Key Points

• Financial sector contribution recorded a sharp annual decline.

• Banks weakened financial sector contribution in 2024.

• Insurance firms also slowed financial sector contribution.

The Nigerian financial sector saw its second straight quarterly drop in output. In the third quarter of 2025, banks, insurers, and other institutions added N1.512 trillion to the economy, which was 15% less than what they added in the first quarter of the year. The most recent figures from the National Bureau of Statistics’ GDP report show how much pressure the industry is under as lending slows and investment interest wanes in important parts of the economy.

The drop is part of the sector’s ongoing slowdown from one quarter to the next and is due to tighter liquidity, higher borrowing costs, and currency instability that have been affecting business activity since the start of the year.

Quarterly output keeps going down

The contraction started in the second quarter, when the sector dropped from N1.778 trillion in Q1 to N1.651 trillion in Q2, a drop of 7.1 percent. In the third quarter, the drop got worse, with output dropping another 8.4 percent to N1.512 trillion. This was one of the biggest quarterly drops the sector has seen in recent years.

Analysts say that the drop in two quarters shows that the industry is having trouble with slower credit growth, cautious consumer spending, and lower insurance uptake. Along with changes in regulations and a general tightening of liquidity, banks have had to adjust their balance sheets and tighten their risk controls.

Annual performance is still on the rise

Even though there have been problems every three months, the sector’s performance over the past year is still very good. From January to September, the finance and insurance industries added N4.94 trillion to the economy. This is a 16.8% increase from the same time last year, when they added N4.23 trillion. The industry also got a bigger piece of the national pie, going from 2.7 percent of GDP last year to 3 percent this year.

The yearly numbers show steady growth across all quarters. The sector grew 15% YoY to N1.778 trillion in Q1. In Q2, growth sped up to 16.1% year over year, and in Q3, it sped up even more with a 19.6% year-over-year increase to N1.512 trillion, even though the quarter saw a drop.

The outlook for the sector depends on credit conditions

Economists say that the difference between quarterly losses and annual gains shows that the sector is balancing short-term pressures with long-term structural strength. Digital payments, activity in the capital markets, and insurance coverage are all still growing, even though tight monetary conditions are slowing down quarterly growth.

The last three months of 2025 will show if the slowdown stops or gets worse. Analysts say that continued pressure on credit demand could make the downward trend last longer, but as the economy moves towards 2026, easing inflation and improving FX supply could help.