Afrinvest asserts that Nigeria needs to expand its economic activities beyond the banking sector in order to realize a $1 trillion economy.
The Federal Government has received advice that in order for the country to reach the projected $1tn economy, it must expand beyond the banking sector.
This recommendation was made by Chioke Ike, the Group
Managing Director of Afrinvest, during the launch of its 2024 Banking Sector
Report titled 'Recapitalisation: Catalyst for a $1 Trillion Economy?'.
The central bank, prior to announcing the new capital
requirements for banks, mentioned that banks must become stronger and more
stable to support the $1tn economy forecasted by President Bola Tinubu.
Chioke stressed that while the recapitalisation process
would boost banks' ability to serve the broader economy, increase lending
capacity, attract foreign investments, and enhance risk management, the banking
sector alone cannot propel economic growth.
He stated, "To achieve a $1tn economy, Nigeria must
expand beyond the banking sector. Every facet of the economy must progress in
tandem."
Chioke also underscored the importance of human capital
development, pointing to Mexico, Indonesia, and Turkey as examples of countries
with higher GDP per capita and human capital indices.
"Nigeria must invest in its people to achieve similar
growth. Prioritizing human capital development is essential to reaching a $1tn
economy. The macroeconomic landscape is challenging, with a potential national
strike on the horizon.
Nevertheless, the necessary data is available to effectively
manage the economy, but politicians must take heed and exhibit the discipline
to remain humble."
John Onoja, the Acting Director of Financial Policy and
Regulations, representing CBN Governor Olayemi Cardoso, affirmed the central
bank's dedication to achieving the $1 trillion economy goal. "We are
pleased that the current administration has established this target, and we are
committed to facilitating its realization," he stated.
He emphasized that the CBN is collaborating closely with
banks to assess their capital strategies and ensure a successful
implementation, working alongside entities such as the Nigeria Deposit
Insurance Corporation, the Securities and Exchange Commission, the Nigerian
Exchange, and the National Assembly.
In a related discussion, Taiwo Oyedele, Chairman of the
Presidential Committee on Fiscal Policy and Tax Reforms, underscored the
necessity for fiscal discipline, revenue enhancement, and competitiveness.
"Nigeria is a nation with limited resources, operating
on a budget of less than $40 billion, which includes supplementary budgets for
all 36 states and 774 local governments. Our revenue falls short of even half
that figure," Oyedele remarked, emphasizing the critical need for reform.
To realize a $1 trillion economy, Oyedele highlighted the
significance of a robust banking sector, a functional capital market, and
stable policies.
He stated, "We can boost revenue by optimizing
government assets, reforming state-owned enterprises such as NNPC Limited, and
leveraging solid minerals and natural resources." His objective is to
elevate Nigeria’s revenue-to-GDP ratio to 30 percent within the next two to
three years. He also advocated for fostering prosperity by eliminating taxes on
capital, investment, production, poverty alleviation, and agricultural seeds.
Oyedele pointed out that Nigeria's over 60 official taxes
and levies are less favorable compared to South Africa's singular personal
income tax, which generates more revenue than all Nigerian taxes combined.
"Through these reforms, we can enhance revenue collection and progress
towards a $1 trillion economy," Oyedele concluded.