The Nigerian banking sector has the potential to drive over seven per cent growth in the country’s Gross Domestic Product (GDP) if effectively leveraged, the World Bank Country Director for Nigeria, Mathew Verghis, has said.
Verghis made the remarks on Wednesday at the Agusto & Co 2026 Economic Roundtable in Lagos, held in honour of the firm’s late founder, Olabode Agusto. He spoke on the theme: “Nigeria’s Banking Recapitalisation Is Almost Over: What Does the Recapitalisation Mean for the Nigerian Economy?”
Highlighting Nigeria’s recent economic performance, Verghis noted that the country recorded nearly 4.5 per cent GDP growth in the second quarter of 2025—its strongest in a decade—but stressed that the target should be seven to eight per cent.
He emphasised that the banking sector must take a central role in driving higher growth, particularly as returns on government securities decline. “Banks have heavily invested in government securities, but falling yields make such investments less attractive, creating incentives to channel funds into lending for the domestic economy,” he said.
Verghis also applauded the ongoing bank recapitalisation, describing it as a necessary step to strengthen financial stability and enable banks to support private sector-led growth. He noted that years of macroeconomic pressures, exchange rate depreciation, and high inflation had eroded banks’ capital buffers, making recapitalisation inevitable.
“An adequately capitalised banking sector is central to economic stability, and the Central Bank has taken the right step,” he said.
He pointed out that domestic credit to the private sector remains low at around 21 per cent of GDP, compared with a Sub-Saharan Africa average of 33 per cent and about 50 per cent in countries like the Philippines. Verghis stressed that increasing credit must be productive to have a meaningful economic impact.
On fiscal reforms, he supported new tax laws as an important stabilisation measure to boost government revenue and manage fiscal deficits. As of December 2025, about 25 of Nigeria’s 38 commercial and merchant banks had met the new recapitalisation requirements, mobilising roughly N2.5 trillion, while the remaining banks have under 50 days to comply.
Linking recapitalisation to broader reforms, Verghis cited foreign exchange harmonisation, subsidy reforms, and revenue measures as critical steps for economic stability. He also highlighted the need to reduce inflation to single digits to protect purchasing power and accelerate growth beyond current levels.
“Growth of four per cent is good, but it is not good enough. Nigeria must grow faster to achieve its ambition of becoming a trillion-dollar economy,” he said.
Verghis identified micro, small, and medium enterprises (MSMEs), which make up about 97 per cent of businesses, as essential for inclusive growth, despite challenges like informality and limited access to credit.
Also speaking at the event, Managing Director of Agusto & Co, Yinka Adelekan, recalled that the 2005 bank recapitalisation required banks to raise N25 billion, mobilising a total of N406 billion (about $3.1 billion at the time). She estimated the current recapitalisation would require around N4 trillion (approximately $3.08 billion), warning that weak governance could turn the process into a systemic risk.
She highlighted the competitive pressure from fintech companies, noting that several have reached unicorn status since 2005.
Access Bank Managing Director/CEO, Roosevelt Ogbonna, said newly recapitalised banks would be better positioned to fund infrastructure, support private sector investment, and boost consumer activity. He stressed that sustainable growth requires strong public investment, a productive private sector, and sufficient disposable income to drive demand.
