Financial Service Sectors’ Contribution to GDP Up 26.5% to N3.8tn

Kayode Tokede

Nigeria’s financial service sector’s contribution to Nigeria’s Gross Domestic Product (GDP) increased to N3.8 trillion in 2023, representing 26.5 per cent Year-on-Year (YoY) from N3.01 trillion reported 2022, THISDAY analysis of the latest data released by the National Bureau of Statistics (NBS) has revealed.

A breakdown of the NBS numbers showed that financial institutions contributed 91.99 per cent of the overall N3.8trillion.

Further analysis revealed that financial Institutions contributed N3.5 trillion in 2023, representing an increase of 28.86 per cent from N2.722 trillion in 2022, while insurance sector N305.02billion in 2023, a growth of 4.82 per cent from N290.98 billion in 2022.

Amid macro economic challenges, the financial service sector recorded an unprecedented contribution to the economy in 2023. The growth in Fintech, foreign exchange unification, and lending to the real sector were major highlights of the banking sector in 2023.

Analysts posits that the banking and insurance sectors are key players in Nigeria’s economy, stressing their support in lending to the real sector, creating jobs and facilitating transactions across the country.  

The Vice President, Highcap Securities Limited, Mr. David Adnori noted that the banks in nine months of 2023 declared impressive earnings on the backdrop of the foreign exchange policy of the Federal Government.  

“Can the financial institutions and insurance sector contribute more to GDP? Yes of course but the business environment has to be friendly and the Government has to improve ease of doing business,” he said.

Recently, the Central Bank of Nigeria (CBN) revealed that banks’ credit to the economy rose by 49.77 per cent Year-on-Year (YoY) to N62.52 trillion in December 2023 from N41.74trillion reported in the corresponding period of 2022.

Data from the CBN’s Money and Credit Statistics showed that credit to the private sector stood at N62.52 trillion for the month of December, second to the highest recorded last year, with October recording the highest with N63.57 trillion.

A breakdown for 2023 showed that January started off with N41.54 trillion, providing a foundation for financial activities. This initial figure set the stage for subsequent months, indicating the baseline for lending operations. February saw a marginal uptick, with credit increasing to N41.75 trillion. This modest rise of approximately 0.51 per cent hinted at a steady pace in financial transactions, setting the tone for the following months.

March witnessed a more pronounced surge, reaching N43.01 trillion. Analysts said the substantial increase of about 2.99 per cent hinted at growing economic activities and a heightened demand for credit in various sectors. Continuing the positive trajectory, April showed a credit figure of N43.66 trillion, marking a further increase of approximately 1.51 per cent.

The upward trend, analysts posited, suggested sustained confidence in the economy. May 2023 brought another boost, with credit reaching N44.79 trillion, signifying an increase of about 2.57 per cent. The consistent climb reflected a robust financial environment and an expanding private sector. June witnessed a significant leap, hitting N52.81 trillion. “This substantial increase of around 17.92 per cent indicated a surge in credit demand, possibly linked to heightened economic activities or strategic investments, “said a market watcher.

Meanwhile, the report by NBS had revealed that Nigeria’s GDP growth has remained in positive territory in recent quarters despite the enormous challenges facing the nation amid various policy reforms and implementations.

In specifics, the newly released GDP report by the NBS revealed that the Nigerian economy grew by 3.46 per cent in real terms in the fourth quarter of 2023, below 3.52per cent in the corresponding quarter of 2022 but higher than 2.54per cent in the preceding quarter.

Commenting, analysts at InvestmentOne Research stated, “Going forward, we expect the Nigerian economy to continue its northward movement in 2024 albeit at a moderate pace given the prevailing challenges facing the economy. Specifically, we expect a formidable growth rate in Q1 2024, which should be mostly driven by low base effect. For the full year 2024, we posit that the expected positive performance will be propelled by the non-oil sector as the economy continues to adjust to policy reforms. We expect this growth to be buoyed by further expansion in the financial services space given the elevated interest rates which should support their financial performance in the year.”