Nigeria's economy 'will be Africa's biggest by 2016'

[Richard Akindele]

Govenor of Central Bank of Nigeria Professor Charles Soludo has predicted that the nation's economy will overtake that of South Africa to emerge the biggest on the continent by 2016.

Soludo's projection was based on the expected outcome of the on-going reforms, especially in the financial sector.

Soludo made the projection while speaking at the breakfast meeting of the Nigerian-South African Chamber of Commerce (N-SACC), which took place last week in Abuja.

Soludo, who was guest speaker at the meeting, spoke on the "Potential Gains of Banking Consolidation". He explained that Nigeria is a $107 billion economy, which possesses both human and economic potentials to be the foremost in Africa, if just 50% of that potentials could be harnessed.

According to him, if the country exploits a mere 50% of its potentials, given its revamped and now dependable financial system, it will overtake South Africa in a decade.

His words: "We want Nigeria to be Africa's financial power house and we have set out to accomplish this deliberately and systematically. We have only taken the first step of the B point reform agenda of the banking sector, which will ensure that.

"In the next 10 years, we should have our banks in the top 50 in the world. We will want to deliberately orchestrate that, which is most."

Soludo added that currently, Nigeria's economy is 61% of that of South Africa, saying that similarly, all the country's 25 banks put together is the size of South Africa's biggest bank, while also revealing that Nigeria's Stock Exchange is well less than 10% of that of South Africa.

Consciousness about capital market

The governor, however, expressed confidence in the on-going government reforms, saying that it will unlock Nigeria's great economic potentials, which certainly will outclass in 10 years.

Soludo had, since assuming office at the apex bank, expressed hope that Nigerian banks will be among 50 to 100 banks in the world within 10 years.

According to the governor, the reform has already brought about a large outcome of a new face of banks in Nigeria as the successful financial institutions accounted for about 93.5% of aggregate deposit liabilities.

Soludo said that large aggregate capital base rose from about $3 billion to $5.9 billion and about $3 billion new investment came in which was largest in non-oil sector in one year while there was foreign investment inflows of about $500 million and lending to the private sector rose by 31% and led to non-oil sector growth of 8.5% in 2005.

He said that aggregate capitalisation of banks as a share of stock market capitalisation rose from 24% to 38% with increased consciousness about capital market among the populace.

According to him, an enhanced liquidity and capitalisation of the stock market, greater depositor confidence and returns on investment on banks amounted to over 30% in the United States dollar terms.

The governor explained that for economies of scale to be achieved, unit costs of operations reduced as overlapping function scrapped while there was no more government dominant ownership.

He added that there was dilution of ownership as most banks become Public Limited Companies (Plc) and more regulators, that is, Securities and Exchange Commission (SEC) and Nigerian Stock Exchange (NSE) oversee them.

Beyond consolidation, Soludo said, is the apex bank's aggressive pursuit of stable macro environment in terms of inflation, exchange rate, fiscal responsibility and growth in gross domestic product (GDP).

Other pursuits are: anti money laundering (AML) delisting from the Financial Action Task Force (FATF) and deepening of the bond market.

The Guardian