Analysts Predict Economic Boost from Bank Recapitalisation and Credit Growth in 2025

Analysts on Sunday predicted a boost in credit to the economy by banks and well as major boost to economic activities next year.

The analysts’ optimism stemmed from recent successes in the ongoing banking sector recapitalisation programme.

They also called for measures to narrow the high profitability gap between operators in the financial services and real sectors of the economy.

The analysts further advised the Central Bank of Nigeria (CBN) to soften its monetary tightening stance to support investment growth and job creation.

Access Bank Plc recently emerged as first the Deposit Money Bank (DMB) to scale Central Bank of Nigeria (CBN)’s new minimum capital requirements of N500 billion for commercial banks with international authorisation.

This followed that announcement by Access Holdings Plc that it has secured full regulatory approvals of the apex bank and the Securities and Exchange Commission (SEC) of its recently closed Right Issue, raising a total of N351.01 billion which was the target amount.

In a statement, the Company Secretary, Sunday Ekwochi, said the success from the capital mobilisation had positioned the company’s flagship subsidiary, Access Bank, as the first bank to meet the CBN’s minimum capital threshold well ahead of the March 31, 2026 regulatory deadline.

There are further indications that other financial institutions are making steady progress towards satisfying the capital requirements in different categories.

Reacting to the development in separate interviews with THISDAY, analysts said the progress in capital mobilisation was an affirmation that despite all odds, investors’ confidence remained high in the economy.

Speaking to THISDAY,

Nigeria’s first Professor of Capital Market/pioneer President, Capital Market Academics of Nigeria, Prof. Uche Uwaleke, said the development, “It speaks to the resilience of the Nigerian economy and the elastic nature of the capital market to meet the needs of issuers whether corporates or the government.

“It’s equally an affirmation that despite all odds, investors’ confidence in the economy is still high.”

The Founder/Chief Executive Director, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, also called on the apex bank to soften its monetary tightening stance to support investment growth and job creation in the economy.

In his Nigeria 2024 Economic Review and 2025 Outlook, Yusuf also said, “There is a need for appropriate policy measures to correct the huge disparity in the profitability between the real economy and the financial economy.

“There is also a progressive crowding out of the real economy in the financial markets.

“The implication is that sectors with high job creation potentials and prospects for economic inclusion are still struggling.

“This situation needs to be reversed to fix the current high unemployment and reduce poverty.”

He pointed out that huge disparities in the growth of financial services and the rest of the economy are reflections of the growing decoupling of the financial services sector from the real economy.

He said, “It is a significant sign of dysfunctional economy, which deserves the urgent attention of policy makers.

“The current reality is that investing in financial instruments has become much more profitable than investing in the real economy. The risk is also very low.

“This is not consistent with our economic aspirations as it is a major disincentive to real sector investment.

Also, Managing Director/Chief Executive, Dignity Finance and Investment Limited, Dr. Chijioke Ekechukwu, said, “It also means that 2025 will have better traction when other Deposit Money Banks come on board. It will bring a lot of loanable funds to the system.”

He said, “I was very hopeful that many Deposit Money Banks would meet their capitalisation in good time. Meeting of N500 billion capitalisation by Access Bank is a good indication that it is possible for other banks.”

Managing Director/Chief Executive, SD&D Capital Management Limited, Mr. Idakolo Gbolade, said the recapitalisation of banks was a major determinant of how the Nigerian economy can achieve the trillion dollar benchmark and remain competitive in Africa and the world.

He said, “The success of Access Bank in being the first bank to meet the N500 billion recapitalisation for commercial banks with international authorisation is a testament to the robust nature of Nigeria’s economy and the promise it holds as we set for 2025.

“The recapitalisation of banks is a major determinant of how our economy can achieve the trillion dollar benchmark and be a very competitive economy in Africa and the world.

“Despite global headwinds, the Nigerian economy has been able to weather the storm in the past years.

“The global economic challenges also affected our economic growth potential but with more home grown policies we can emerge as a growing economy in the coming years.”

However, citing developments in the country’s sectoral economic growth in 2024,

CPPE director, noted that the service sector has continued to dominate the sectoral growth performance for most part of the year.

“In Q3 2024, the financial services sector outperformed other sectors with a growth performance of 32 per cent. Insurance grew by 19.8 per cent road transport grew by 17.9 per cent and rail transportation 19.7 per cent.

“However, real sector growth remained subdued during the year with agriculture posting a GDP growth of 1.14 per cent and manufacturing, 0.92 per cent in the third quarter of 2024 while quarry and minerals, petroleum refining and textile sector remained in recession as at third quarter of 2024.”

Yusuf also stressed the need to address the structural defects that has made the non-oil sector that contribute 94.43 per cent of the country’s GDP in Q3 2024, to contribute almost less than 10 per cent of Nigeria’s foreign exchange earnings.

According to him, the oil sector contributed 5.57 per cent of Nigeria’s GDP in Q3 2024 but earned estimated 90 per cent of the country’s foreign exchange during the quarter.

“This is a structural shortcoming in our economy that needs to be addressed as sectors that contribute hugely to GDP have no corresponding contribution to foreign exchange earnings.

“This economic structure reflects the enormous productivity and competitiveness challenges of the non-oil sector of the Nigerian economy.”

He said, “The policy implication is that more should be done to fix the challenges of productivity and competitiveness of the non-oil sector of the economy.

“Most of these challenges are the structural issues, infrastructural challenges, funding constraints, regulatory issues and the general macroeconomic headwinds.”

He also projected that inflation might moderate slightly in 2025 on the expected reduction of the volatility of the exchange rate and possible rebound of the Naira, adding that monetary conditions might remain tight in 2025.

Yusuf identified strong ideological commitment of the CBN to orthodox monetary policy as a major factor that would shape monetary outlook in 2025, including risk of elevated fiscal deficit and its inflationary implications and risk of higher money supply growth in 2025.

Nonetheless, he said there was a likelihood that the degree of CBN’s monetary tightening may decelerate in 2025 given the current high levels of Monetary Policy Rate (MPR) and Cash Reserve Ratio (CRR), noting that the space for further tightening was limited.

Yusuf said, “However, the electricity pricing conundrum would remain a tricky issue in 2025. The economy is too fragile to absorb the shocks of a fully deregulated or commercial electricity market.

“The outlook for the sector remains a major cause for worry in 2025. There are also the transition challenges of the states taking up regulatory responsibilities for electricity market. Not many states have the capacity to manage this transition.

“This is, therefore, a major source of risk for the electricity sector in 2025.”

James Emejo and Dike Onwuamaeze

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