The Nigerian banking sector has the potential to drive GDP growth beyond seven per cent if effectively leveraged, the World Bank Country Director for Nigeria, Mr Mathew Verghis, said yesterday.
Verghis spoke at the Agusto & Co 2026 Economic Roundtable in Lagos, themed: “Nigeria’s Banking Recapitalisation Is Almost Over: What Does the Recapitalisation Mean for the Nigerian Economy?”, held in honour of the late founder, Mr Olabode Agusto.
Highlighting Nigeria’s economic performance, he noted that the country recorded nearly 4.5 per cent GDP growth in Q2 of 2025—the strongest in a decade—but stressed that growth ambitions should target 7–8 per cent.
“The banking sector must play a central role, especially as returns on government securities decline,” Verghis said. “With interest rates expected to moderate, banks will be compelled to redirect liquidity into lending to the domestic economy. The incentives are well aligned.”
He praised the ongoing bank recapitalisation process, describing it as a key measure to strengthen financial stability and position banks to support private sector-led growth. He explained that macroeconomic pressures, exchange rate depreciation, and inflation had eroded capital buffers, making recapitalisation necessary.
“The basic reason recapitalisation was needed is that banks had become undercapitalised. Capital adequacy requirements had to be raised because of inflation and exchange rate pressures,” Verghis said.
On domestic credit, Verghis noted that Nigeria’s ratio of credit to the private sector stands at about 21 per cent, below the Sub-Saharan Africa average of 33 per cent and far behind countries like the Philippines at 50 per cent. He emphasised that credit expansion must be productive to achieve inclusive growth.
He also supported recent tax reforms, describing them as critical for revenue generation and fiscal stability. As of December, 25 of Nigeria’s 38 commercial and merchant banks had met new recapitalisation requirements, mobilising roughly N2.5 trillion, while remaining banks have less than 50 days to comply.
“Inflation has to fall to single digits to protect purchasing power, and growth beyond four per cent is needed if Nigeria wants to become a trillion-dollar economy,” he said, noting that micro, small, and medium enterprises (MSMEs), which make up 97 per cent of businesses, are central to inclusive growth despite credit and informality challenges.
Mrs Yinka Adelekan, Managing Director of Agusto & Co, compared the current recapitalisation with the 2005 process, warning that weak governance could turn the exercise into a systemic risk. She also noted the competitive pressure from fintech companies, with several reaching unicorn status.
Access Bank CEO, Mr Roosevelt Ogbonna, added that recapitalised banks are better positioned to fund infrastructure, stimulate private sector investment, and boost consumer activity.
He stressed that sustainable economic growth requires strong public investment, a productive private sector, and consumers with adequate disposable income to drive demand.