Two years into President Bola Tinubu’s administration, Nigeria’s banking sector has emerged as one of the biggest beneficiaries of its bold economic reforms aimed at stabilising the economy and achieving a $1 trillion Gross Domestic Product (GDP) target by 2030.
While many Nigerians—and especially businesses in the manufacturing sector—are reeling from double-digit inflation, high living costs, and record-high interest rates, the country’s banks have posted record profits, attracted renewed foreign investment, and cemented their position as key players in Nigeria’s economic growth.
“I must restate that the only alternative to the reforms our administration initiated was a fiscal crisis that would have bred runaway inflation, external debt default, crippling fuel shortages, a plunging naira, and an economy in a free-fall,” President Tinubu said in his second anniversary speech on Thursday. He acknowledged the pain caused by rising living costs but insisted that “we have made undeniable progress.”
Reform winds fuel capital inflows
While various sectors reel under pressure, the financial services industry is thriving. According to Nabila Mohammed, a research analyst at Chapel Hill Denham, banks are the biggest gainers from the reform-led environment of high interest rates and currency devaluation.
“The banks’ recapitalisation efforts, combined with these macroeconomic tailwinds, have helped revive foreign participation in the equity market—an interest that had been largely absent in recent years,” she said. “Notably, some of these foreign investors are now taking positions in banking stocks.”
Foreign capital inflows—driven by portfolio and foreign direct investments—jumped by 303.9% to $2.06 billion in January 2025, up from $0.51 billion in January 2023, according to the Central Bank of Nigeria (CBN). Data from the National Bureau of Statistics (NBS) further showed that the banking sector accounted for $1.12 billion (43.2%) of all capital imported in Q2 2024, rising from $194.6 million in the same period of 2023.
“The banking sector is one of the major instruments that could help the administration to achieve the target of a one trillion dollar economy by 2030,” Mohammed added.
In dollar terms, Nigeria’s GDP reduced from $476.5 billion in 2022 to $187.6 billion in 2024 due to naira devaluation, but real GDP growth hit a three-year high of 3.4% in 2024. Financial services were a major driver, expanding by a record 30.89%.
Record profits, FX gains, and a windfall tax
Data from the Nigerian Exchange Limited (NGX) show that the combined after-tax profits of nine top banks—including Zenith, GTCO, First Holdco, Access, UBA, Fidelity, Wema, Stanbic IBTC, and FCMB—rose to ₦4.79 trillion ($3 billion) in 2024, up from ₦1.19 trillion ($749.9 million) in 2022.
In Q1 2025 alone, profits jumped to ₦1.35 trillion ($847 million), nearly quadrupling from ₦358.9 billion ($226.2 million) in Q1 2023.
Aggressive monetary tightening played a major role. The CBN raised its Monetary Policy Rate (MPR) by 875 basis points to 27.5% between July 2023 and May 2025. Total bank interest income rose to ₦14.6 trillion ($9.2 billion) in 2024, from ₦6.61 trillion ($4.2 billion) in 2022.
The average official exchange rate also ballooned to ₦1,450/$ in 2024 from ₦645/$ in 2023, generating a combined ₦2.58 trillion ($1.6 billion) in FX revaluation gains for banks with foreign currency assets, up from ₦723.9 billion ($454 million) a year earlier.
GTCO and Zenith crossed ₦1 trillion ($630.1 million) in profit for the first time
Among the major lenders, GTCO and Zenith Bank made history last year by posting over ₦1 trillion in after-tax profits for the first time since their establishment in 1990. Zenith Bank led the pack with ₦1.03 trillion, closely followed by GTCO with ₦1.02 trillion.
“The bank’s impressive performance reflects effective management and pricing of risk assets, as well as an optimised treasury portfolio—reinforcing its position as a leader in Nigeria’s banking industry,” said Adaora Umeoji, group managing director/CEO of Zenith Bank, in a recent statement.
Segun Agbaje, group CEO of GTCO, noted that the bank had proactively strengthened its balance sheet. “We have prudently provided for all our forbearance loans, well ahead of the June 2025 timeline, while fully accruing for the windfall tax. This has further enhanced our financial resilience.”
The surge in profitability across the sector prompted the federal government to propose a one-off windfall tax on bank earnings, with proceeds earmarked for infrastructure, healthcare, education, and social welfare. In 2024, nine top banks, including GTCO and Zenith, paid a combined ₦313 billion ($197.2 million) in taxes.
However, some industry analysts have raised concerns about the strain this could place on the sector.
“Despite posting bumper profits and emerging as major beneficiaries of the reforms, the windfall tax places a significant burden on banks,” said Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), a business advocacy group. “At the same time, their ability to support the real sector has been constrained by the high Cash Reserve Ratio (CRR), which currently stands at 50%.
Recapitalisation and investor confidence
In March 2024, the CBN mandated all banks to increase their capital bases by March 2026. This directive triggered a new wave of capital-raising and consolidation in the sector. So far, GTCO, Access, Zenith, Fidelity, and FCMB have collectively raised ₦1.27 trillion ($800.3 million) in the first phase of their recapitalisation programs.
The sector’s strong financial performance has also lifted investor sentiment. The NGX banking index has more than doubled, reaching 1,164.3 points as of May 28, 2025, compared to the same period in 2023.
Rising fintech pressure prompts tech investments
Traditional banks are also increasing technology spending to counter growing competition from top fintech players such as OPay, PalmPay, and Moniepoint.
In 2024, six major banks spent a combined ₦268.7 billion ($171.5 million) on IT and digital infrastructure, up 74.5% from ₦153.8 billion ($98.2 million) in the previous year. The bulk of that investment went into core banking upgrades and digital platforms as lenders seek to improve customer experience and back-end efficiency.
Cost pressures mount despite strong earnings
Despite strong top-line performance, banks are grappling with rising operational costs. Operating expenses jumped 76.1% to ₦4.42 trillion ($2.7 billion) in 2024, driven by inflation, FX pressures, and elevated energy and infrastructure costs.
The depreciation of the naira—averaging ₦1,450/$ in 2024—has also eroded capital buffers and increased the cost of foreign-denominated liabilities.
High interest rates are another constraint. Lending has slowed as borrowing costs soared, hurting businesses, especially manufacturers. According to the Manufacturers Association of Nigeria (MAN), the average lending rate climbed to 35.5% in 2024, up from 28.1% in 2023.
“Consequently, manufacturers’ finance costs totaled ₦1.3 trillion ($819.2 million), constraining investment and expansion plans,” said Segun Ajayi-Kadir, Director-General of MAN, in the association’s 2024 economic review.
Outlook: The end of easy profits?
With inflation moderating to 23.7% in April and no major devaluation or rate hikes on the horizon, banks may be heading into a period of more modest returns. While strong capital buffers and diversified earnings provide resilience, maintaining profitability amid tighter margins and rising competition will be the next big test.
“The naira has seen some stability with only 4.3% depreciation year-to-date. As such, we don’t see banks doing as much FX gains as they did in 2024,” said Mobifoluwa Adesina, an investment research analyst at Afrinvest West Africa Limited.
For now, banks remain central players in the Tinubu administration’s economic experiment—but the era of windfall profits may be giving way to one of sharper strategy and efficiency.
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