As the massive foreign exchange gains that banks enjoyed in the wake of the harmonisation of the FX market dry up, market watchers say lenders are actively seeking ways to open up other non-interest channels.
This was part of the outlook projected by experts at Meristem Securities in their monthly Banking Sector Highlights for November 2025.
The PUNCH reports that President Bola Tinubu, weeks into his administration in 2023, harmonised segments of the FX market, which led to a significant depreciation in the value of the naira and resulted in a boon for banks in terms of FX revaluation gains. The National Assembly thereafter imposed a windfall tax following the amendment of the Finance Act 2023. The PUNCH reported that six banks paid about N205.59bn as windfall tax in the 2024 financial year.
On the outlook for the banking sector, Meristem said, “As the 2025 FY period wraps up in December, we expect the pace of growth in banks’ gross earnings to moderate further as the sector fully transitions into a normalised earnings environment. Growth will, however, remain largely driven by interest income, as banks continue to leverage the still-high interest rate (MPR at 27.00%).
This will be supported by the capacity for balance sheet expansion following the widening of the asymmetric corridor to +50/-450 bps from +250/-250 bps. This adjustment lowers banks’ effective borrowing cost at the CBN and strengthens their ability to extend credit to the real economy.
“Beyond interest income, we acknowledge that more banks are making efforts to grow their non-interest income, especially after the extraordinary FX gains made in the last two years as a result of the naira devaluation and depreciation. The ability to grow non-interest components like fees and commissions, hinged on increased demand and the impact of digitalisation, would help boost the non-interest revenue stream.”
The PUNCH had reported that at the end of the third quarter of 2025, nine financial institutions made about N2.81tn from account maintenance charges, commissions on collections, e-business, and other fees. This figure represents about a 24.10 per cent increase from the N2.27tn earned in the same period of the previous year.
A look at the nine-month results of the financial institutions filed with the Nigerian Exchange Limited indicated that Access Holdings recorded a slight dip in non-interest income by 2.32 per cent YoY to N996.86bn. FX revaluation loss (-53.43 per cent YoY to N255.40bn) weighed on non-interest income performance. However, strong growth in other operating income (+110.31 per cent YoY) and fees and commission income (+49.53 per cent YoY), as the bank continues to focus on core banking operations, provided support.
For Sterling Financial Holding Company, Meristem said that the growth recorded in its fees and commission income, which grew by +17.12 per cent YoY, and trading income, which expanded significantly (+78.19 per cent YoY), more than offset FX revaluation losses of N1.88bn that the company suffered. It was a similar scenario at United Bank for Africa, where non-interest income fell to N488.63bn from N599.11bn in 9M:2024, mainly due to an 83.34 per cent YoY decline in FX revaluation gains.
“This sharply suppressed trading performance, with net trading income down 77.34 per cent YoY, reversing last year’s FX-driven windfall,” said the analysts.
At Wema Bank, as of September 2025, FX revaluation gain declined by -70.21 per cent YoY to N4.23bn, contributing largely to the dip in other income, which fell by 58.03 per cent YoY.
Analysing the impact of the decisions of the Monetary Policy Committee of the Central Bank of Nigeria, which includes holding the benchmark rate at 27 per cent, the experts said, “The revised asymmetric corridor places the Standing Lending Facility at 27.50 per cent (down from 29.50 per cent), meaning banks now borrow from the CBN at a lower cost. At the lower band, the Standing Deposit Facility now stands at 22.50 per cent, offering less incentive for banks to park liquidity with the CBN. We believe that some banks may still opt to place funds with the CBN, as the SDF rate remains meaningfully above prevailing yields in the fixed-income market (c.16.00%). The removal of the N3.00bn cap further enhances its appeal, especially for banks prioritising risk-free returns.
“Although the liquidity expansion gives banks additional capacity to extend credit, it is unlikely to translate into a significant reduction in lending rates to the real sector. Loan pricing is expected to stay elevated as banks work to meet the 50 per cent loan-to-deposit ratio requirement while keeping non-performing loan levels in check. The high-interest-rate environment is expected to continue to bolster banks’ earnings through interest income, though at more normalised levels. In 9M:2025, banks like Access Holdings, Stanbic IBTC Holdings, and Zenith Bank maintained current account and savings account ratios above 60.00 per cent, providing a buffer for net interest margins against mild yield compression. This strong, low-cost funding base also enhances their flexibility to channel liquidity into additional lending or interbank placements amid the more accommodative policy corridor.”
Meanwhile, the CBN has confirmed that 16 banks have now met the recapitalisation requirements, higher than the 14 from the September meeting of the MPC.
The Managing Director of Financial Derivatives, Bismarck Rewane, has warned that the banking sector is experiencing a shift. Speaking at the recently held 2025 Parthian Economic Discourse in Lagos, Rewane said:
“The bargaining power of the banking system is getting weaker and weaker. You have this Chinese OPay and Moniepoint. If you look at advertising slots at peak hour, 10 and 11 o’clock news, you are more likely to see Victor Osimhen and Moniepoint than you see X bank. It tells you something. You are more likely to see MoMo and MTN, and it’s not coincidental. Nothing happens by accident. It’s because of the kind of money that’s being made, money to be made, and more money to be made. The banking sector is going through a change to make it more efficient. The banking system lives on rent, just like downstream petroleum, on rent extensively from allocating to round-tripping and all sorts of things. So, it’s now about efficiency and how to deliver value to the client, and the client has become very sophisticated and resistant to increases.”
PUNCH.
