Oliver Alawuba, the Group Managing Director and Chief Executive of the United Bank for Africa Plc, at the weekend in Lagos described the $1tr economy envisioned by Nigeria’s Federal Government at the onset of the Bola Tinubu administration as both bold and audacious, but achievable.

Achieving the target, he said, will however require a combination of incremental growth, structural shifts in how banking financial innovation are done in the country, as well as sectoral development.

Alawuba, who was guest speaker at the 2024 annual conference of the Finance Correspondent of Nigeria (FICAN) with the theme: “Nigeria’s Journey Towards a $1 Trillion Economy: Impact of Banks’ Re-capitalization, Opportunities for Fintechs and Real Sector,”

Nigeria’s journey to a $1tr economy, he argued, “is not just a vision – it is a shared responsibility. The banking sector, fintech innovators, the real sector, and regulatory institutions must work hand-in-hand to drive this transformation. We are on the cusp of a new era, one that will be defined by innovation, resilience, and sustainable growth.”

To achieve the goal, he urged stakeholders to recognise “that the future of Nigeria’s economy rests on the strategic alignment of policy, investment, technology, and, most importantly, our collective will to innovate and grow.”

He said the ongoing banking sector recapitalisation exercise, a policy initiative of the Central Bank of Nigeria (CBN), designed to fortify the sector, will make it more resilient and capable of driving sustained economic growth.

According to Alawuba, who was represented by Ugo Nwaghodoh, Executive Director, Finance and Risk Management at the UBA Group, Nigerian banks have in recent years faced challenges from both external shocks. These, he said, included the COVID-19- a global pandemic, volatile oil prices, global monetary tightening, as well as internal pressures like heightening inflation and Naira depreciation.

The ongoing recapitalization initiative, which is coming two decades after a similar one, must go beyond just complying with regulatory requirements to “equipping the banking sector with the financial strength to be a reliable engine for economic transformation.”

A strong capital base, he believes, will stabilize the nation’s financial ecosystem, as banks are imbued with critical resilience to enhance market confidence that will enable the financial system “function even during times of crisis. We saw the importance of this during the global financial crisis and the COVID-19 pandemic. A robust capital base also attracts foreign investments, as global investors seek stability and growth opportunities.”

With better capitalised banks, he believes the real sector of the economy is able to expand significantly with improved credit, particularly in agriculture, manufacturing, and infrastructure that will help bridge the current productivity gap.

“According to the Nigerian (National) Bureau of Statistics, the Manufacturing Sector for example, contributed about 12.68% to the nominal GDP as of Q2 2024 down from 14.55% in Q2 2023 and lower than the 14.79% recorded in Q1 2024 and 16.04% recorded in Q4 2023. This is far below the level required to drive industrialization and economic diversification. With larger capital bases, Nigerian banks should be well-positioned to finance long-term infrastructure projects and provide low-cost credit facilities to businesses that will drive industrial growth,” Nwaghodoh added.

A fresh capital injection, he believes will equally enable Nigerian banks remain “attuned to global trends such as digitization, application of artificial intelligence, ESG (Environmental, Social, and Governance) criteria, and Sustainable Finance. International Banks are already capitalizing for these trends, and Nigerian banks should position themselves to take advantage of these emerging opportunities by offering products and services that align with global best practices.”

Nigeria, according to him, has the largest fintech market in Africa, with a rapidly growing number of start-ups offering solutions that address the inefficiencies of the traditional banking sector. Fintech has already transformed how Nigerians access financial services – from mobile payments to lending platforms, the scope is vast.

As the country marches towards a $1 trillion economy, he said “the Fintech Sector is poised to play a crucial role in expanding financial access, driving innovation, and stimulating competition within the broader financial system.”

With an estimated 26% of Nigerians still unbanked or under-banked, according to the 2023 survey of the EFInA (Enhancing Financial Innovation and Access), the UBA Group boss expressed belief that “Fintech companies, with their low-cost structures and innovative delivery models, are uniquely positioned to bridge this gap. Beyond the urban centers, Fintechs should focus on creating products tailored to rural populations, leveraging mobile technology and partnerships with microfinance institutions.

He called for greater collaboration between banks and fintechs, with traditional banks seeing fintechs as partners, rather than competitors.

“Banks offer established customer bases and trust, while Fintechs bring agility and innovation. Strategic collaborations will be key in building hybrid solutions that leverage the strengths of both sectors, particularly in areas like mobile payments, SME financing, and cross-border transactions,” he added.

A conducive regulatory environment, he continued, “is essential for fintech growth. The CBN has taken commendable steps in fostering innovation through policies like the regulatory sandbox, but there is room for more engagement. A flexible, yet secure, regulatory framework will be critical in balancing innovation with consumer protection.”

For Nigeria to achieve its $1tr economy goal, he believes the real sector including agriculture, the country’s largest employer of labour but accounts for the lowest productivity level on the continent; manufacturing, and Services must become the true engine of growth.

“A vibrant real sector will drive employment, foster innovation, and strengthen the overall economy by reducing dependency on the oil sector,” Nwaghodoh further stressed.

The real challenge, in the agric sector, he noted, “lies not just in expanding agricultural production, but in making it more efficient and technologically driven.”

Changing this narrative, he says, would require more lending by banks and fintech innovations to “facilitate easier access to credit and technological inputs like precision farming tools. Additionally, a focus on value-chain development (processing, packaging, and logistics) will boost the sector’s contribution to GDP (which was 22.61% as of Q2 2024, from 23.01% in Q2 2023 – Source: NBS).”

Given the critical role manufacturing plays in driving industrialization, he spoke of the need to increase its share of nominal GDP beyond the current 12.68% level through a coordinated approach that includes expanding local production, enhancing export capacity, and improving access to power and logistics infrastructure.

“Nigeria’s manufacturers face high operational costs due to poor infrastructure and energy challenges. Solving these issues is key to unlocking the sector’s potential to create jobs and foster economic growth,” he lamented.

In addition, judging by the importance of Small and Medium Enterprises (SMEs) as the lifeblood of Nigeria’s economy as it accounts  for over 90% of businesses and contributing 48% to the GDP, according to the Nigerian Small and Medium Enterprises Development Agency (SMEDAN), he advocated better to long-term finance and affordable credit.

“This is where the recapitalization of banks and fintech innovation must converge. By creating products specifically targeted at SMEs, such as flexible loan packages, digital banking tools, and access to markets, Nigeria can unlock their potential for exponential growth,” he stressed.

By way of regulatory support, Nwaghodoh wants the CBN to adopt more proactive policy interventions by ensuring that its monetary policies support sectors that are critical to economic expansion, rather than relying solely on inflation management, no matter how crucial it is.

This, he believes, will require “maintaining a careful balance between interest rates, exchange rates, and inflationary pressures to support the real sector without stifling growth.”

The CBN, he continued, should continue to encourage banks to lend more to the aforementioned critical economic sectors, as recapitalization alone is not enough and “must be followed by focused lending to strategic areas that promise the highest economic returns.”

“As banks become more capitalized, NDIC’s role in safeguarding the financial system becomes even more vital. A failure to protect depositors’ interests could lead to instability. The NDIC should also work closely with fintech players to explore ways to insure new types of digital financial products,” he added further.

He also challenged the deposit insurer to ensure it can protect depositors in an increasingly complex financial ecosystem that Nigeria’s has become while growing  with complex financial products and institutions.

Nwaghodoh urged stakeholders to take the opportunity of the government’s new vision “to collectively shape the future, ensuring that the Nigeria of tomorrow is one where prosperity is shared, opportunities abound, and our economy stands as a beacon of growth on the global stage.”