Nigerian banks are set to witness a sharp decline in their earnings in the full year of 2025 as foreign exchange revaluation gains that have bolstered profitability over two years slow.
Lenders in Africa’s top crude producer have been the most beneficiaries of the country’s unification of the exchange rate and the subsequent floating of the naira to be more market-determined as eight leading banks cupped N754.8 billion in FX revaluation gains in 2023, up 472.3 percent from N132 billion recorded in the prior year.
But the rare calmness of the naira that has suffered more than 70 percent devaluation means lower revaluation gains and an overall decline in earnings for the lenders.
“We expect a 19.2 percent decline in profit before taxation with the pre-tax return on average equity plummeting to 27.3 percent (FY 2024: 48.2 percent) in FY 2025,” Augsto&Co, a Lagos-based credit rating agency said in its recent banking industry report.
The research and consultancy firm, however, sees a rebound in 2026, supported by the ongoing recapitalisation exercise and the impact of the uptick in the impairment charge.
Banks’ total assets to hit N242.3trn as liquidity ratio seen at 60%
The banking industry’s total assets are projected to hit N242.3 trillion ($151.4 billion ) by the end of 2025, expanding by 44.9 percent from N186.6 trillion ($121.5 billion), underscoring the banks’ resilience amid macroeconomic headwinds.
Despite the funding pressure from the prevailing high-interest rate environment and the contractionary stance of the monetary authority, the banking industry remained resilient with a 59.4 percent liquidity ratio last year compared to 43.5 percent recorded in 2023.
“We believe the liquidity ratio will exceed 60 percent by FYE 2025, supported by favourable, albeit declining, yields on treasury securities. In our view, banks will accelerate the adoption of innovative funding strategies, as reflected in the uptick in commercial paper issuances, to moderate the impact of the funding pressures,” Augusto&Co said in its report.
Read also: What to expect from Nigerian banks before end of FY 2025
Banks as well as other corporates are turning to commercial papers to source finances for their operations in a bid to take cover from the record high interest rate environment.
In the first seven months of 2025, commercial papers amounting to about N750 billion were issued by various players with Augusto&Co seeing that number rising further particularly as the prevailing yields gradually moderate in the latter part of the year.
N900bn to be injected ahead of 2026 capital rule
The banking industry is expected to inject not lesser than N900 billion into the sector ahead of the 2026 first quarter deadline of the the minimum paid-up capital.
“We anticipate the injection of an additional N900 billion as a significant number of banks strive to comply with the minimum capital directive before 31 December 2025. Thus, providing additional capital buffer for current business risks and near-term growth plans,” Augusto&Co said.
According to the report, about N1.7 trillion was raised by 16 banks in the full year of 2024 while N800 billion was raised in the first seven months of 2025 as many await the approval of the central bank.
Most of the capital raised by the banks in the last 19 months were from domestic investors, reflecting the acceptability of the industry by Nigerians.
As it stands, eight banks have complied with the minimum paid-up capital directive as of 31 July 2025, ahead of the 31 March 2026 deadline. However, the mandatory verifications by the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC) are pending on some of the capital raised.
