In 2024, Nigeria’s commercial banking sector delivered a stellar performance, riding a wave of high interest rates and strategic asset deployment to post record-breaking profitability. With foreign exchange reserves steady at
38.56billionandthenairatradingat₦1580.44/38.56 billion and the naira trading at ₦1580.44/
38.56 billion and the naira trading at ₦1580.44/in the NFEM window, the Central Bank of Nigeria’s (CBN) aggressive monetary tightening—raising the monetary policy rate (MPR) by 800 basis points to 27.5%—created a high-yield environment that banks skillfully leveraged. The result? A 53.5% surge in combined post-tax profit to ₦4.8 trillion for 10 major publicly listed banks, up from ₦3.1 trillion in 2023, driven by a 122% spike in interest income to ₦15.1 trillion and gains from repriced foreign exchange assets.
A Year of Strategic Expansion
Banks capitalized on the high-interest rate environment by channeling funds into customer loans, which grew 38% year-on-year to ₦51.4 trillion, and high-yielding fixed income instruments and interbank placements. Total deposits soared by 35.6% to ₦111.9 trillion, reflecting robust deposit mobilization. Combined asset value also surged by 50.5% to ₦17.9 trillion, underscoring the sector’s growth momentum. The National Bureau of Statistics (NBS) reported that the banking sector grew by 30.9% in real terms, contributing 42% to Nigeria’s 3.4% real GDP growth in 2024 and accounting for 5.01% of the economy with a nominal value of ₦13.7 trillion.
The sector’s resilience was further evidenced by an improved average Return on Average Equity (ROAE), which rose to 31.3% from 30.9%, reflecting banks’ ability to generate stronger returns on shareholders’ funds. The average capital adequacy ratio (CAR) also climbed to 22.3% from 19.5%, bolstered by recapitalization efforts to support the CBN’s $1 trillion economy initiative. However, challenges persisted, with the average non-performing loan (NPL) ratio rising to 4.5% from 4.1%, signaling increased loan impairments amid aggressive lending.
Why the Banking Sector Matters
As a cornerstone of Nigeria’s economy, the banking sector drives growth through financial intermediation, innovation, and inclusion. Its 2024 performance highlights its pivotal role in economic expansion, but scrutiny of cost efficiency, financial stability, and prudential soundness remains critical, given banks’ stewardship of public funds. Nairametrics Research ranked the top-performing banks based on key metrics, including profit growth, asset growth, ROAE, deposit and loan growth, cost-to-income ratio, CAR, and NPL ratio.
Top Performers in 2024
1. Wema Bank claimed the top spot, excelling in asset growth (60% to ₦3.59 trillion) and profitability, with post-tax profit soaring 140% to ₦86.28 billion. Its ROAE jumped to 43.6% from 32.4%, while the NPL ratio improved to 3.9% from 4.3%. Cost efficiency also improved, with the cost-to-income ratio dropping from 64.4% to 56.2%.
2. Fidelity Bank secured second place, boasting the highest profit growth at 179.6% to ₦278.1 billion and a remarkable ROAE increase to 41.7% from 26%. Deposits grew 47.9% to ₦5.9 trillion, and CAR rose to 23.5% from 16.2%, while the NPL ratio fell to 3.1%.
3. FBN Holdings ranked third, driven by a 61% surge in deposits to ₦17.2 trillion, a 115% increase in post-tax profit to ₦663.5 billion, and a 57% rise in total assets to ₦26.5 trillion.
4. Zenith Bank took fourth, with customer loans up 52% to ₦9.97 trillion and post-tax profit rising 52.6%. Its CAR improved to 25.6% from 21.7%.
5. GTCO rounded out the top five, achieving an 88.6% profit increase to ₦1.02 trillion and a standout CAR rise to 39.3% from 21.9%, though its NPL ratio ticked up to 5.2%.
Market Dynamics and Challenges
The Treasury Bills market reflected the high-rate environment, with stop rates in OMO auctions rising sharply to 23.77% and 23.98% for 182-day and 210-day tenors, respectively. The Primary Market Auction saw ₦1.17 trillion in subscriptions for ₦500 billion offered, with the 364-day bill yield dropping slightly to 19.56%. Despite robust liquidity (₦431.87 billion), the interbank rate of 26.92% underscored the elevated cost of capital.
While profitability soared, the uptick in NPLs highlights risks tied to aggressive lending in a high-rate environment. Banks’ ability to balance growth with prudential stability will be crucial as they navigate recapitalization mandates and economic uncertainties.
Looking Ahead
Nigeria’s banking sector in 2024 demonstrated remarkable resilience, leveraging high interest rates and FX gains to deliver record profits and fuel economic growth. With innovation, financial inclusion, and strategic risk management at the forefront, the sector is well-positioned to support Nigeria’s ambitious economic goals. However, maintaining cost efficiency and managing loan quality will be critical to sustaining this momentum in 2025 and beyond. As Wema Bank and its peers continue to set the pace, the sector’s ability to adapt to evolving challenges will define its role in Nigeria’s economic future.
