Nigeria’s Banking Profit Boom Fades as Earnings Drop, While African Rivals Surge Ahead
Nigeria’s banking sector, once celebrated as one of Africa’s strongest profit engines, is entering a new phase marked by slowing growth and increasing pressure on earnings. After enjoying two years of record-breaking profits driven by naira devaluation gains and high interest rates, the country’s largest banks are now experiencing a noticeable slowdown. New financial results show that combined profit after tax for major lenders, including UBA, Access Holdings, Zenith Bank, GTCO, and First HoldCo, fell by 16.4 percent in 2025, highlighting a significant shift in the industry’s performance.
The decline stands in sharp contrast to developments across the rest of Africa. While Nigerian banks struggled to maintain momentum, lenders in Kenya, South Africa, Egypt, and Morocco continued to expand their earnings. Kenya emerged as one of the strongest performers, recording nearly 29 percent profit growth among its leading banks, while South Africa’s largest financial institutions posted a 14.9 percent increase in earnings. This growing gap has positioned Nigeria as the only major African banking market to record an earnings contraction, raising questions about the sustainability of its recent banking success story.
Industry experts say the slowdown was inevitable. For much of 2023 and 2024, Nigerian banks benefited from extraordinary foreign exchange revaluation gains following the sharp depreciation of the naira, alongside aggressive interest rate hikes by the Central Bank of Nigeria (CBN). These factors significantly boosted revenues and profitability. However, with the naira becoming more stable and the CBN beginning to ease monetary policy, many of those exceptional gains have disappeared, forcing banks to rely more heavily on their core operations to generate income.
Adding to the challenge is the end of regulatory forbearance, which has compelled banks to recognize previously delayed loan losses. As a result, impairment charges across major lenders surged to N2.42 trillion in 2025, up from N1.65 trillion the previous year. Analysts note that these provisions are now weighing heavily on profitability, as banks adjust to stricter financial reporting standards and confront credit risks that had previously been deferred. The shift marks a return to more realistic earnings levels after years of unusually high profits fueled by economic disruptions.
Looking ahead, the future of Nigeria’s banking sector will depend less on currency swings and more on traditional banking strengths such as asset quality, operational efficiency, digital innovation, and regional expansion. Although profitability remains among the highest on the continent, investors are increasingly favoring markets where growth is supported by stable economic conditions rather than temporary policy-driven gains. While analysts expect a gradual recovery as banks deploy fresh capital and benefit from sustained lending activities, the industry may continue to face short-term pressure as African competitors capitalize on stronger currencies, healthier economic environments, and faster earnings growth.
source: Business day