The Nigerian financial and insurance sector experienced remarkable growth, expanding from 10.1% in 2021 to 31.2% in Q1 2024, according to a new report by Afrinvest. The study, titled “Bank Recapitalisation: Catalyst for a $1 Trillion Economy,” provides insights into the performance of Nigeria’s key economic sectors over the past three years.
Key Findings:
- Financial services lead growth. The financial services sector emerged as the fastest-growing among Nigeria’s seven largest GDP sub-components, with an 18.4% expansion in real terms between Q3 2023 and Q1 2024. Afrinvest attributes this growth to increased investments, digital channel earnings, favourable interest rates, and positive effects from the naira devaluation.
- The agriculture sector struggles. In contrast to the financial sector’s success, agriculture showed a declining trend.
- 2021: 2.1%
- 2022: 1.9%
- 2023: 1.1%
- Q1 2024: 0.2% Experts suggest this decline may be due to climate change vulnerabilities and rural infrastructure challenges.
- Mixed Performance Across Industries
- Mining and Quarry: Recovered from -18.2% in 2022 to 6.3% growth in Q1 2024
- Real Estate: Fluctuated, ending at 0.8% growth in Q1 2024
- Manufacturing: Gradual decline from 3.3% in 2021 to 1.5% in Q1 2024
- Trade decreased from 8.6% in 2021 to 1.2% in Q1 2024.
- Information and Communication: Grew from 6.5% in 2021 to 5.4% in Q1 2024
Future Outlook:
Afrinvest projects overall economic growth between 3–4% in the near term, citing weak institutional capacity as a limiting factor. However, the banking sector is expected to maintain strong growth as institutions adapt to the new recapitalisation requirements.
Agricultural Importance: Rasheed Sarumi, Managing Director of Saro Africa International, emphasised agriculture’s critical role in achieving a $1 trillion economy. He stressed the need for increased agricultural output to drive industrialisation, productivity, and employment.
Challenges:
Despite productivity improvements, inflation remains a concern. Sarumi noted that government involvement in agriculture over the past five decades has not yielded significant change.
Conclusion:
While Nigeria’s financial sector shows robust growth, other key industries face challenges. Addressing these disparities and focussing on agricultural development may be crucial for achieving sustained economic expansion and reaching the $1 trillion economy goal.