Funds have gotten Nigerian banks’ development lever, says S&P

Nigerian banks’ profitability is anticipated to say no marginally in 2026, in accordance with a brand new banking sector forecast from S&P World Scores, a global credit standing company.

The credit standing company expects the sector’s common return on fairness (ROE) to normalise to twenty%–23% in 2026, whereas return on property is anticipated to slide to three.0%–3.1%. 

Nigerian banks are coming into a brand new section of profitability: much less pushed by overseas trade incomes windfalls and interest-rate positive aspects, extra sustained by transaction volumes. S&P expects banks to lean more durable on non-interest earnings (NII), significantly charges and commissions, as they develop retail providers, course of increased cost volumes, and deepen company banking.

S&P says profitability in 2026 will nonetheless be supported by excessive curiosity margins, rising NII, and barely decrease provisions. Nonetheless, NII will play a extra outstanding position as a consequence of rising cost exercise and ongoing digitalisation, which now accounts for about 10% of banks’ working prices, in accordance with the company.  

The shift is already seen within the numbers. In 2024, seven banks, together with Zenith Financial institution Plc and United Financial institution of Africa (UBA), earned ₦4.2 trillion ($3.06 billion) revenue, boosted largely by windfalls from realised overseas trade positive aspects. 

However earnings momentum weakened in 2025 as these positive aspects light: earnings at 5 banks, together with Entry Holdings and Zenith Financial institution, fell 15% within the first 9 months of 2025.

Transaction-driven earnings is transferring in the other way. E-payments earnings has been rising as digital transactions surge. In 2024, digital transaction values rose by 78.33% to ₦1.07 quadrillion ($779.37 billion).

Ten of Nigeria’s largest banks, together with Entry Holdings Plc and Warranty Belief Holding Firm (GTCO) Plc, recorded a 58% improve in e-payments earnings to ₦674 billion ($490.93 million) in 2024. 

Within the first 9 months of 2025, eight of the nation’s largest banks, together with UBA and First HoldCo Plc, earned ₦514.82 billion ($374.99 million) from digital funds, reinforcing the class as a gradual and rising earnings line.

Past transaction volumes, S&P expects Nigeria’s charges to stay excessive relative to see markets, maintaining internet curiosity margins supported via 2026. This could protect excessive yields on authorities securities and reinforce banks’ reliance on low-cost buyer deposits, serving to maintain funding low-cost and margins elevated.

At its final financial coverage committee on November 25, 2025, the Central Financial institution of Nigeria (CBN) retained the benchmark rate of interest at 27%, extending its pause on tightening because it seeks to consolidate progress in worth stability, trade charges, and capital flows.

Prices, nevertheless, will stay a drag. S&P flags regulatory bills, significantly the Asset Administration Company of Nigeria (AMCON) levy, as a persistent weight on profitability. The levy, charged at 0.5% of on-and-off stability sheet property, is estimated to account for 15%–20% of banks’ complete working prices, making it one of many sector’s largest recurring value drivers.

S&P expects the tip of regulatory forbearance to strain banks’ asset high quality, whereas increased capital necessities strengthen banks’ loss-absorption buffers. It additionally anticipates that internet curiosity margins will come underneath strain as anticipated price cuts filter via.

In 2026, S&P expects the tip of regulatory forbearance to problem banks’ asset high quality, elevated capital necessities that may assist banks’ loss absorption capability to return due, and internet curiosity margins to return underneath strain due to anticipated rate of interest cuts.

Banks’ non-performing loans rose to 7% in 2025, above the prudential threshold of 5%, reflecting the phased withdrawal of regulatory forbearance launched through the COVID-19 interval, in accordance with the CBN.

Nonetheless, S&P expects Nigerian banks to stay resilient and worthwhile, supported by NII development and a declining although nonetheless elevated value of danger.