Nigeria’s Banks Lose Their Crown as Profits Fall 16%

NIGERIA · MARKETS

Nigerian banks lost their crown as Africa’s standout profit story in 2025, with combined earnings at the biggest lenders down 16.4%. As currency windfalls faded, Nigeria became the only major African banking market where profits fell while peers across the continent kept growing.

What the numbers show

A BusinessDay analysis of full-year results from Nigeria’s largest lenders found combined profit after tax fell 16.4% to 2.24 billion dollars in 2025, from 2.68 billion a year earlier. The group covers United Bank for Africa, Access Holdings, Zenith Bank, Guaranty Trust Holding Company and First HoldCo.

In local currency the slide was just as real, with tier-one earnings dropping to 3.2 trillion naira from 4.12 trillion. The fall followed a 38.1% contraction in 2024, a sharp reversal after profits had surged 116.5% in 2023.

“The era of abnormal profit growth for banks is over,” Tony Brown, an Abuja-based banking analyst, told the newspaper. The boom, in other words, was always borrowed time.

Why Nigerian banks boomed, then cooled

The record years were built on two unusual forces. When the naira was floated and slid sharply, banks booked large paper gains on their foreign-currency assets, and a steep rise in interest rates widened the margin between what they paid and what they earned.

The central bank had lifted its benchmark rate by 875 basis points between July 2023 and May 2025, to 27.5%. That pushed yields up across the financial system and handed lenders a windfall.

Both forces have now weakened. The naira has steadied after its wild swings, leaving little room for fresh revaluation gains, while the central bank has begun cautiously cutting rates, squeezing future margins.

A regulatory clean-up bites

A second, quieter shift came from inside the system. The central bank withdrew the regulatory forbearance that had let banks defer recognising soured loans, forcing them to face the losses at last.

The effect was immediate. Provisions for bad loans across the major lenders jumped to 2.42 trillion naira in 2025, from 1.65 trillion a year earlier, eating directly into the bottom line.

Why African peers pulled ahead

Elsewhere on the continent, banks leaned on steadier ground. Kenya’s leading lenders grew combined profit 28.9%, while South Africa’s big four lifted earnings 14.9% to 6.25 billion dollars.

Morocco’s biggest banks added 13.9% and Egypt’s 4.4%, helped by fee income, digital services and regional expansion rather than one-off currency swings. Currency itself was a divider: the African Development Bank notes that 28 African currencies strengthened against the dollar last year, lifting profits once converted.

For an outside investor, the lesson is that the source of a profit matters as much as its size. Earnings driven by stable economies tend to last longer than those conjured by a currency shock.

A turning point, not a collapse

It helps to read the drop as a return to normal rather than a breakdown. The bumper years were the product of a wrenching reform programme, not of steady growth.

Since 2023, Nigeria has floated the naira and scrapped a costly fuel subsidy, moves that jolted the economy and, for a time, gilded bank balance sheets. As those shocks settle, the distortions that flattered profits are washing out.

Many lenders also raised fresh capital last year to meet tougher minimum requirements. Putting that money to work in loans, rather than parking it in high-yield government paper, is the test of whether they can grow the hard way.

What comes next

Nigerian banks remain among the most profitable in Africa, and few expect a lasting slump. Analysts see a gradual recovery as some lenders write back earlier provisions and put freshly raised capital to work in new lending.

The harder task is proving the earnings can grow without a currency crisis to power them. The next chapter for the sector will be written in core banking: asset quality, efficiency, digital services and expansion across the region.

That regional story is already under way. Nigerian groups such as UBA and Access run branches across much of Africa, and their reach gives them room to grow even when the home market cools.

For now, the standout profit story has simply moved on. Investors hunting bank earnings in Africa are looking east and south as much as they once looked to Lagos.

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