Renowned economist Professor Akpan Ekpo has characterised the recently concluded bank recapitalisation exercise as a positive development, highlighting its significant enhancement of Nigeria’s banks’ capacity to foster economic growth.
Speaking in an interview with Voice of Nigeria, Professor Ekpo said the primary objective of the exercise was not expansion but to make banks stronger and better positioned to provide large-scale financing.
“The idea was to make the banks bigger so they can have a larger loan space. Now, all the banks, whether global, regional, or national, have met the requirements, and that is commendable,” he said.
He noted that the successful capital raise, which saw Nigerian banks attract about ₦4.65 trillion with a significant portion from foreign markets, signals renewed investor confidence in the banking sector.
According to him, “Both domestic and foreign investors can now look at Nigerian banks with confidence, especially because the banks now have the capacity to lend and support investments.”
Professor Ekpo, however, raised concerns over the nature of foreign investments flowing into Nigeria, noting that much of it remains short-term despite improved confidence.
“What we are seeing is more of foreign portfolio investment, hot money that comes in to take advantage of high interest rates and leaves at the slightest shock,” he explained.
He stressed that Nigeria is yet to witness significant inflows of foreign direct investment (FDI), particularly in sectors that create jobs, such as manufacturing.
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He warned that without strong coordination between monetary and fiscal authorities, the banking sector reforms may not yield their full benefits.
Professor Ekpo also expressed concern over the high cost of funds in the Nigerian financial system, warning that it limits access to credit for businesses.
“Nobody can borrow at current rates, invest, make profit, and repay. The cost of funds is simply too high,” he said.
He urged the CBN to consider more decisive measures to reduce interest rates, including a potential review of the Monetary Policy Rate.
On the resilience of the banking sector, Ekpo expressed confidence that most Nigerian banks would successfully pass post-recapitalisation stress tests.
“Our banks are resilient. If any fail, it will be very few. The sector is strong and well-positioned,” he stated.
Looking ahead, Professor Ekpo projected a positive outlook for the banking sector over the next three to five years, driven by stronger capital buffers and improved stability.
However, he emphasised that banks must channel more credit to small and medium-scale enterprises (SMEs) to make a real impact.
“SMEs are the backbone of the economy. If banks do not finance them, then growth and job creation will remain limited,” he warned.
Professor Ekpo explained that the recapitalisation exercise has strengthened the financial system and restored confidence, adding that Nigeria must urgently address structural and policy challenges to unlock sustainable economic growth.