The National Bureau of Statistics (NBS) on Monday released its second quarter report for Gross Domestic Product (GDP), which is a monetary measure of the market value of all the final goods and services produced in a given period.
The report revealed that financial institutions grew by 28.41 percent in the second quarter (Q2) of 2020 compared to 24.00 percent in the first quarter (Q1) 2020, and -3.52 percent in corresponding quarter of 2019, helped by increased patronage of electronic banking during the Covid-19 pandemic lockdown.
Nigerian banks recorded a total of N11.44 trillion worth of financial transactions on the Point of Sales (PoS) and instant payment and electronic bills platforms in March, the latest data from the Nigeria Inter-Bank Settlement System (NIBSS) indicated.
Analysts at FSDH research said the fastest growing sectors are financial institutions and telecoms. These are the best performing sectors during the lockdown. The use of digital platforms and services has spiked during this period.
“Every cloud has a silver lining. The Financial services sector and the Telecoms sector represent the silver lining in this cloud occasioned by COVID’19,” Uche Uwaleke, a professor of capital market at Nasarawa State University Keffi, said.
Following the surge in internet banking and e-transactions generally due to lockdowns and movement restrictions, Uwaleke said it is expected that the banking sector, which dominate the financial services sector, should witness strong growth.
He noted that most of the Central Bank of Nigeria (CBN) COVID-19 interventions have passed through the banks.
Financial and Insurance sector grew by 18.49 percent in in the second quarter (Q2) of 2020 from 20.79% in the first quarter (Q1) of 2020 and -2.24 percent in the corresponding period of 2019.
The Finance and Insurance Sector consists of the two subsectors, Financial Institutions and Insurance, which accounted for 89.82% and 10.18% of the sector respectively in real terms in Q2 2020.
As a whole the sector grew at 20.82% in nominal terms (year on year), with the growth rate of Financial Institutions as 30.94% but –28.15% growth rate recorded for Insurance. The overall rate was higher than that in Q2 2019 by 19.85% points, and lower by –3.14% points than the preceding quarter. Quarter on Quarter growth was 0.49%. The sector’s contribution to aggregate nominal GDP was 3.76% in Q2 2020, higher than the 3.03% it represented a year earlier, and higher than the contribution of 3.57 % it made in the preceding quarter.
Ayodeji Ebo, managing director, Afrinvest Securities Limited said the strong growth in financial institutions despite the lockdown in Q2:2020 can be attributed sustained loan growth of the banks. This uptrend started in Q1:2020 due to the effort of the CBN to ensure banks create more risk assets. Surprisingly, the number of online transactions dropped 20% from 135 million in March to 107 million during the lockdown in April 2020.
Growth in this sector in real terms totaled 18.49%, higher by 20.73% points from the rate recorded in 2019 second quarter, but down by –2.30% points from the rate recorded in the preceding quarter. Quarter on Quarter growth in real terms stood at –0.16%. The contribution of Finance and Insurance to real GDP totaled 4.00%, higher than the contribution of 3.17% recorded in the second quarter of 2019 by 0.83% points, and higher than 3.81% recorded in Q1 2020 by 0.20% points.
Uwaleke said the negative growth in real GDP in Q2 2020 was expected. “This appears to be in line with global expectations as we have seen similar trends recently in countries like UK and Japan.
I am also not surprised about the huge size of the contraction put at 6.10%. As a matter of fact, because it is based on year-on-year, when one considers the 2.12% positive real GDP growth this same period last year, the decline in GDP comes to as high as 8.22%,” he said.
Continuing, Uwaleke said “I think this is going to be the worst this year. A negative real GDP growth is also most likely to be recorded in Q3 2020 but the size will be smaller as the economy gets restarted and crude oil price gradually picks up”.
To ensure, the impact of these economic headwinds is moderated, he said it is important to increase the size of the various interventions by the government and the CBN and ensure they are well targeted and implemented.
