The World Bank has predicted robust growth for the Nigerian economy in 2010, the Lagos based Punch newspaper reported on Friday.

Citing Ismail Radwan, the bank's senior economist of the Finance and Private Sector Development in Africa Region, the report said with the price of crude oil hovering around US$80 per barrel, the Nigerian economy would experience exponential growth from next year.

He said Nigeria's economy had the potential for double-digit growth.

"The Nigerian economy is doing very well and we thought that growth would slow-- may be to two per cent. But the latest figures released by the Central Bank of Nigeria indicates that growth is still going on at six or even close to seven percent this year and next year will even be higher," the paper quoted him as saying.

"We know that the potential of the Nigerian economy is even higher than that," he said.

"As a matter of fact, the Nigerian economy should be growing in double digits, however, in terms of financial crises, Nigeria has seen some limitations especially in trade finance. But we have not had any of the sophisticated derivatives as we have seen in other areas," he added.

"Also, Nigerian banks have limited links with international banks. This has reduced their exposure to the negative effects of the global financial crises," the World Bank official said.

According to him, the problems of the financial sector in Nigeria have been created at home rather than being an impact from the global financial crises.

He said the biggest impact from the financial crises has been, until recently, the fall in commodity prices, especially the fall in the price of oil which had since rebounded to about 80 dollars per barrel.

"So, it seems that the crisis is over for Nigeria," he added.

Radwan described the on-going reform in the banking sector as a step in the right direction adding that the bank would partner with the Nigerian federal government in its bid towards entrenching sound corporate governance practices in the country's financial sector.

"After the consolidation exercise, the banks had a lot of capital and they had to go into more areas to look for opportunities, which entailed lending to more risky areas," he said.

"We knew that with the expansion of credit, there would be deterioration in credit quality. We suspected that there would be problems with the margin loans as the banks had become so big that they dominated the stock market because there was a lot of lending for people to buy bank shares as they controlled about 75 percent of the stock exchange," he added.

"We did not know the extent of the issues in the banks. We knew that there were governance issues. We also knew that some banks were weaker than others," he said.

"But frankly, we were surprised at the extent of the damage to the banks balance sheet. We are very happy that the Central Bank is taking a firm and decisive stance to improve supervision and governance practices. We will like to support the government and the CBN in this regard," he added.

He stressed that given the increase in the number of microfinance banks in Nigeria, the CBN currently lacked the capacity to effectively regulate their operations.

He said the CBN should exercise restraint in granting licenses to microfinance banks.

He urged the government to restructure the microfinance institutions and the Nigeria Agricultural Credit and Rural Development Bank in order to strategically position the Small and Medium Scale Enterprises as the engine for employment generation.

(Xinhua News Agency November 27, 2009)