World Bank: Stronger Banking Sector Could Power Nigeria’s GDP Growth Beyond 7%
The World Bank has thrown a spotlight on Nigeria’s banking sector as a potential powerhouse for driving economic expansion that could lift the nation’s Gross Domestic Product (GDP) growth to more than 7 per cent, provided key structural reforms and financial sector strategies are properly implemented.
This assessment was delivered by Mathew Verghis, World Bank Country Director for Nigeria, during the Agusto & Co 2026 Economic Roundtable in Lagos, where he argued that the country has both the institutional capacity and the latent economic momentum to achieve growth well above its recent performance.
Verghis noted that Nigeria’s economic growth of nearly 4.5 per cent recorded in the second quarter of last year was the strongest in a decade, but emphasized that this level remains insufficient to meet the nation’s broader economic ambitions. According to the World Bank official, growth in excess of 7 per cent is achievable if the banking sector transitions from a reliance on government securities toward more productive lending that fuels the real economy.
Central to this vision is a strategic redirection of bank liquidity. Historically, Nigerian banks have parked significant funds in high-yield government instruments. With yields on those securities now declining and interest rates expected to moderate, Verghis argued that banks will have stronger incentives to increase credit to businesses and households, especially in areas that drive productivity and job creation.
This shift would mark a significant step toward reducing Nigeria’s longstanding credit gap a gap that has left domestic credit to the private sector at around 21 per cent of GDP, below Sub-Saharan African peers and far beneath emerging markets such as the Philippines.
A fundamental pillar underpinning the World Bank’s confidence is the ongoing bank recapitalisation process, which Verghis and other financial leaders present at the roundtable described as timely and crucial.
The recapitalisation effort, driven by the Central Bank of Nigeria (CBN), is designed to strengthen balance sheets, enhance financial stability, and position Nigerian lenders to better support private-sector investment. So far, about 25 of the country’s 38 commercial and merchant banks have met the new capital requirements, mobilizing roughly N2.5 trillion in fresh capital ahead of the compliance deadline.
Proponents of the recapitalisation argue that a deeper and better-capitalized banking sector will be better equipped to fund infrastructure, industrial expansion, and the growth of small-to-medium enterprises (MSMEs) sectors critical to inclusive economic development and employment generation.
Nigeria’s MSMEs account for around 97 per cent of businesses, yet they have historically struggled to access formal credit, a challenge that stronger banks could help address if lending conditions improve.
Beyond just capital adequacy, the World Bank’s analysis reflects a broader narrative about economic reform momentum in Nigeria. Recent World Bank reports and government statements suggest that ongoing fiscal and monetary adjustments including tax reforms and efforts to stabilize inflation are gradually creating a more conducive environment for private investment.
While the bank’s Global Economic Prospects forecasts more modest headline GDP growth of around 4.4 per cent for 2026 and 2027, the emphasis on finance and services as growth drivers underscores why policymakers and development partners see significant upside if reforms deepen.
Achieving growth above 7 per cent will not be automatic. Inflation still erodes purchasing power, foreign exchange volatility persists, and productive private-sector credit remains relatively low. Yet, if the banking system can adapt redirecting capital away from passive holdings into dynamic lending that fuels business expansion, consumer spending, and productive investment Nigeria could unlock sustained, high-impact growth. This, experts say, would put the country on a stronger path toward its $1 trillion economy goal, with broad implications for job creation, poverty reduction, and long-term prosperity.
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