Nigerian banks are getting into a section of slower revenue development in 2025, because the windfalls from naira devaluation and aggressive rate of interest hikes start to fade. With international alternate (FX) positive factors normalising and credit score growth nonetheless weak, the sector’s once-robust earnings momentum is exhibiting indicators of fatigue.

In accordance with knowledge from the Nigerian Trade Restricted (NGX), the mixed after-tax revenue of 9 main business banks—Zenith Financial institution Plc, Warranty Belief Holding Firm (GTCO) Plc, First Holdco Plc, Entry Holdings Plc, United Financial institution for Africa (UBA) Plc, Constancy Financial institution Plc, Wema Financial institution Plc, Stanbic IBTC Holdings Plc, and FCMB Group Plc—rose barely by 0.74% to ₦1.35 trillion ($847.3 million) in Q1 2025.

This can be a stark distinction to the 274.3% revenue development recorded in Q1 2024.

A lot of the document earnings final yr have been fueled by the federal authorities reform—similar to the 2 rounds of naira devaluation in July 2023 and January 2024, and a pointy enhance in curiosity earnings pushed by the Central Financial institution of Nigeria’s (CBN) aggressive financial tightening. The Financial Coverage Fee (MPR) rose by 875 foundation factors to 27.50% between July 2023 and Might 2025.

Now, as revenue development slows, analysts warn that underlying weaknesses in conventional banking capabilities—similar to mobilising deposits, issuing loans, processing funds, and incomes steady curiosity and charge earnings—are starting to floor.

“The period of irregular revenue development for the banks is over,” stated Tony Brown, an Abuja-based banking analyst. “Within the final two years, earnings have been pushed by exterior shocks. This yr, we’re seeing a return to extra natural and sustainable earnings patterns.”

Nonetheless, some development is anticipated. Mobifoluwa Adesina, an funding analysis analyst at Afrinvest West Africa Restricted, tasks after-tax revenue development of 30% to 40% for banks in 2025, though slower than in earlier years.

“We don’t count on any price cuts till the second half of 2025, and we forecast that the MPR will stay above 26% by year-end,” he stated. “Additionally, with the naira recording solely a 4.3% depreciation year-to-date, FX positive factors gained’t match the dimensions we noticed in 2024.”

Flattening earnings traces

The moderation in earnings is already evident in Q1 outcomes. FX revaluation positive factors—one of many key drivers of 2024 earnings—have lowered from earlier excessive ranges following relative stability within the naira. Knowledge from the CBN exhibits the common official alternate price rose to ₦1,450/$ in 2024 from ₦645.10/$ in 2023. Since January 2025, the naira has traded throughout the ₦1,500–₦1,600/$ vary.

“Volatility within the alternate price has dropped considerably—from over 4 p.c a yr in the past to lower than half of 1 p.c now,” CBN Governor Olayemi Cardoso stated on the three hundredth Financial Coverage Committee (MPC) assembly on Might 20.

In consequence, mixed FX revaluation positive factors for Zenith, GTCO, Entry, UBA, Constancy, and FCMB declined to ₦240.7 billion ($150.6 million) in Q1 2025 from ₦2.58 trillion ($1.6 billion) in 2024 and ₦723.9 billion ($453.8 million) in 2023.

Additionally, the MPR—held regular at 27.50% in Might—has begun to squeeze curiosity earnings development. The 9 banks posted curiosity earnings development of 52.7% in Q1 2025, down from a blistering 137.4% in the identical interval final yr.

“The development of excessive curiosity earnings is anticipated to plateau this yr with the CBN sustaining present charges,” stated Ola A., a Lagos-based banking analyst.

Conventional drivers reemerge

Earlier than the FX reforms and rate of interest shocks, banks relied extra closely on core income sources: charge and fee earnings from digital transactions, account upkeep charges, and commerce finance. 

In earlier years of decrease rates of interest, banks additionally loved low-cost funding—significantly by means of present and financial savings accounts (CASA)—which helped maintain wholesome web curiosity margins. These margins, outlined because the distinction between curiosity earnings earned on loans and investments versus curiosity paid on deposits relative to complete incomes property, have been a bedrock of profitability.

Considerations on IT spend

With revenue development slowing, considerations are rising about potential cutbacks in capital and operational expenditures, particularly round expertise investments. This comes at a time when competitors from fintechs and telco-backed digital banks is intensifying.

Of the 9 banks analysed, solely GTCO and First Holdco reported revenue declines of 45% and 22%, respectively, in Q1 2025. Whereas First Holdco didn’t disclose its IT spending, GTCO reported a year-on-year drop in expertise funding to ₦12.8 billion from ₦14.4 billion.

GTCO didn’t reply to a request for remark. 

Nevertheless, Brown emphasised that expertise stays a core expenditure for banks. “The banks’ complete service construction depends upon it. Whether or not you’re raking in billions or not, IT expenditure determines revenue development,” he stated.

Cautious outlook

With no main forex shocks or additional price hikes on the horizon, banks face a yr of reasonable returns and sharper value self-discipline. Whereas sturdy capital buffers and diversified earnings traces provide some resilience, the shift to a normalised earnings setting will take a look at how nicely banks can adapt.

For now, the times of record-breaking revenue declarations could also be over. The main target is shifting to how banks can keep relevance and aggressive energy in an setting of normalised earnings and rising digital competitors.