Kayodetokede
Excluding the insurance sector, banks and other financial institutions contributed N771.06 billion to Nigeria’s real gross domestic product (GDP) in the third quarter of 2023 (Q3), compared to N846.7 billion in the same period in 2023. 8.94% decrease from N70 million. .
According to the National Bureau of Statistics (NBS), the contribution of banks and other financial institutions to GDP in the first quarter of 2023 was N870.82 billion.
Analysts attributed this decline to volatile Naira rates in the foreign exchange market, reforms in the oil and gas sector by the federal government, and double-digit inflation rates that reduce consumer purchasing power and commercial banks’ continued lending to the real. It is said that there has been a decline in sector.
With an inflation rate of 26.72% as of September 2023 (27.33% in October 2023), Stanbic IBTC Bank Nigeria’s Purchasing Managers’ Index (PMI) has declined to 49.1 basis points, compared to the September reading of 51.1 decreased from basis points. This is the first contraction in the domestic private sector since March of this year.
New business fell at a steady pace, ending a six-month streak of growth, as a rapidly inflationary environment suppressed customer demand. Business activity also fell, marking the second drop in the past three months and the biggest drop since the funding crisis at the beginning of the year, as revealed by Stanbic IBTC Bank’s PMI report.
However, the agency revealed that the banks, financial institutions and insurance sector contributed N2.73 trillion to the Nigerian economy in the nine months of 2023, compared to the same period reported in 2022. 2.18 trillion representing an increase of 25.3 percent compared to the Nigerian economy.
According to the NBS, in the breakdown of the insurance sector, the real GDP growth rate of the insurance sector was N78.3 billion in the first quarter of 2023, increasing to N86.04 billion in the second quarter of 2023. However, it was down 11.42% quarter-on-quarter. In the third quarter of 2023, it will reach 76.22 billion naira.
NBS said the real growth rate of the financial and insurance sector totaled 28.21 percent, 15.52 percentage points higher than the growth rate recorded in the third quarter of 2022 and 1.37 percentage points higher than the growth rate recorded in the previous quarter.
“The quarter-on-quarter growth rate in real terms was -9.17%. The contribution of finance and insurance to real GDP was a total of 4.36%, 0.87 percentage points higher than the contribution of 3.49% recorded in the third quarter of 2022. It was 0.91 percentage points lower than the 5.26% recorded in the second quarter of 2023,” NBS revealed in a report.
NBS reveals in its latest report that Nigeria’s GDP grew by 2.54% (YoY) in real terms in Q3 2023, higher than 2.51% in Q2 2023 and 2.25% in Q3 2022. I made it.
It further added, “The GDP performance in the third quarter of 2023 was mainly driven by the services sector, which recorded a growth of 3.99% and contributed 52.70% to the total GDP.”
Robust growth in the global economy in early 2023 will be driven by a rebound in demand for consumer services as post-pandemic spending shifts from goods to activities such as travel, recreation and tourism, according to S&P Global Sector PMI research data. It is shown that
Nigeria’s business environment is currently facing double-digit inflation, a consequent shortage of foreign exchange that is impacting the prices of goods and services, and lower interest rates on loans to customers.
Commenting on the performance of the financial and insurance sector, Dr. Adi Bongo, a senior lecturer at the Lagos Business School, said that due to the removal of fuel subsidy and the impact of currency reform, the GDP of financial institutions will increase in the third quarter of 2023. It was predicted that the contribution of
“What is happening in the economy that has caused the inflation rate, the amount of business activity in Nigeria has decreased significantly and it may take a long time for the correction to begin.
“Nigeria continues to suffer from high levels of infrastructure deficiencies, low energy production and deteriorating security. These are key indicators driving the financial and insurance sectors, and so far there has been no improvement or policy direction. No,” he said.
He said the Nigerian economy is facing a move by the Central Bank of Nigeria (CBN) to unify the naira and the federal government’s subsidy policy, as both reforms play an important role in real GDP growth in the banking and financial sector. He said he is doing so.
According to him, the financial sector has over the years remained resilient to the emergence of economic misfortunes in Nigeria for obvious reasons. This time, however, the financial and insurance sectors were not immune to economic turmoil.
Tajudeen Olinka, CEO of Wyoming Capital and Partners, said the decline in real GDP growth in the financial and insurance sector in the third quarter of 2023 reflects the economic situation.
He said: “The fact that the CBN has used more monetary policy tools to stem inflationary pressures primarily caused by supply-side factors means that economic entities that rely on demand-side improvements to survive are in serious danger. That means we are going to see a setback, and that is something that we are starting to see in the banking and insurance sectors as well.
“The rise in inflation caused by supply-side factors and the CBN’s fourth consecutive interest rate hike is in no way in the interest of the demand side of the economy. The current situation means that the resulting difficulties will cause the economy to suffer a more severe setback.
David Adnoli, vice president of Hicap Securities Limited, also said that the banking and financial sector had recorded a phenomenal growth rate due to excessive use of online and internet banking facilities due to cash shortages, but due to the new government’s reforms, , especially the foreign exchange market, influenced the financial sector’s GDP performance in the second quarter of 2023.
He added: “This suggests that other key sectors, such as agriculture and manufacturing, are suffering from flaws and cash shortages due to the misimplementation of the currency redesign programme.” This policy was grossly mismanaged by the CBN and that is the result we are seeing today. ”