EnterpriseNGR, a professional policy and advocacy group, says Nigeria’s financial institutions total assets rose to N121.8 trillion despite tough economic conditions.
Banks’ total assets rose by 56 percent in 2023, equivalent to almost half of the country’s national gross domestic product, the financial consulting group said in its latest report released on Monday.
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“Nigerian banks and other financial services accounted for 4.6% of GDP which translates to financial institutions accounting for approximately ₦5 for every ₦100 generated nationally in 2023, up from about ₦4 in 2022,” the report said.
According to the State of Enterprise (SOE) 2024 Report, which seeks to highlight the key importance of Financial & Professional Services (FPS) sectors in the economy, it delves into nine sub-sectors such as banking and insurance.
Others are capital markets, asset management, pensions, non-interest finance, fintech, professional services and sustainable finance.
Demonstrated great impact on Nigerians and the economy, the banking sector provides necessary funds to support businesses and the productive sector.
“The sub-sector’s role (Bank) in tax revenue was equally commendable, ranking third out of the 23 economic sectors, in income tax and VAT generation to the government coffer,” the SOE report stated.
The report also highlights positive trends in the insurance sub-sector of the FPS with gross written premiums rising by 18.77 percent to N1.003 trillion in 2023 from N844.5 billion the previous year, reflecting increased insurance operations.
Also, the industry’s gross claims ratio rose to 53.5 percent, indicating higher payouts, the report said.
“Even though this growth was driven by a regulatory intervention, such as increased motor insurance rates, the sub-sector paid 36% more claims than in 2022, an indication that the Insurance sub-sector is rising to its responsibility to protect policyholders against adverse financial and economic consequences,” EnterpriseNGR noted.
The capital market also recorded an increased domestic participation with the equity market registering an All Share Index of 74,773.77 (47%) by year-end in 2023, which surpassed many international market indices such as the FTSE100, S&P 500, and Hang Seng, reflecting a thriving equity market and growing investor confidence.
“The last time the markets achieved something close to this was in the wake of the pandemic (in 2020),” the SOE report stated.
“When you look at performance by sector, the Oil & Gas sector emerged as the growth leader (recording a phenomenal 126% gain). The performance of the Oil & Gas sector can be linked to policy changes such as the suspension of subsidies,” the policy group said.
Another sub-sector breaking barriers and contributing largely to the economy is the rise in FinTech operations in Nigeria.
FinTechs and financial institutions facilitated an increased number of transactions conducted through digital and electronic channels, connecting millions of Nigerians to financial services, helping them meet their everyday needs at reduced costs compared to traditional banks.
Despite the many contributions of the FPS sectors to individuals, businesses and the economy at large, particularly its potential to drive Nigeria’s transition into Africa’s financial powerhouse, they are still fraught with challenges such as inflation, FX volatility, human capital deficits among others.
The group however called on the government, policymakers and industry regulators alike to address the macroeconomic challenges in order “to advance the FPS sector and support the growth and development of Nigeria’s wider economy”.
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