What Nigeria’s Banking Sector Trend Means for Credit, Economy & Regulation

 

The recent financial results of Nigeria’s top five banks — Access Corporation, United Bank for Africa, Zenith Bank, First HoldCo and GTCO Holdings — reveal a striking trend: within the first nine months of 2025, these banks recorded ₦4.8 trillion in interest income from their combined investment in government securities and treasury bills. Their holdings jumped to about ₦49.152 trillion, up from ₦42.204 trillion at the end of 2024 — a rise of approximately 16.5%. On the other hand, growth in loans and advances to customers rose merely ~7.27% to ~₦42.26 trillion.

Why this matters? Because it tells us that banks are becoming more conservative with lending and more aggressive in capturing return from sovereign debt. The shift reveals three major areas of impact: credit availability, economic growth and regulatory oversight.

Credit availability: Banks’ slower loan growth signals that fewer funds are flowing into private-sector activity (businesses, individuals). For example, Zenith Bank’s loans dropped by 0.34%, Access grew 20%, UBA 3.51%, GTCO ~16.1% and First HoldCo ~8.98%. When major lenders pull back on credit, SMEs often feel it first, impacting investment, expansion and hiring.

Economic growth: A banking sector that favours securities over loans may result in less financing for productive sectors. While fixed-income investments boost bank profitability, the economy might lose momentum if credit to businesses is constrained. In developing economies, the banking-to-business link is critical: when banks are not lending, growth slows.

Regulatory oversight & market structure: The move by the Central Bank of Nigeria to migrate fixed-income trading and settlement to the S4 Real-Time Gross Settlement platform marks a major regulatory shift. The CBN will assume operation and regulation of the fixed-income market, previously overseen by the FMDQ Securities Exchange and the SEC. This centralisation could improve transparency and efficiency in the bond market — but also reshape margins, competition and the role of banks in the fixed-income space.

What does this all mean going forward? For investors, banks with large fixed-income holdings may appear more stable and profitable, offering strong returns. For businesses and individuals seeking credit, it may mean higher hurdles or reduced access — especially if banks maintain a conservative posture. For regulators and policy-makers, the challenge is to ensure that the banking sector remains both profitable and supportive of economic development.

In short, the ₦4.8 trillion in fixed-income earnings is a story of strategy, profit and shifting priorities. It’s a banking-sector pivot that has real consequences for Nigeria’s financial ecosystem. Monitoring how banks balance between investment income and credit expansion will be key in assessing the health of the economy and the banking system alike.