Banking, insurance, capital market, asset management, pensions, non-interest finance, fintech, professional services and sustainable finance are critical sub-sectors with the potential to make Nigeria Africa’s financial hubNigeria Africa’s financial hub, according to the latest State of Enterprise (SOE) report.
The report unveiled on Wednesday the 12th of October, 2022, by EnterpriseNGR, a professional advocacy group, is a first-of-the-kind annual industry publication that analyses the supportive, facilitative and central role played by the Financial and Professional Services (FPS) sector in supporting the country’s positive economic growth. It demonstrates the importance of the sector to the economy.
According to a statement by the group, “We can only have a strong FPS sector when all these sub-sectors are operating maximally and achieving their full potential because our vision is to transform Nigeria into Africa’s financial hub, ” says Obi Ibekwe, Chief Executive Officer at EnterpriseNGR.
“Each of these sub-sectors currently operates in silos. So, we are trying to get them together and see those leakages and synergies that we can leverage on as a sector or as a single voice so that we can discuss with the government and be at the initiation of policies concerning the sector,” Ibekwe said.
She added that the government does not know it all and that as operators in the sector, we know the sector, its challenges and how to resolve them.
“If we collaborate with them, we will have a positive impact on the economy and help to achieve economic growth and prosperity that will improve the wellbeing of ordinary Nigerians.”
Aigboje Aig-Imoukhuede, chairman at EnterpriseNGR, said that the report was growing in impact and influence every year.
“It is meant to baseline for all of us the real things that are taking place in the sector. And in the subsequent reports, we will look at what has not been done so well and what needs to be done to make it well, not only for professionals, but for the nation as well,” Aig-Imoukhuede said.
The report highlighted that for banking, the assets of deposit money banks grew by 15.3 percent to N62.9 trillion, representing 35.7 percent of the national gross domestic GDP in 2021.
“Financial institutions contributed 3.2 percent to the GDP. Key challenges that must be addressed to facilitate future growth include: a shortage of talent, lack of incentives for patient capital, low competition, undercapitalisation, regulatory roadblocks, uneven growth, and low spread of innovation,” it stated.
For fintech, the number of firms grew from just a few (such as Systems Spec, Interswitch, and eTranzact) in the 1990s and early 2000s to 201 to 250 in 2021. “It attracted 73 percent of total tech Venture Capital while areas, including e-commerce, healthtech, edtech, enterprise, entertainment, logistictech, and insurtech were responsible for the remaining 27 percent.”
The challenges faced in the sub sector are limited to weak interoperability and the lack of common data sources, shortage of talent, slow pace of regulation, inadequate patient capital, data privacy, and security challenges, poor understanding of user experience, and shortage of funding.
The report further stated that to facilitate the finance of businesses and capital projects, in the first three quarters of 2020, the asset management sub-sector supported the issuance of new securities valued at N2.8 trillion.
“Thirty-three unit trust schemes valued at N10.3 trillion and $86.4 million (dollar/Eurobond funds) were registered with SEC in 2021 and 19 companies received approval to issue corporate bonds valued at N369.8 billion.
“While the asset management sub-sector has great potential, it is challenged by low levels of innovation, the influx of unregulated operators, low participation rates, difficulties in the boarding process, poor integration of financial services, talent shortages, low product diversification, non-availability of data, and low use of research,” it added.
In a keynote speech, Stefan Decron, a professor of Economic Policy, University of Oxford, noted that when it comes to losers in economic development, Nigeria is one of them.
“It is a fine example of the kind of country that in the last 20-30 years has not had fast economic growth compared to Indonesia, Bangladesh, India, Vietnam,” Decron said.
“The last 20 or 30 years have been the best in global history in terms of the take-off of development across the world. But sadly, Nigeria did not take part in it.
“It is a loser in my language. Its low growth and stagnation has not made it to rank good in terms of development. It is only among the top when it comes to poverty. And by 2030, it will be the country with the most extreme poor people in the world,” he further said.
The economist recommended that the country can take lessons from China, Bangladesh and Ethiopia who are winners in the area of growth and development
“These countries have credible politics for the longer term to keep peace and stability, a state that is self-aware, accountable and functional democracy.”