By George George Idowu
The Leaders of Banking Directors Association of Nigeria (BDAN) have disclosed the challenges confronting the Nigerian financial markets despite making significant advancements in recent years.
Leader of Nigerian Delegation/Director, Bank Directors Association of Nigeria (BDAN), Alhaji (Dr.) Umaru Kwairanga, highlighted these in a presentation he made to representatives of Korea Federation of Banks at the Korea-Africa Economic & Financial Cooperation held in Seoul, Korea on Monday.
He said the challenges include regulatory issues, market volatility, limited access to capital for small and medium-sized enterprises, non-performing loans, and continuous pressing need for stronger risk management practices to safeguard against economic shocks and ensure the stability of the Banking system.
Other challenges, according to Dr. Kwairanga, were inconsistent policies, bureaucratic red tape, high cash reserve requirements, and loan-to-deposit ratio constraints, which create an unpredictable environment for investors.
Dr. Kwairanga, who is also the Group Chairman of The Nigerian Exchange Group, said despite the challenges, Nigerian financial marekts present unique opportunities for growth and innovation.
He said, with a financially excluded and unbanked population of 28.9 million, there is immense potential to expand financial inclusion through the adoption of digital banking solutions and mobile money services.
According to him, this would not only enhance access to financial services but also drive economic empowerment and development across the country.
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Alhaji Kwairanga, who sits on the Baord of many blue-chip companies, highlighted the growth that has been made in the past few years, which he said cuts across the banking sector in Nigeria
In his words: “over the last few decades, the Nigerian Banking sector has grown rapidly, significantly contributing to the country’s economic development by mobilizing financial resources for businesses.
“Prior to the 2004 consolidation, which increased the minimum capital requirement for Banks from N2 billion to N25 billion, Nigerian Banks had a weak capital base and lacked the ability to finance large businesses and investment portfolios”, he said, adding that the consolidation reforms initiated by the CBN strengthened the sector and led to merger of many small banks into fewer but more robust entities.
Said he: “This consolidation not only improved the Banks’ ability to finance large-scale projects but also facilitated their expansion abroad, adding that banking reform was part of a broader effort to reposition Nigeria’s economy to become one of the world’s 20 largest economies by 2020.
“As a result, the banking sector now plays a vital role in financial intermediation, with Nigerian Banks obtaining international licenses and joining global players in the international financial markets.
Dr. Kwairanga noted that in a recent move to enhance the stability and capacity of the banking industry, the CBN increased the minimum capital requirements for Banks based on their authorizations.
He said: “Banks with international authorization now require a minimum capital of N500 billion, while national banks require N200 billion, and regional and merchant require N50 billion. In the same vein, non-interest banks with national and regional authorization need N20 billion and N10 billion, respectively.”
Kwairanga explained that while the Nigerian financial markets and banking sector face considerable challenges, they also offer substantial opportunities for those willing to navigate the complexities.
He said the combination of a large unbanked population, economic reforms, and a growing interest in diversified digital products has positioned Nigeria as a promising destination for investment and innovation in the financial sector.
