By Everest Amaefule

Tuesday, 18 Jan 2011

The contribution of the banking sector to the nation’s economy in 2010 was subdued, the World Bank has said.

The World Bank, which stated this in its “Global Economic Prospects for 2011,” attributed the subdued contribution of the banking sector to the economy to ongoing restructuring and cleansing of the sector by the Central Bank of Nigeria.

The bank said, “The contribution from the banking sector was more subdued, due to restructuring following the clean-up in 2009.

“The agriculture sector benefited from favourable weather and the increasing commercialisation of the sector. And robust activity in services, particularly, telecommunications and public and private construction activities supported growth.

“The relative peace in the Niger Delta region has boosted crude oil and natural gas production, while the non-oil sector has continued to grow strongly.”

On sub-Saharan Africa, the bank said that part of the recent resilience in the region reflected in the implementation of counter-cyclical domestic demand policies in a number of countries.

Many countries with adequate fiscal space like Kenya, Nigeria and Tanzania, went ahead with infrastructure programmes despite the crisis, in part because of multilateral and bilateral budgetary support, the bank added.

The report said, “Developing countries face three main short-term risks – tensions in European financial markets, large and volatile capital flows, and a rise in high food prices.

“Full-scale financial turmoil, while viewed as unlikely, could threaten recovery in developing as well as developed countries. With so much at stake, regulators and international policymakers are determined to avert such an outcome.

“Capital flows to developing countries picked up in 2010, in part because persistent low interest rates in certain high-income countries led investors to seek higher yield in developing countries.”

The report said that net international equity and bond flows to developing countries rose sharply in 2010, rising by 42 per cent and 30 per cent respectively, with nine countries receiving the bulk of the increase in inflows.

Foreign direct investment to developing countries rose by 16 per cent in 2010, reaching $410bn after falling 40 per cent in 2009, the report said.

It attributed the rebound partly to rising South-South investments, particularly originating in Asia.

Source: Punch