The World Bank Country Director for Nigeria, Mr Mathew Verghis, has said Nigerian banking sector has the capacity to drive more than seven per cent growth in Gross Domestic Product (GDP) if properly leveraged
Verghis spoke on Thursday at the Agusto & Co 2026 Economic Roundtable held in Lagos in honour of the firm’s late founder, Mr Olabode Agusto.
He spoke on the theme: “Nigeria’s Banking Recapitalisation Is Almost Over: What Does the Recapitalisation Mean for the Nigerian Economy?”.
Verghis noted that Nigeria recorded nearly 4.5 per cent GDP growth in the second quarter of last year, its strongest performance in a decade.
“And it’s not nearly enough. The ambition should be seven to eight per cent growth, and there is no reason why Nigeria cannot achieve that,” he said.
Verghis stressed that the banking sector must play a central role in achieving higher growth, particularly as returns on government securities decline.
He said banks had benefited from investing heavily in government securities, but falling yields would make such investments less attractive, creating incentives to redirect funds into lending to the domestic economy.
“With interest rates expected to moderate over time, banks will be compelled to change strategy,” he said.
“The good news is that banks should be incentivised to do this. As interest rates come down, banks can no longer rely as heavily on government securities. That liquidity will need to be put to good use, and the incentives are well aligned,” he added.
The World Bank official also applauded the ongoing bank recapitalisation process, describing it as the right step to strengthen financial stability and reposition lenders to support private sector-led growth.
He explained that years of macroeconomic pressures, exchange rate depreciation and high inflation had eroded banks’ capital buffers, making recapitalisation inevitable.
“The basic reason recapitalisation was needed is that banks had become undercapitalised. Capital adequacy requirements had to be raised because of inflation and exchange rate pressures,” Verghis said.
“An adequately capitalised banking sector is central to economic stability, and the Central Bank has taken the right step.”
He observed that domestic credit to the private sector remains low compared with peer economies.
“The ratio of domestic credit to the private sector is about 21 per cent. The Sub-Saharan Africa average is 33 per cent, while a country such as the Philippines is around 50 per cent,” he said, stressing that increased credit must also be productive.
