses a major challenge to the country’s economic growth, especially compared to countries with multitrillion-dollar economies where private sector financing typically amounts to around 80% of GDP.
Commenting on the development, the Managing Director of First City Monument Bank (FCMB), Mr. Yemisi Edun, said the ongoing recapitalization of Nigerian banks would help address this shortfall.
Speaking at the 17th Annual Conference on Banking and Finance held in Abuja, Edun stressed the need to increase private sector credit to foster economic development, especially for small and medium-sized enterprises (SMEs).
“Small and medium-sized enterprises, which play a critical role in employment and economic growth in this country, are struggling with limited access to finance,” Edun said. “Recapitalizing banks will increase their ability to provide affordable financing to small and medium-sized enterprises, enabling them to grow and contribute more effectively to GDP,” he said.
Edun further explained that if Nigeria aims to achieve a $1 trillion economy, the financial services sector must grow faster than the economy.
Financial services account for approximately 4.7% of GDP. The sector needs to grow by more than 18% each year to reach the 5.5% target by 2030.
He noted that the ongoing recapitalization is expected to increase shareholder funds in the banking sector by more than 50% and is critical to this growth.
“The expanded capital base will enable the bank to meet the financing needs of critical sectors such as infrastructure and manufacturing, which are critical to Nigeria’s long-term economic growth,” he disclosed.
Beyond traditional financing, Mr. Edun advocated alternative financing mechanisms such as joint ventures, venture capital, and loan guarantee schemes to support high-potential SMEs.
“Diversified financing options, including equity and debt partnerships, are essential to overcome the capital constraints faced by many businesses,” she recommended.
He noted that infrastructure financing is also a pressing issue, with Nigeria needing about $100 billion annually to address infrastructure deficits. Mr. Edun recommended that banks collaborate in issuing long-term infrastructure bonds and forming public-private partnerships (PPPs) to achieve this.
Edun also pointed out that Nigeria’s deposit-to-GDP ratio is low, currently at 15% compared to the global average of 50%. He called on banks to expand financial inclusion by expanding agent banking in underserved areas and introducing customized savings products to mobilize more deposits. Ta.
Looking ahead, Mr. Edun emphasized the importance of investing in technology and human capital, saying, “Digital transformation and automation are critical to the future of financial services. Innovations like artificial intelligence will drive efficiency and , will play an important role in expanding access to underserved populations.”
