Do you agree the real sector is the gateway to unlocking productivity in the economy as well as attaining the $1trillion target?
Yes, of course. Without the real sector, I don’t think any economy can grow as fast as it should. So, if there is any challenge in the real sector, that economy is already challenged.
For an economy where the real sector is facing challenges, like the challenges we are having now; for us to move to that $1 trillion economy, we have to go back and eliminate the issues and challenges we have in our real sector.
For some years now, some companies have gone down, some households have been stopped from their micro productions.
For farmers, the little production they are doing has been stopped because of one challenge or the other. So, we can go back to real sector and resuscitate it by making policies that will encourage production.
What kind of policies are we looking at here?
First and foremost, let me start from my own sector where I work. The Central Bank of Nigeria (CBN) and the NDIC have created a lot of policies that encourage already and intending participants in that sector.
For instance, we have what we call loan-to-deposit ratio. What is it all about? Certain percentage of banks’ deposit must go to real sector. Before, when it started it was 65 per cent, it has dropped to 60 per cent by March.
The intention of regulatory authorities is for banks, apart from fixed income securities, deposits, should look towards developing the real sector.
And the only way to compel banks to do that is through this ratio, and other incentives done by regulatory authorities.
The banks are required to extend part of their profit to small and medium enterprises (SMEs) and those credit they extend is part of their capital in order to allow them to do more for them.
And there are a lot of forbearances granted when the banks are exposed to that sector. All these are to show the importance of the real sector in the growth of the economy.
For us, the $1 trillion economy is achievable, but we have to go back to the real sector and do what we are supposed to do. Nigeria has a lot of resources. Our problem is: are we harnessing the resources? There are fundamental infrastructural deficit, which we must address for us to achieve this $1 trillion economy.
Without addressing the real sector challenges so as to get it thriving, it is difficult.
What does a $1trn economy mean to the country given the current economic situation with all the shocks and volatility you can mention?
The $1 trillion economy is something the president has set as a vision for the country, and it is not just a vision. It is a call to the collective duty that everyone has to work together to make it happen.
When you are talking about this $1 trillion economy, part of the component is that activities will increase that will give rise to higher GDP revenue within the economy.
Also, there is the side of boosting the exchange rate, the strengthening of the naira. If the naira to dollar exchange rate improves today, where we are now (about $300bn economy) will improve.
What is the nexus of having $1 trillion economy with ongoing recapitalisation of the banks?
For achieving that $1 trillion economy, the role of banks in the economy is very vital.
For me I believe it is achievable in this country, but certain things must be put in place, both banking and non-banking sectors. For any economy to grow, you must have that role of intermediation seriously done by the financial sector.
You can’t j u m p s t a r t your economy without the role of intermed i a t i o n , banks act as intermediaries, otherwise the economy can’t grow.
So, I believe that recapitalisation is very vital because the role of int e r m e d i at i o n and the volume of intermediation is tied to the role of bankers. If
For achieving that $1 trillion economy, the role of banks in the economy is very vital. For me I believe it is achievable in this country
economy because you can’t create that capital that is required to jumpstart the household, jump start the real sector. The volume of credit to be dispensed by a bank is tied to the level or volume of capital.
That is why the CBN said for us to grow and match that $1 trillion economy, and there is need for banks to be buoyant enough to withstand the needs of the economy and the real sector, because without banks you can do nothing.
Even the foreign portfolio investors (FPI) that are coming in, they are being routed through the banks.
So, the capital they have is very vital because as a regulator, you can’t go far or bring onboard a lot of risks into your operation or records without having adequate capital.
Your growth as a bank or economy is tied to the capital that you have. The risk you bring on board is tied to the capital that you have. For us to grow, there is need for banks to be very buoyant.
If you look at other economies in Africa, even worldwide, that are growing aggressively, it is because they have banks that are very buoyant. That is why they can undertake any risk.
How do we drive financial inclusion where the $1 trillion agenda is inclusive, not only the banks, and real sectors, but also other sectors of the economy to make it more holistic?
About how do we drive financial inclusion, the fintechs coming into that space is a good solution to that. And if you look at the ongoing recapitalisation of banks, the banks will have more capital for infrastructural development.
And that will make them strong partner to the fintechs. And technology is required to reach underserved parts of the country and the economy.
And in doing this, you are bringing a lot of people into the financial economy, whether it is financial or the flow of money, or the real sector where we are talking about productivity.
And it goes without saying that it will definitely drive the gross domestic product (GDP) upwards towards the $1 trillion economy.
In about 2014, we had about half a trillion dollar economy, which was $500 billion at a time. So, imagine where the exchange rate improves significantly, that means it will push up the dollar valuation.
So, I see a combination of all of these getting us to the $1 trillion economy mark.
What is your advice to all stakeholders towards achieving the $1 trillion economy target?
I believe that for us to get there, there should be adequate policies, implementable policies. And it should be dynamic to address the situation we find ourselves from time to time.
Though there are challenges in the real sector economy, but those challenges are surmountable. If you look at the fintechs, they fall in-between financial services and telecom.
If you put those two sectors together, it comes to about 20 percent which is huge. So, I think once we get this collaboration among the players, we are already there to the $1trn economy.
We have to continue to make sure that there is synergy all the time. Let us not get discouraged. There is a dashboard. Even if one does not work, we can get other one to work.
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