Nigeria’s largest banks posted a sharp decline in combined profits for the 2025 financial year, even though their core earnings continued to expand, indicating growing pressure on margins across the sector.
A nairametrics’ analysis of Tier-1 lenders, commonly referred to as FUGAZ banks, showed that total profits fell by 18 per cent year-on-year. The decline was driven largely by a steep drop in foreign exchange income, which had previously provided a major boost to bank earnings. In 2024, many lenders benefited from windfall gains following currency devaluation. That effect faded in 2025, with combined FX income plunging by 53 per cent to N1.52 trillion from N3.22 trillion the previous year.
The reversal was widespread across the industry. While some banks, such as Access Holdings, still recorded growth in FX income, others saw dramatic declines. FirstHoldco’s FX earnings dropped by more than 90 per cent, while Zenith Bank Plc and GTCO also reported sharp contractions. In the case of UBA, FX gains turned into a net loss, underscoring the volatility of this income stream.
Beyond weaker FX performance, rising costs played a significant role in eroding profitability. Operating expenses across the banks climbed by over 29 per cent to N5.53 trillion in 2025, driven by higher depreciation, inflationary pressures, and expansion-related costs.
Some institutions recorded particularly steep increases in expenses. UBA and FirstHoldco saw cost growth of over 70 per cent and 36 percent respectively, while other major lenders also reported double-digit increases.
Loan impairments further weighed on earnings. Banks made higher provisions for potential credit losses, reflecting a tougher operating environment and the lingering effects of policy changes such as the expiration of regulatory forbearance measures.
Despite these pressures, the sector showed underlying resilience. Total assets across Tier-1 banks rose by over 10 per cent to N160.97 trillion, supported by continued growth in deposits and lending activity.
This suggests that while profitability has taken a hit, the core business of banking remains strong. Interest income and other operating revenues continue to grow, indicating sustained demand for financial services.
The 2025 performance highlights a shift in the earnings structure of Nigerian banks. With FX-related windfalls no longer cushioning results, profitability is increasingly tied to core operations and cost efficiency.
Analysts say the outlook will depend on how banks navigate inflation, manage costs, and adapt to a more stable but less windfall-driven foreign exchange environment.
Emmanuel Abara Benson is a business journalist and editor covering artificial intelligence, global markets, and emerging technology.
He has previously worked with Business Insider Africa and Nairametrics, reporting on finance, startups, and innovation.
His work focuses on AI, digital economy, and global tech trends.
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