Financial institutions grow 9.6% in Q3 as economic activities slow

Nigeria’s financial institution in nominal terms recorded 9.6 percent growth in the third quarter (Q3) 2020

Nigeria’s financial institution in nominal terms recorded 9.6 percent growth in the third quarter (Q3) 2020 from 30.94 percent in the second quarter of the same year, according to the latest report on Gross Domestic Product (GDP) by the National Bureau of Statistics (NBS).

Although the sector is still in a positive territory, the numbers show a -21.34 percentage point decline compare to the last quarter numbers.

Olalekan Aworinde, senior lecturer, department of economics, Pan-atlantic University, Lagos, attributed the decline to some of the issues going on globally, particularly, the Covid-19.

More importantly, he said the #ENDSARS protest affected economic activities. “Basically economy is closed, meaning that a lot of activities are not taking place,” he said.

It is because the intermediation process are not taking place, and if this does not happen, it will definitely affect the flow in terms of the capital and profit that these financial institutions are likely going to get, he said.

According to the NBS, the finance and insurance sector consists of the two subsectors, financial institutions and insurance, which accounted for 88.89% and 11.11% of the sector in real terms in Q3 2020.

Related News

As a whole, the sector grew at 5.91% in nominal terms (year on year), with the growth rate of financial institutions at 9.60% and –16.54% growth rate recorded for insurance. The overall rate was higher than that in Q3 2019 by 2.20% points, but –14.91% points lower than the preceding quarter. Quarter on quarter, growth was -24.76%.

The sector’s contribution to the overall nominal GDP was 2.46% in Q3 2020, higher than the 2.40% it represented a year prior, but lower than the contribution of 3.76 % it made in the preceding quarter. In real terms, growth in this sector was estimated at 3.21% during Q3 2020, or 2.14% points from the rate recorded in the third quarter, though down by –15.29% points from the rate recorded in the preceding quarter.

Quarter on quarter growth in real terms stood at –25.24%. The contribution of finance and insurance to real GDP reached 2.67%, higher than the contribution of 2.49% recorded in the third quarter of 2019, but 1.33% points lower than 4.00% recorded in Q2 2020.

Aisha Ahmad, deputy governor in charge of financial system stability said six months into the pandemic, the financial system continued to show resilience with soundness indicators retaining their robustness, amidst regular stress testing by the CBN. Non-performing loans ratio declined to 6.1 per cent in August 2020, from 6.4 per cent in the previous month, capital adequacy improved to 15.3 per cent from 14.6 per cent over the same period even as net interest margin remained robust.

Focused implementation of the Loans to Deposit (LDR) policy over the last year continues to promote credit growth to the real sector and lower deposit and lending rates, – which supported banks’ net interest margins.

For instance, credit to the economy increased by N3,766.08 billion from N15,567.66 billion at endMay 2019 to N19,333.74 billion at end-august 2020, with significant growth recorded in manufacturing, consumer credit, general commerce and agriculture.

Hope Moses-Ashike

Hope Moses-Ashike is an Associate Editor, Banking and Finance, with more than a decade of experience reporting on Nigeria’s financial system and broader economy. She closely tracks market movements, monetary policy decisions, company disclosures, regulatory actions, economic indicators, and global developments, and interprets what they mean for businesses, investors, policymakers, and households. Her reporting helps readers understand complex issues such as inflation trends, foreign exchange market dynamics, interest rate decisions, bank performance, and investment risks. She also covers major international events and periodically travels to Washington, D.C., to report on the World Bank/IMF Spring and Annual Meetings. Her dedication to financial journalism has earned her multiple recognitions and invitations to high-level professional development programmes. She is an alumna of the International Visitors Leadership Programme (IVLP) in the United States and holds an Advanced Financial Journalism Certificate from the Press Association Training in London, UK. Her other notable achievements include completing the Lagos Business School CMC Programme, the Bloomberg Media Africa Initiative Programme, and a Master Class in Journalism at Rhodes University in South Africa.