IS NIGERIA READY FOR REVIVAL? until the sovereign attracts new dollar funding, Nigerian corporates will continue to struggle. Securing external financing will improve dollar flows between the banks in Nigeria. Once this happens, the backlog of outstanding transactions [ on the interbank market ] can then be settled and the market will begin to function effectively,” says Mr Suleiman.
If the government’ s spending plans can be realised, they will go some way to addressing some of the country’ s current ills, including high unemployment. Moreover, the emphasis on infrastructure development will give a much-needed boost to the sectors of the economy that have escaped the current malaise, such as agriculture and mining. And, with these improvements in place, there is every chance that their growth could accelerate further in the coming years.
“ Growth in the mining and agriculture sectors has been strong in recent times and it appears to be quite sustainable [ over the long term ],” says Mr Suleiman. Agriculture and healthcare For their part, Nigeria’ s banks stand ready to support this booming growth and are actively seeking to diversify their loan books away from traditionally dominant sectors. Zenith Bank, the country’ s largest lender, has identified the agricultural sector as a key pillar of its growth, for instance. Similarly, Sterling Bank is supporting investments in both the health and education sectors.
But the country’ s banking system has not been immune from many of the current challenges. Even the largest lenders are feeling the pinch of slower economic growth, exposure to the oil and gas sector and higher operating expenses.
“ The near-term challenges facing the banking system are broadly hinged on macroeconomic uncertainties. The slowing economy and contraction of GDP in the first half of the year reflect the weak level of economic activity occurring in the country and [ more limited opportunities ] for banking sector growth,” says Mr Ugochukwu Nwaghodoh, group chief finance officer at United Bank for Africa.
Today, Nigeria is at a juncture. With the right reforms and a commitment to the further liberalisation of the economy, this could be an excellent opportunity to revive a regional powerhouse. Much will depend on the government’ s commitment to meaningful change as well as the restoration of confidence among both local and international investors. Better transparency Early signs have been encouraging – the transparency of key public institutions has increased, while reforms have strengthened the ability of the country’ s financial sector to weather adverse economic conditions.“ Today there is unprecedented transparency in the Nigerian National Petroleum Corporation and a number of opaque contracts have been cancelled. The banking sector is in better shape than it was before the previous crisis [ in 2008 ], and reforms from the central bank have helped,” says Ms Anubi at Bank of America Merrill Lynch.
Nigeria’ s progress from here is unlikely to be linear. But there is every chance it will continue on a forward march. – This report is from The Banker
CENTRAL BANK OF NIGERIA
THE NEAR-TERM CHALLENGES FACING THE BANKING SYSTEM ARE BROADLY HINGED ON MACROECONOMIC UNCERTAINTIES.
2016 | Business Times Africa 51