Nigeria’s top commercial banks are witnessing a significant slowdown in profit growth in 2025, as the exceptional gains from currency devaluation and soaring interest rates wane. Analysts say the sector’s earnings surge over the past two years—largely driven by external economic shifts—is now giving way to a more measured and organic performance pattern.
According to recent data from the Nigerian Exchange Limited (NGX), the combined after-tax profit of nine leading banks, including Zenith Bank, GTCO, First Holdco, Access Holdings, and UBA, rose modestly by 0.74% in the first quarter of 2025 to ₦1.35 trillion. This is a sharp contrast to the 274% profit jump recorded in the same period last year.
FX Gains Shrink, Core Banking Returns
The exceptional profit performance in 2024 was heavily influenced by two naira devaluations and a cumulative 875 basis-point hike in the Central Bank of Nigeria’s (CBN) benchmark interest rate. With the Monetary Policy Rate now at 27.5% and no further aggressive changes expected, the surge in interest income is tapering off.
Foreign exchange revaluation gains—previously a major driver—have also contracted significantly. The combined FX gains of six major banks dropped to ₦240.7 billion in Q1 2025, down from over ₦2.5 trillion the previous year, reflecting the relative stability of the naira, which now trades between ₦1,500 and ₦1,600 per dollar.
Interest Income Growth Levels Out
Interest income for the same group of banks grew by 52.7% in the first quarter—down from 137% in Q1 2024. Analysts note that with rates remaining high and stable, the explosive growth seen in previous quarters is unlikely to continue.
Ola A., a banking analyst based in Lagos, noted, “We are seeing the end of the interest rate-fueled income boom. Banks will now have to depend more on traditional sources of revenue.”
Return to Core Banking Activities
With FX and rate-driven profits receding, financial institutions are returning focus to their foundational services—such as deposit mobilisation, lending, and generating income through transaction fees and commissions.
Banks previously benefited from low-cost current and savings account deposits, which supported solid net interest margins. Now, they must find ways to maintain efficiency amid rising competition from digital banks and fintech platforms.
IT Spending Under Scrutiny
The shift to a leaner earnings environment has also raised questions about IT investment sustainability. GTCO, one of the banks that reported a 45% profit drop in Q1, also disclosed a decrease in tech spending from ₦14.4 billion to ₦12.8 billion year-on-year. First Holdco, which posted a 22% decline in profit, did not disclose its technology budget.
However, industry observers caution against slashing IT budgets. “Technology is central to banking operations,” said analyst Tony Brown. “If banks start cutting back in this area, it could hurt long-term profitability.”
Outlook: Slower, More Sustainable Growth
While banks are expected to still post positive results—with projected profit growth of 30–40% for the year—the era of triple-digit earnings growth appears to be over. With FX gains diminishing and interest income plateauing, profitability will increasingly depend on efficient operations, innovation, and customer retention.
The Nigerian banking sector now faces the challenge of adjusting to this “new normal”—a more competitive and digitized financial landscape without the cushion of currency shocks and policy-driven windfalls.
