Nigerian Banks Face Profit Headwinds: Revaluation Gains Fade, But Is It All Gloom?

Nigerian banks, long considered pillars of the nation’s economy, are navigating a challenging landscape. Recent reports indicate a concerning trend: a collective 14.9% dip in after-tax profit for the first nine months of 2025 among the Tier 1 banks. This decline, compared to the same period last year, raises questions about the sector’s immediate future. Remember the boom of 2024? A significant portion of that resulted from the naira revaluation. Those were one-off gains. They’re gone now, exposing underlying pressures.

Specifically, the combined profit after tax of FBN Holdings, UBA, GTCO, Access Holdings, and Zenith Bank slipped to N2.91 trillion. When you dissect the individual performances, the picture gets even more nuanced.

United Bank for Africa (UBA) emerged as the outlier. It managed to buck the trend with a modest 3% year-on-year profit increase. This begs the question: What is UBA doing differently? Is it a superior business model, better risk management, or perhaps a more effective approach to cost control? Whatever the secret, it deserves closer scrutiny.

In contrast, GTCO, the nation’s largest bank by market capitalization, experienced a steep 35.5% profit decline. That’s a substantial drop. FirstBank also saw its profit shrink, down 13%. Access Holdings, despite its size, exhibited relative stability with a smaller 2.2% decrease, while Zenith Bank’s earnings dropped by 8%. These variances highlight the inherent complexities within the Nigerian banking sector. It’s not a monolithic entity; each institution faces its unique set of circumstances.

The primary culprit for this downturn is the evaporation of those foreign exchange revaluation gains. In 2023, Nigerian banks reaped substantial benefits from the naira’s devaluation. It boosted their earnings significantly. However, the relative stability of the naira lately means these gains have dried up, impacting overall profitability. We knew this windfall wouldn’t last forever.

Augusto & Co., a credit rating agency, forecasts a further decline in profit before taxation for the full year 2025, along with a significant drop in pre-tax return on average equity. Yet, they anticipate a rebound in 2026, fueled by the ongoing recapitalization exercise and adjustments to account for increased impairment charges. That’s the crucial point here: This isn’t necessarily a death knell. It could be a temporary setback, a correction after an artificial high.

Analysts suggest that variations in performance stem from differing business models, operational efficiencies, and cost management strategies. Banks with exposure to high-growth segments or disciplined cost control seem to be weathering the storm better. On the other hand, those with higher risk-weighted assets or increasing loan impairments are feeling the pinch more acutely. Makes perfect sense.

The stock market hasn’t been kind to these banks either. Previously market darlings, banking stocks are now experiencing declines. GTCO, Access Holdings, Zenith, FirstHoldCo and UBA have all seen their stocks decrease lately.

So, what does all this signify for the future of Nigerian banks? I think it signals a period of recalibration. Banks need to shift their focus from relying on fleeting currency revaluation gains to building sustainable growth through core banking activities. Strong loan growth, diversified fee income, and efficient operations become paramount. They need to aggressively pursue new avenues for revenue generation, and that means investing in technology, expanding their customer base, and tailoring products to meet the evolving needs of the market.

Moreover, the recapitalization exercise could inject much-needed capital into the sector. This move would strengthen balance sheets and provide banks with the resources to pursue growth opportunities. Still, it’s not a magic bullet. How effectively banks deploy this capital will determine its ultimate impact.

This period of turbulence could also lead to consolidation within the sector. Smaller, less efficient banks may struggle to survive, potentially leading to mergers and acquisitions. This, in turn, could create larger, more resilient institutions capable of competing effectively in the global market.

The Central Bank of Nigeria (CBN) also has a role to play. It must create a stable and predictable regulatory environment that fosters innovation and growth. This includes providing clear guidelines on digital banking, fintech partnerships, and other emerging trends.

Nigerian banks have demonstrated resilience in the past, navigating economic downturns and regulatory changes. While the current challenges are significant, they also present an opportunity for the sector to reinvent itself, to become more efficient, more innovative, and more customer-centric. The coming year will be crucial in determining whether they can rise to the occasion. One thing’s sure: the Nigerian banking landscape is far from static. It will continue to evolve. Smart banks will adapt and thrive.

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Keywords: Nigerian banks profit, naira revaluation impact, UBA bank performance, bank stock decline, bank recapitalization Nigeria, CBN regulation banks, banking sector consolidation, Nigerian banking future