Financial institutions across Nigeria are intensifying efforts to cultivate sustainable, non-interest income streams, as the extraordinary foreign exchange revaluation gains that boosted profits in recent years have significantly faded, according to a new sector analysis.
This strategic pivot was outlined in the November 2025 Banking Sector Highlights report by investment firm Meristem Securities. The shift marks a transition towards a normalized earnings environment after a period of windfall profits triggered by the harmonization of the foreign exchange market segments in 2023. That policy, enacted early in President Bola Tinubu’s administration, led to a sharp depreciation of the naira, resulting in substantial FX revaluation gains for banks. These gains were later partially reclaimed by the government via a windfall tax, with six banks reportedly paying approximately N205.59 billion under the amended Finance Act 2023 for the 2024 financial year.
Meristem projects that while overall gross earnings growth will moderate, it will continue to be “largely driven by interest income,” supported by the prevailing high Monetary Policy Rate of 27.00%. A key recent development is the Central Bank of Nigeria’s (CBN) adjustment of the asymmetric corridor around the MPR to +50/-450 basis points from +250/-250. This change lowers banks’ effective borrowing costs from the CBN and enhances their capacity for balance sheet expansion and credit extension.
“Beyond interest income, we acknowledge that more banks are making efforts to grow their non-interest income,” the Meristem analysts stated. They emphasized that boosting components like fees, commissions, and digital banking services is crucial for diversifying revenue away from the volatile FX gains of the past two years.
Industry data appears to validate this trend. By the end of the third quarter of 2025, nine listed financial institutions collectively generated about N2.81 trillion from account maintenance charges, e-business, commissions, and other fees—a 24.10% increase from the N2.27 trillion recorded in the same period of 2024.
However, the decline in FX gains is visibly impacting bottom lines. Access Holdings, for instance, saw a 2.32% year-on-year dip in non-interest income to N996.86 billion in the first nine months of 2025, weighed down by a 53.43% plunge in FX revaluation gains. Similarly, United Bank for Africa’s non-interest income fell to N488.63 billion from N599.11 billion, primarily due to an 83.34% collapse in FX revaluation income. Wema Bank also reported a 70.21% annual decline in FX revaluation gains.
Sterling Financial Holding Company managed to offset its N1.88 billion FX revaluation loss with robust growth in fees and commission income (+17.12%) and trading income (+78.19%).
The Meristem report also analyzed the implications of the Monetary Policy Committee’s latest decisions. The revised asymmetric corridor sets the Standing Lending Facility at 27.50%, reducing the cost for banks to borrow from the CBN. Conversely, the Standing Deposit Facility rate is now 22.50%, which analysts note remains attractive compared to yields in the fixed-income market, encouraging some banks to park liquidity with the central bank for risk-free returns.
Despite increased lending capacity, the report cautions that lending rates are unlikely to fall significantly as banks strive to meet the 50% loan-to-deposit ratio requirement while managing non-performing loan levels. The high-interest environment is thus expected to continue supporting interest income.
In a related development, the CBN confirmed that 16 banks have now met its recapitalization requirements, an increase from the 14 reported at the September MPC meeting, signaling ongoing consolidation of the sector’s capital base.
