Nigerian banks would have to increase their capital base, so as to leverage on the opportunity presented by the rebased Gross Domestic Products (GDP) of $510 billion, the largest on the continent, analysts have said.
Besides, they argue that the revelation by the exercise of the dominant role of the social services sector calls for ingenuity on the part of bankers, to tap into this and become more competitive internationally, as this will make them attractive to their foreign counterparts for channeling of funds to the preffered sectors.
The analysts said that the compelling need for raising the capital base should be among the top priorities of Godwin Emefiele, Central Bank of Nigeria, (CBN) governor designate, when he assumes office next month.
Under the present structure, Nigerian banks operating internationally are required to have N50 billion capital base, while those operating at the national level must have N25 billion and regional, N10 billion.
To the analysts rebasing, which has made Nigeria the 26th largest economy in the world and biggest African economy by 2013, means that the banks should match up to the challenges by increasing their capital base.
“There would be need for Nigerian banks to increase their capital base to effectively leverage this opportunity,”said Ayodeji Ebo, head, investment research, Afrinvest.
Ebo further said, “The relative size of the six key sectors (crop production, trade, crude petroleum and natural gas, telecommunications and information services, real estate and food, beverage and tobacco) that account for 70.0% of the nominal GDP (estimated at N56.2tn or US$357.0bn) is overwhelming, relative to the Banks’ current level of capital.
“ In addition, Nigerian banks may easily attract foreign banks that are willing to channel funds to the newly evolved sectors. This will create additional fees for Nigerian banks.”
Phillips Oduoza, group managing director and Chief Executive Officer (GMD) of the UBA Group, recently said that the restructuring of the bank’s operations into two broad divisions, UBA Africa and UBA Nigeria was as a result of emerging opportunities in Nigeria, including the rebasing exercise and in Africa as a whole, so as to improve efficiency.
Opeyemi Agbaje, CEO, RTC Advisory Services Limited, said that the rebasing exercise suggests that by mere statistical adjustments and better measurement of Nigeria’s economic activity, the country is on its way to achieving the Vision 2020 target, adding that the vision is to place Nigeria among the biggest 20 economies in the world by year 2020.
Agbaje who spoke at the Finance Correspondents Association of Nigeria (FICAN) Bi-Monthly Discourse held last week in Lagos, said that the feat also enhances the country’s Vision 2020 target, considering its GDP growth rate post-rebasing averaging 6.4 per cent.
This is possible, as according to him, the excercise gives Nigeria a more accurate picture of the current state of our economy and presents a more credible and contemporary report of the state of sectors and overall activity within the economy.
“Besides, the fact that there is more accurate information about sectors and output is good for potential investors, both foreign and domestic, even as financial markets would probably take more interest in the Nigerian economy, given its new GDP figures.” Agbaje said.
However, Samir Gadio, emerging markets strategist at Standard Bank, London, said besides the enhanced capital base, Nigeria should tackle the infrastructural bottlenecks which have the tendency of impacting negatively on the country’s new status.
“The new GDP figures will make it increasingly harder for companies looking at Africa to overlook Nigeria, especially considering the size of the domestic market and its potential, but the main constraints on a sizeable turnaround in FDI will still persist. This includes persistent energy and infrastructure bottlenecks, weak institutions and governance issues, as well as the slow pace of structural reforms in the country.”
John Omachonu
