Business
Achieving $1trn economy requires structural shifts in banking – UBA MD, Alawuba
Mr. Oliver Alawuba, Group Managing Director and Chief Executive Officer of the United Bank for Africa (UBA) Plc, has noted that Nigeria can achieve a $1 trillion economy by 2030 if the necessary structural shifts are put in place in the banking sector.
Olayemi Cardoso, governor of the Central Bank of Nigeria (CBN), had in July said the apex bank was committed to implementing policies that foster sustainable growth in the financial markets while ensuring overall economic stability that will make Nigeria hit a $1trn economy by 2030.
Alawuba, who is also the Chairman of the Body of Banks’ CEOs, said the target is achievable, but requires not just incremental growth, “but structural shifts in how we approach banking, financial innovation, and sectoral development,” noting that he future of Nigeria’s economy “rests on the strategic alignment of policy, investment, technology, and, most importantly, our collective will to innovate and grow.”
The UBA MD, represented by Mr. Ugo Nwaghodoh, the bank’s Executive Director, Finance and Risk Management, spoke while delivering his address as the guest speaker at the 2024 Annual Conference of the Finance Correspondents Association of Nigeria (FICAN), with the theme, “Nigeria’s Journey Towards a $1 Trillion Economy: Impact of Banks’ Re-capitalization, Opportunities for Fintechs and Real Sector”, on Saturday.
Describing the CBN’s bank recapitalization policy as a catalyst for economic resilience and growth, Alawuba emphasized that the recapitalization, “is designed to fortify the banking sector, making it more resilient and capable of driving sustained economic growth.”
He noted that in recent years, Nigerian banks have faced challenges from both external shocks (such as the global pandemic, volatile oil prices, and global monetary tightening) and internal pressures like inflation and Naira depreciation.
“This recapitalization initiative is not just about compliance with regulatory requirements, but about equipping the banking sector with the financial strength to be a reliable engine for economic transformation,” he said.
Giving further insights, Alawuba argued that with a stronger capital base, banks will have the cushion to withstand both external and internal shocks.
This resilience, he said, is critical to maintaining market confidence and ensuring that the financial system can continue to function even during times of crisis. We saw the importance of this during the global financial crisis and the COVID-19 pandemic. A robust capital base also attracts foreign investments, as global investors seek stability and growth opportunities.
He, however, said the recapitalization policy “must lead to a significant expansion in the provision of credit to the real sector, particularly in Agriculture, Manufacturing, and Infrastructure. Currently, Nigeria’s economy faces a productivity gap.”
He said 12.68 percent contribution by the manufacturing sector to nominal GDP as recorded in Q2 2024, is far below the level required to drive industrialization and economic diversification.
“With larger capital bases, Nigerian banks should be well-positioned to finance long-term infrastructure projects and provide low-cost credit facilities to businesses that will drive industrial growth,” he said.
Alawuba said the Nigerian banking sector must remain attuned to global trends such as digitization, application of artificial intelligence, ESG (Environmental, Social, and Governance) criteria, and Sustainable Finance.
According to him, “international banks are already capitalizing for these trends, and Nigerian banks should position themselves to take advantage of these emerging opportunities by offering products and services that align with global best practices.”
Fintechs
Speaking on the opportunities for Fintech, he said Nigeria has the largest fintech market in Africa, with a rapidly growing number of start-ups offering solutions that address the inefficiencies of the traditional banking sector. Fintech has already transformed how Nigerians access financial services – from mobile payments to lending platforms, the scope is vast.
According to him, as “we march towards a $1 trillion economy, the Fintech Sector is poised to play a crucial role in expanding financial access, driving innovation, and stimulating competition within the broader financial system.
He said Fintech can play crucial role in driving inclusion.
“About 26% of Nigerians remain unbanked or underbanked, according to the 2023 survey of the EFInA (Enhancing Financial Innovation and Access). Fintech companies, with their low-cost structures and innovative delivery models, are uniquely positioned to bridge this gap. Beyond the urban centers, Fintechs should focus on creating products tailored to rural populations, leveraging mobile technology and partnerships with microfinance institutions,” he said.
Alawuba said the future of fintech lies in the intelligent use of data. Through advanced analytics and artificial intelligence, fintech companies can create highly personalized services that meet the specific needs of different customer segments. For example, using data to create credit scoring models for individuals and businesses without traditional credit histories will enable more inclusive lending practices.
On the relationship between Fintechs and banks, he said rather than viewing Fintechs as competitors to traditional banks, banks should embrace them as partners.
“Banks offer established customer bases and trust, while Fintechs bring agility and innovation. Strategic collaborations will be key in building hybrid solutions that leverage the strengths of both sectors, particularly in areas like mobile payments, SME financing, and cross-border transactions,” he said.
He, however, noted that a conducive regulatory environment is essential for fintech growth, pointing out that the CBN has taken commendable steps in fostering innovation through policies like the regulatory sandbox, “but there is room for more engagement. A flexible, yet secure, regulatory framework will be critical in balancing innovation with consumer protection.”
Real Sector
Harping on the critical role of the real sector, Alawuba said that for Nigeria to achieve its $1 trillion economy goal, the real sector (which includes Agriculture, Manufacturing, and Services) must become the true engine of growth.
A vibrant real sector, he emphasized, will drive employment, foster innovation, and strengthen the overall economy by reducing dependency on the oil sector.
He called for the boosting agricultural productivity, noting that agriculture remains one of Nigeria’s largest employers, yet productivity levels are among the lowest in Africa.
“The real challenge lies not just in expanding agricultural production, but in making it more efficient and technologically driven. The banking sector, along with fintech innovations, must facilitate easier access to credit and technological inputs like precision farming tools. Additionally, a focus on value-chain development (processing, packaging, and logistics) will boost the sector’s contribution to GDP (which was 22.61% as of Q2 2024, from 23.01% in Q2 2023 – Source: NBS),” he said.
Alawuba noted that manufacturing plays a critical role in driving industrialization.
To increase its share of nominal GDP beyond 12.68%, he said, we need a coordinated approach that includes expanding local production, enhancing export capacity, and improving access to power and logistics infrastructure. Nigeria’s manufacturers face high operational costs due to poor infrastructure and energy challenges. Solving these issues is key to unlocking the sector’s potential to create jobs and foster economic growth.
On Small and Medium Enterprises (SMEs), which he said, are the lifeblood of Nigeria’s economy, representing over 90% of businesses and contributing 48% to the GDP, according to the Nigerian Small and Medium Enterprises Development Agency (SMEDAN), he said they often struggle with access to finance, particularly long-term, affordable credit.
According to him, this is where the recapitalization of banks and fintech innovation must converge, adding that, creating products specifically targeted at SMEs, such as flexible loan packages, digital banking tools, and access to markets, Nigeria can unlock their potential for exponential growth.
Recommending policies for the CBN and the Nigerian Deposit Insurance Corporation Policy (NDIC), Alawuba said the CBN has been at the forefront of ensuring monetary stability while fostering growth, but the journey to a $1 trillion economy requires more proactive policy interventions.
He said the monetary policy should be with Growth Focus, as according to him, “while inflation management is crucial, the CBN must ensure that its monetary policies support sectors that are critical to economic expansion. This means maintaining a careful balance between interest rates, exchange rates, and inflationary pressures to support the real sector without stifling growth.”
He said the apex bank should also encourage impactful lending, and should continue to encourage banks to lend more to sectors like Agriculture, Manufacturing, and Infrastructure. Recapitalization alone is not enough; it must be followed by focused lending to strategic areas that promise the highest economic returns.
For the NDIC, he said the corporation should protect the financial ecosystem, noting that, “As banks become more capitalized, NDIC’s role in safeguarding the financial system becomes even more vital. A failure to protect depositors’ interests could lead to instability. The NDIC should also work closely with fintech players to explore ways to insure new types of digital financial products.”
He added that ensuring financial stability is also key, because as the economy grows, so too does the complexity of financial products and institutions.
“The NDIC must evolve in line with this growth to ensure it can protect depositors in an increasingly complex financial ecosystem,” he said.
