Nigeria’s banking sector faces a shifting outlook as a recent report by S&P Global projects tighter margins, higher capital requirements, and evolving regulatory conditions in 2026. Despite these pressures, lenders are still expected to remain profitable, supported by structural strengths such as demographics, transaction growth, and improving capital frameworks.
In this interview, Akin Adegoke, chief digital officer at Lotus Bank, explains how balance-sheet discipline, digital transformation, and risk-aligned pricing can help banks sustain earnings and expand market share. BusinessDay’s Chinwe Michael brings excerpts.
S&P expects margin pressure. How can banks offset compression?
Margin compression is cyclic, but disciplined balance-sheet management remains important over the long term. Banks may need to pay closer attention to asset-liability alignment, review tenor structures, and deepen low-cost retail deposits.
A stronger focus on value-based financing terms and capital-efficient lending could cushion potential pressure. Institutions that understand their cost of funds at a granular level and price risk appropriately will protect spreads better than those chasing expansion.
How will higher capital requirements reshape lending and returns?
Higher capital requirements are likely to encourage more measured risk-taking across the sector. We may see more selective underwriting and broader portfolio diversification in more volatile segments. Return on equity may decline in the near term due to capital dilution, but stronger capital buffers can support more sustainable returns over time.
What risks could emerge as regulatory forbearance ends?
Stress may surface first among firms exposed to currency volatility, import-dependent businesses and smaller companies with thin liquidity. Early indicators will show up in rising delinquencies before non-performing loan ratios increase.
Can digital transformation offset weaker interest income?
Yes, if it is executed strategically. Digital platforms reduce operating costs, improve credit analytics and unlock new revenue streams. Efficiency gains and higher transaction volumes can raise total earnings, not just shift revenue sources.
S&P expects fee and commission income to drive growth. Which digital products or payment channels will generate the largest incremental revenue over the next 12–18 months?
Real-time payments, merchant acquiring, agency networks, and cross-border digital transfers are likely to remain important contributors. SME-focused digital collections and embedded finance partnerships are also gaining traction. Revenue growth may be driven more by higher transaction volumes and deeper ecosystem integration than by pricing changes alone.
How can banks strengthen capital buffers without slowing lending to businesses and households that already face tight credit conditions?
Banks don’t have to limit financing to stay safe. They can be smarter about spreading risks, keeping more of their profits, and partnering on investments or trade deals. Using better information and technology, they can help people and businesses grow while still keeping the bank secure.
With your wealth of experience, what overlooked opportunity could allow Nigerian banks not just to withstand regulatory pressure in 2026 but actually expand market share?
Nigerian banks could grow market share in 2026 by offering simple, useful services. Easy payments, small loans, and savings tools. Expand to where our customers live, shop, and work.
