…The slowdown in the Finance and Insurance subsector was primarily due to the Central Bank of Nigeria’s (CBN) intensification of monetary tightening measures which slowed banks’ creation of risky assets
THUR AUG 29 2024-theGBJournal| The Nigeria services sector growth moderated to 3.79% y/y (Q1-24:+4.32% y/y|Q2-23:+4.42%y/y).
Analysts including Cordros Research analysts attribute the weak performance to the deceleration across the Finance and Insurance (+28.79% y/y vs Q1-24:31.24% y/y |Q2-23:+26.84%y/y), ICT (-4.44% y/y vs Q1-24: +5.43 y/y| Q2-23: +8.60% y/y) and trade (+0.70% y/y vs Q1-24: +1.23% y/y| Q2-23 +2,41% y/y) sub components, while transport and storage (-13.53% y/y vs Q1-24: +3.33% |Q2-23:-50.64% y/y) contracted.
Cordros points out that the slowdown in the Finance and Insurance subsector was primarily due to the Central Bank of Nigeria’s (CBN) intensification of monetary tightening measures which slowed banks’ creation of risky assets.
Specifically the Monetary Policy Committee (MPC) raised the Monetary Policy Rate (MPR) further to 26.25% in May (Previous 24: 24.75%), while lowering Banks’ Loan-to-Deposit Ratio to 50.0% from the previous rate of 60.0%.
At the same time, regulatory constraints, such as the NIN-SIM linkage directive by the Nigerian Communication Commission (NCC), which led to the deactivation of non-complaint SIM cards, remained a downside factor to the growth of the ICT subsector.
Meanwhile,, the lackluster growth in the trade sector reflects the negative impact of tight financial conditions, currency depreciation and high inflationary pressures on trading activities.
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