CIBN: Bank Recapitalization to Boost Lending and Drive Nigerian Economic Growth

The Chartered Institute of Bankers of Nigeria (CIBN) has expressed support for the ongoing bank recapitalization exercise, stating that it will empower banks to lend more to the Nigerian economy. CIBN President Dr. Ken Opara emphasized that the recapitalization will strengthen the capital base of banks, enabling them to extend more credit to businesses and individuals, thereby boosting economic growth.

Opara noted that the volume of credit to key sectors such as agriculture, manufacturing, and services is relatively low compared to their critical role in propelling economic development. "The recently announced upward review of the Minimum Capital Requirements by the Central Bank of Nigeria would further empower banks to extend more credit to the economy's productive sectors," he stated.

According to CIBN, the net domestic credit stood at N66.4 trillion as of December 2022, showcasing the substantial credit extended by financial institutions to the real sector. This figure experienced a significant surge to N96.1 trillion by December 2023, highlighting the potential for expansion and development in the real sector.

Why this matters: The bank recapitalization exercise is expected to have far-reaching implications for the Nigerian economy. By strengthening the capital base of banks, the initiative aims to increase lending capacity and stimulate economic activities across various sectors. This move is particularly crucial as Nigeria seeks to accelerate its post-pandemic recovery and foster sustainable economic growth.

To address the factors impeding credit to the real sector, Opara suggested that the government needs to improve the ease of doing business, develop infrastructure, harmonize and reduce various taxes and levies, and set up industrial centers where companies can share common infrastructure. He also recommended that banks should be deliberate in de-risking these companies through capacity-building programs and advisory services, and that specialized financial institutions, such as credit guarantee agencies and risk-sharing institutions, should be created to further facilitate the expansion of credit.

Key Takeaways

• CIBN supports bank recapitalization to empower banks to lend more to the economy.
• Recapitalization will strengthen banks' capital base, enabling more credit to businesses.
• Credit to key sectors like agriculture, manufacturing, and services is relatively low.
• Net domestic credit surged from N66.4T in 2022 to N96.1T in 2023, indicating growth potential.
• CIBN recommends improving ease of doing business, infrastructure, and reducing taxes to boost lending.