Nigeria’s financial system stalls economic growth – Report
Nigeria’s lack of an efficient and resilient financial system is holding back inclusive and sustainable growth in the country, a new report by PricewaterCooper, PwC, has revealed.
The report states that Nigeria has by far the highest percentage of its population living in poverty, and its financial system also shows the least progress of all seven emerging markets identified in the report.
The report, obtained by PREMIUM TIMES Wednesday, was titled ‘Geared up for growth: Shaping a fit for purpose financial system’, and put together by PwC, a network of firms delivering assurance, advisory and tax services.
The PwC assessment highlights considerable room for improvement in key areas, ranging from financial inclusion to pensions and protection.
The report listed the key emerging markets as Brazil, China, India, Indonesia, Mexico, Nigeria and South Africa, noting that policymakers, regulators and financial services organisations should more actively shape a financial system that is fit for purpose.
“While growth in emerging markets continues to outstrip developed counterparts and hundreds of millions of people have been lifted out of poverty, developing a well-functioning financial system remains critical to tackling poverty and sustaining economic growth over the long term.
“Emerging markets need a robust and broad-based financial infrastructure to channel funds efficiently, draw people into the market economy and enable them to share in the benefits,” the report stated.
All seven emerging markets performed well on private sector lending, which is known to drive growth, the report said. With the exception of Brazil, the banking spread in the emerging markets is low, improving borrowers’ ability to service debt.
Another key area in which most of the seven emerging markets did reasonably well is controlling the size of their banking system. Only the size of China’s banking sector – compared to its economy – could raise systemic concerns, the report stated.
On the status of each emerging market, the report positioned that South Africa was on the right track but the nation has a long way to go; China and Indonesia are underperforming in number of key areas, especially high corporate debts and well-functioning housing systems, respectively; and India’s financial system is showing mixed signs of progress.
It explained further that Brazil and Mexico are moving in the right direction with e-payments, while Nigeria’s financial system is stalling economic growth. The report, however, said that the success of Nigeria’s auto-enrolment pension model is a bright spot.
In his submission, Andrew Nevin, FS Advisory Leader and Chief Economist at PwC Nigeria and Project Blue Global Leader, stressed that emerging markets should try and learn from their peers.
“Our analysis clearly shows that some markets are ahead of others in different dimensions. Ask yourself the question: what can we learn from each other’s experience?” he noted.
“Specifically financial services organisations should realise that many of the ground-breaking innovations in FS are being spearheaded in Asia and other emerging markets.
“Without ageing legacy systems to hold them back, they have clean sheets upon which to harness the latest developments in technology and develop their own distinctive business models.”