A recent report by the National Development Plan (NDP) has shown that the financial sector added a total of N44.2 trillion to the Nigerian GDP from 2017 to 2020.
According to the report, the total size of the financial services sector in 2017 was N78.10 trillion but rose significantly reaching N122.30 trillion by the year 2020, adding N4.8 trillion and N17.4 in 2018 and 2019 respectively.
The banking sector chaired the market contributing the highest at N34.6 trillion in 2017, N37.8 trillion in 2018 and N42.7 trillion in 2019, consequently speeding up the figure in 2020 to N53.3 trillion due to the lockdown from COVID-19 which forced the increased adoption of digital banking.
This was followed by the capital market which contributed the sum of N32.6 trillion in 2017 but slipped to N31.9 trillion the following year. In 2019 however, the market rose sharply to N42.6 trillion and continued with the trend witnessing a N49.2 trillion in 2020.
The non-banking financial institution contributed the least during the period with a N10.9 trillion in 2017, improving the digit to N13.2 trillion, N15 trillion and N19 trillion respectively in the following years.
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A review of the sectoral performance shows that the money market which is largely dominated by banks, underwent significant changes in recent times, amidst regulations from the Central Bank of Nigeria (CBN) and innovations from the industry players as the apex bank maintains stability of the banking sector.
In the capital market, several innovations have recently been introduced under the 10-year Capital Market Masterplan (2015-2025) which envisions the emergence of Nigeria as Africa’s most modern, efficient and internationally competitive market. These include the new regulation on derivatives and the registration of Central Counterparty (CCPs) aimed at the commencement of derivatives trading in Nigeria.
Similarly, the performance of the Non-Bank Financial Institutions (NBFIs) segment of the financial sector which consist of Pensions, Insurance, Development Finance Institutions (DFIs), Finance Companies and Primary Mortgage Institutions (PMIs); has consistently grown over the years as pension accounted for over 60% of the sector while DFIs and PMIs had almost the same total asset as the Insurance sector.
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The improved performance of the NBFIs reflected the implementation of significant reforms as the National Insurance Commission (NAICOM) worked towards improving the effectiveness and efficiency of the insurance sector during the period through investments in automation and risk-based supervision. Also, National Pension Commission (PenCom) recently introduced a multi-fund structure to align the age and risk profile of retirement savings account holders.