Despite Nigeria’s challenging business environment, the banking and insurance industries increased real GDP by 26% year on year (YoY) in the first quarter (Q1) of 2023. According to the latest National Bureau of Statistics (NBS) report, the growth rate from both sectors reached N949.11 billion, up from N781.98 billion in the same first quarter of 2022.
According to the bureau, the finance and insurance sector is divided into two subsectors: financial institutions and insurance businesses functioning in the country. According to analysts, internet transactions expanded dramatically during the time under review due to the Central Bank of Nigeria’s (CBN) currency swap policy.
Festus Adenikinju, a member of the CBN’s Monetary Policy Committee from the Department of Finance who is from the Department of Economics, University of Ibadan, said: “I fear that the staff output growth forecast of 2.64 per cent in Q1 2023 may not be realised because of the problems associated with the implementation of the currency redesign policy and the fuel queues in parts of the country for January and February 2023”.
The currency redesign policy imposed significant negative shocks on the economy as both aggregate demand and aggregate supply were constrained. The informal sector and SMEs were heavily impacted by the huge net withdrawal of cash from the economy and widespread failures of online banking transactions.
“The effects of cash withdrawals constitute a huge shock, in my view that the MPC should wait to assess their net effects on the economy and prices before considering additional rate hikes.