While millions of Nigerians grapple with rising inflation and a weakened naira, commercial banks continue to report record-breaking profits highlighting a disconnect between the financial sector and the real economy.
Although experts have highlighted that these gains were largely fueled by foreign exchange (FX) windfalls and high-interest rates, they warn that the surge in banking profits underscored deep structural flaws in the economy. While banks benefited from monetary policies that favoured interest income and forex revaluation gains, businesses and households faced mounting economic pressures, including reduced purchasing power and high operational costs.
The disparity raises concerns about the long-term sustainability of Nigeria’s economic model, where financial institutions flourish while key sectors such as manufacturing and agriculture struggle with limited access to affordable credit, currency volatility, and policy uncertainties.
For the 2024 financial year, Zenith Bank, Guaranty Trust Holding Company (GTCO), United Bank for Africa (UBA), and Ecobank Transnational Incorporated (ETI) all posted remarkable earnings. Zenith Bank’s profit before tax (PBT) surged to N1.33 trillion, a 66.7 per cent jump from N795.96 billion in 2023. Similarly, GTCO recorded a 108 per cent increase, reaching N1.27 trillion, while UBA’s profit after tax grew 26.14 per cent to N766.6 billion among other banks who have posted significant gains.
Since the CBN floated the naira in 2023, financial institutions holding foreign-denominated assets have booked extraordinary profits. Additionally, rising interest rates have boosted net interest income, as banks charge more on loans while keeping deposit rates relatively low. Investment in high-yield government securities has also bolstered earnings.
However, David Adonri, Vice President at Highcap Securities, argues that this trend reveals fundamental weaknesses in Nigeria’s economic structure. He notes that the dominance of banks in profitability, rather than manufacturers or industrial firms, reflects an economy overly reliant on trade finance and importation.
“The FX windfall has significantly increased banks’ working capital, and the ongoing recapitalization exercise is further expanding their financial base, increasing their lending capacity,” Adonri explained. “But in a properly structured economy, producers of goods, not banks, should be the most profitable entities.”