The insurance and service sectors in Nigeria dominated sectoral growth performance for most part of the year 2024.
However, despite the intense macroeconomic headwinds in 2024, the Nigerian economy exhibited resilience on account of Gross Domestic Product (GDP) performance which grew at 2.98 per cent in the first quarter, 3.19 per cent in the second quarter and 3.46 per cent in the third quarter.
It is predicted to close the year at about 3.6 per cent which is at par with International Monetary Fund (IMF) forecasts for GDP growth for the sub-Sahara Africa which is 3.6 per cent and better than global GDP forecast of 3.2 per cent.
In an analysis by the Director and Chief Executive Officer of the Center For The Promotion Of Private Enterprise (CPPE) Dr. Muda Yusuf, in Q3 2024, the financial services sector outperformed other sectors with a growth performance of 32 per cent.
In the analysis tagged ‘NIGERIA 2024 ECONOMIC REVIEW AND 2025 OUTLOOK Gross Domestic Product [GDP] Performance” the Insurance grew by 19.8 per cent road transport grew by 17.9 per cent and rail transportation 19.7 per cent.
However, real sector growth remained subdued during the year with agriculture posting a GDP growth of 1.14 per cent and manufacturing, 0.92 per cent in the third quarter of 2024.
Yusuf, observed that the Air Transport, Quary & Minerals, Petroleum Refining and Textile sector remained in recession as at third quarter of 2024.
The implication is that sectors with high job creation potentials and prospects for economic inclusion are still struggling.
This situation needs to be reversed to fix the current high unemployment and reduce poverty.
The huge disparities in the growth of financial services and the rest of the economy are a reflection of the growing decoupling of the financial services sector from the real economy.
Yusuf, said that it also exemplifies the failure of the financial intermediation role of the financial services sector in the Nigerian economy.
“It is a significant dysfunctionality in the economywhich deserves the urgent attention of policy makers. The current reality is that investing in financial instruments has become much more profitable than investing in the real economy.
“The risk is also very low.This is not consistent with our economic aspirations as it is a major disincentive to real sector investment. There is a need for appropriate policy measures to correct the huge disparity in the profitability betweenthe real economy and the financial economy. There is also a progressive crowding out of the real economy in the financial markets.” he said.
From a structural perspective, the CPPE Director, said the non-oil sector continues to dominate the economic space with the sector contributing 94.43 per cent of the country’s GDP in Q3 2024, while the oil sector contributed 5.57 per cent.
However, the economy is characterized by a paradox of the oil sector contributing an estimated 90 per cent of foreign exchange earnings while the non-oil sector accounts for about 10 per cent.
This is according to the economist is a structural shortcoming in our economy which needs to be addressed as sectors that contribute hugely to GDP have no corresponding contribution to foreign exchange earnings.
However, he noted that the non-oil sector contribution to revenue had improved markedly in recent times which is a reflection of the enormous productivity and competitiveness challenges of the non-oil sector of the Nigerian economy.
The policy implication is that more should be done to fix the challengesof productivity and competitiveness of the non-oil sector of the economy.
