As foreign exchange gains that boosted Nigerian banks over the past two years begin to fade, financial experts say lenders are now racing to diversify their earnings. This shift comes as the banking sector transitions away from the extraordinary FX windfalls triggered by the 2023 harmonisation of the foreign exchange market. Analysts note that banks are increasingly turning to non-interest income streams to stay profitable in a cooling FX environment.
According to Meristem Securities’ November 2025 Banking Sector Highlights, the industry is heading toward a more “normalised” earnings period as the year winds down. Although growth in gross earnings is expected to moderate, analysts believe banks will continue to depend heavily on interest income, supported by the still-high Monetary Policy Rate of 27%. The Central Bank of Nigeria’s adjustment to the asymmetric corridor has also reduced banks’ borrowing costs, creating additional room for credit expansion.
With FX revaluation gains tapering off, banks are now intensifying efforts to grow fees, commissions, e-business revenues, and other digital-driven income. Data from the Nigerian Exchange shows that nine leading financial institutions generated about N2.81tn from various non-interest activities in the first nine months of 2025 — a 24.1% rise from the previous year. However, individual banks recorded mixed performances. While Access Holdings faced a dip in non-interest income due to FX losses, it saw strong growth in core banking fees. UBA and Wema Bank also reported sharp declines in FX gains but cushioned the impact through improved digital and operational income.
Monetary policy developments continue to shape the outlook. The CBN’s decision to maintain the benchmark interest rate at 27% and widen the asymmetric corridor has made borrowing cheaper for banks while reducing incentives to keep funds parked at the CBN. Analysts warn, however, that this liquidity will not necessarily translate into lower lending rates for businesses, as banks aim to meet regulatory loan-to-deposit ratios and manage credit risks. Nevertheless, institutions with strong low-cost deposits — such as Access Holdings, Stanbic IBTC, and Zenith Bank — remain well-positioned to preserve healthy interest margins.
Meanwhile, the CBN has confirmed that 16 banks have now met recapitalisation requirements. At the 2025 Parthian Economic Discourse, economist Bismarck Rewane highlighted a deeper shift in Nigeria’s financial landscape, warning that traditional banks are losing bargaining power to agile fintech players like OPay, Moniepoint, MoMo, and MTN. He noted that customers are becoming more price-sensitive and digitally savvy, forcing banks to prioritise efficiency and genuine value delivery. “The banking system lives on rent,” Rewane said, “but the client has changed — and the system must now change with them.”
source: Punch