Stronger Banks Will Finance Nigeria’s Economic Growth, Cardoso Says
The Governor of the Central Bank of Nigeria, Olayemi Cardoso, has said that stronger and well-capitalised banks are critical to financing businesses, supporting small and medium-sized enterprises and accelerating Nigeria’s economic growth.
Cardoso stated this during a fireside chat at the BusinessDay CEO Forum in Lagos, where he explained that the recent bank recapitalisation exercise was designed to improve the resilience of the financial system and position lenders to provide more funding to productive sectors of the economy.
According to the CBN governor, raising additional capital alone will not automatically translate into increased lending. He said banks must also strengthen their understanding of key industries, improve risk-management systems and develop the expertise needed to identify viable businesses.
Cardoso noted that financing sectors such as agriculture, manufacturing, oil and gas and small businesses requires more than having funds available. He said lenders must understand each industry’s revenue cycle, regulatory environment, supply chain, foreign-exchange exposure and operational risks before approving long-term credit.
The CBN introduced new minimum capital requirements for banks in March 2024. Commercial banks with international authorisation were required to raise their minimum capital to N500 billion, while national and regional banks were given thresholds of N200 billion and N50 billion respectively.
Cardoso said the recapitalisation programme had placed Nigerian banks in a stronger position to withstand economic shocks, particularly after currency depreciation and other pressures exposed weaknesses in their balance sheets.
He added that the CBN would continue to supervise banks even after the completion of their capital-raising programmes, stressing that effective regulation remained necessary to protect depositors and maintain confidence in the financial system.
The CBN governor also acknowledged concerns over the volume of bank funds invested in government securities instead of being channelled to private businesses. However, he cautioned that banks must not be pressured into granting loans without properly assessing the risks involved.
According to him, financial institutions are custodians of depositors’ money and must ensure that loans are extended to businesses with credible plans, sustainable operations and the capacity to repay.
Cardoso said improved industry knowledge could help banks distinguish between weak proposals and complex but viable business opportunities. This, he noted, could also make it easier for SMEs to access credit despite challenges such as limited collateral, irregular cash flow and inadequate documentation.
He acknowledged that high interest rates remained a major obstacle to affordable borrowing but expressed optimism that the situation would improve as inflation and interest rates move towards more sustainable levels.
Cardoso maintained that the success of the recapitalisation exercise would ultimately be measured by how effectively banks convert their stronger capital positions into responsible lending that supports investment, production, employment and long-term economic growth.
