The banking industry is entering a new phase—one defined less by extraordinary currency-related gains and more by the need to rebuild sustainable revenue streams. Analysts say Nigerian banks are increasingly turning toward non-interest income opportunities as the Banks Reassess Revenue Strategies as FX Windfalls Fade and Competition Intensifies wave of foreign exchange revaluation gains recedes.
This outlook formed part of Meristem Securities’ Banking Sector Highlights for November 2025, where experts noted that the sector is adjusting to a “normalised earnings environment” after two years of FX-driven volatility. The shift traces back to President Bola Tinubu’s 2023 decision to harmonise the segments of the FX market. The policy triggered a steep depreciation of the naira and delivered exceptional revaluation gains to the banking sector—gains significant enough to prompt the National Assembly to impose a windfall tax under the amended Finance Act 2023. By 2024, six banks had remitted about N205.59bn in windfall taxes.
A More Temperate Earnings Landscape
Meristem projects that as the 2025 financial year winds down, growth in gross earnings will moderate. Interest income is expected to remain the primary driver, buoyed by persistently high rates, with the Monetary Policy Rate steady at 27 per cent.
The analysts highlighted that the widening of the asymmetric corridor to +50/–450 basis points will support balance-sheet expansion. The adjustment effectively lowers banks’ borrowing costs at the CBN and provides additional room to extend credit to the real economy.
However, with FX gains now subdued, banks are paying closer attention to non-interest avenues such as fees, commissions, and digital transaction income. Meristem notes that the expansion of digital channels and rising customer activity should continue to bolster these revenue lines.
Indeed, filings on the Nigerian Exchange for the first nine months of 2025 show that nine financial institutions generated about N2.81tn in non-interest revenue—a 24.10 per cent increase over the N2.27tn recorded in the same period of 2024.
How Individual Lenders Are Faring
The banks’ performances suggest a sector-wide realignment.
- Access Holdings posted a 2.32 per cent decline in non-interest income, largely due to a 53.43 per cent drop in FX revaluation gains. Still, stronger operating income and substantial growth in fees and commissions helped offset the shortfall.
- Sterling Financial Holding Company managed to counterbalance FX losses of N1.88bn through gains in trading income (+78.19 per cent YoY) and fees and commissions (+17.12 per cent YoY).
- United Bank for Africa felt the impact of a sharp 83.34 per cent fall in FX revaluation gains, which pulled its non-interest income down to N488.63bn from N599.11bn in the previous year.
- Wema Bank also reported a 70.21 per cent decline in FX revaluation gains, contributing to a broader downturn in its other income.
These results underscore how heavily the sector had leaned on FX-related gains—and how urgently banks are now repositioning.
Interest Rate Policy and Lending Conditions
Meristem analysts noted that the CBN’s decision to retain the MPR at 27 per cent, while adjusting the asymmetric corridor, carries mixed implications. Although the Standing Lending Facility rate has dropped to 27.50 per cent, easing the cost of borrowing from the CBN, the Standing Deposit Facility rate at 22.50 per cent remains attractive relative to fixed-income yields.
Even with greater liquidity, lending rates are expected to stay elevated. Banks remain cautious as they balance loan-to-deposit ratio requirements with the need to keep non-performing loans under control. The analysts observed that institutions such as Access Holdings, Stanbic IBTC Holdings, and Zenith Bank—each maintaining CASA ratios above 60 per cent—are better positioned to manage their net interest margins and support additional lending.
Meanwhile, the CBN has confirmed that 16 banks have now met its recapitalisation requirements, up from 14 in September, indicating steady progress in strengthening the financial sector’s buffers.
A Changing Competitive Landscape
Beyond macroeconomic shifts, competition from fintech and mobile-money operators is reshaping the sector in profound ways. At the 2025 Parthian Economic Discourse in Lagos, Financial Derivatives Company CEO Bismarck Rewane warned that banks’ bargaining power is weakening as new digital rivals capture consumer attention—and advertising space.
According to Rewane, brands like OPay, Moniepoint, and MTN’s MoMo are not just more visible; they are capturing significant revenue opportunities that once flowed primarily through traditional banks. He argues that the industry is undergoing a structural transition away from “rent-based” earnings—such as FX arbitrage and round-tripping—and toward efficiency and genuine value creation in response to more demanding, price-sensitive customers.
Overall, the picture that emerges is of a banking sector recalibrating its footing. With FX windfalls gone and competition rising, the coming years may hinge on how effectively lenders innovate, diversify revenue, and deliver value in a more disciplined and technologically driven environment.