Banking
Nigerian Banks to Still Struggle in 2017—Fitch
By Dipo Olowookere
Fitch Ratings says Nigerian banks will continue to face challenges this year, following an extremely difficult 2016.
Banks faced multiple threats from the operating environment in 2016, including Nigeria sliding into recession, the economy continuing to suffer from low oil prices and severe shortages of foreign currency (FC).
Consequently banks struggled with declining operating profitability (excluding translation gains), sluggish credit growth, fast asset quality deterioration, tight FC liquidity and weakening capitalisation, putting increasing pressure on their credit profiles.
Fitch, in its latest report, stated that outlook for the rest of 2017 is not much brighter, stressing that it believes that the banks will continue to face extremely tight FC liquidity despite the authorities’ best efforts to normalise the foreign-exchange (FX) interbank market and improve the supply of US dollars.
“Importantly, deliveries under the Central Bank of Nigeria’s (CBN) FX forward transactions since 1H16 have helped the banks access US dollars and reduce a large backlog of overdue trade finance obligations to international correspondent banks.
However, given the severity of the FC liquidity issues, refinancing risk remains at the top of our perceived risks for the sector, especially as some banks have large Eurobond maturities in 2017/2018,” the rating agency said.
It noted that fast asset quality deterioration is in line with its expectations given the macro challenges and the continuing issues in the oil-sector.
It added that oil-related impaired loans (NPLs) are high and this excludes large volumes of restructured loans.
Other industry sectors contributing to NPLs include general commerce and trading, which have been affected by both the naira depreciation and FC shortages.
For the Fitch-rated banks, “We believe the NPL ratio could rise to 10%-12% by end-1H17 (this remains lower than the CBN’s reported figure for the entire sector). As a one-off policy change, the CBN allowed banks to write off all fully reserved NPLs by end-2016.
“Together with significant loan restructuring (particularly in the oil sector), this will ease pressure on NPLs for now, in our view.”
Fitch further said slower economic growth and a lower risk appetite from banks will continue to translate into subdued credit growth and weak core earnings generation in 2017. Loan growth averaged 25% in 9M16, but this was due to the currency translation effect post devaluation as about half of sector loans are in FC. Loan growth was negligible in constant currency terms.
The banks’ 2016 profitability was underpinned by large translation gains booked on net long FC positions following the naira devaluation. Excluding these, some banks would have reported a significant fall in operating income.
Regulatory capital ratios are high from a global perspective, but remain under pressure due to inflated risk-weighted assets (due to the FC translation effect) and lower core retained earnings.
The agency said in its view, there is a limited margin of safety as some banks could very easily breach minimum regulatory requirements in the event of further naira depreciation and/or weaker asset quality.
It said the Long-Term IDRs of all banks’ are in the ‘B’ range, indicating highly speculative fundamental credit quality. The low ratings reflect the significant influence of the weak operating environment, which overshadows other rating factors. The banks’ IDRs are driven by their Viability Ratings, Fitch’s assessment of their standalone creditworthiness.
The agency pointed out that following a reassessment of potential sovereign support available to the banks in 2016, it believes that sovereign support cannot be relied on given Nigeria’s (B+/Negative) weak ability to do so in FC.
“As a consequence, we removed sovereign support from the Long-Term IDRs,” it said.
Concluding, Fitch said overall, the largest Nigerian banks with stronger and more diverse business models, high revenue-generating capacity and stronger liquidity profiles appear to be coping better than smaller banks on most metrics. However, tail risks remain high for all banks due to their sensitivity to concentration risk.
By Modupe Gbadeyanka
The Nigeria Revenue Service (NRS) has denied reports that customers performing financial transactions would pay a Value Added Tax (VAT) of 7.5 per cent from January 19, 2026.
Information about this emanated from messages sent out to customers of a financial institution, informing them of the new development in compliance of Nigeria’s new tax laws, especially the Nigeria Tax Act 2025.
It was claimed that Nigerians, as part of efforts of the government to generate more funds from taxes, would begin to pay VAT for the use of banking services like USSD and others.
But reacting in a statement signed by its management on Thursday, January 15, 2026, the tax collecting agency emphasised that the VAT collection for such services was not new.
It stressed that customers have always paid taxes for electronic money transfers and others, as this is charged on the fee, not from the main amount of the transaction.
“The Nigeria Revenue Service wishes to address and correct misleading narratives circulating in sections of the media suggesting that Value Added Tax (VAT has been newly introduced on banking services, fees, commissions, or electronic money transfers. This claim is categorically incorrect.
“VAT has always applied to fees, commissions, and charges for services rendered by banks and other financial institutions under Nigeria’s long-established VAT regime. The Nigeria Tax Act did not introduce VAT on banking charges, nor (sic) did it impose new tax obligation on customers in this regard.
“The Nigeria Revenue Service urges members of the public and all stakeholders to disregard misinformation and to rely exclusively on official communications for accurate, authoritative, and up-to-date tax information,” the statement read.
Business Post reports that what this basically means is that if a customer sends N10,000 and the bank charges N50 for the service, a 7.5 per cent VAT on the N50, which is N3.75, would be paid by the sender, not N750, which is 7.5 per cent of N10,000.
By Adedapo Adesanya
Nigerian-born payments company, Paystack, has announced its entry into the banking sector with the launch of Paystack Microfinance Bank (Paystack MFB) after the acquisition of Ladder Microfinance Bank.
The bank continues Paystack’s push into consumer products and adds a banking layer to its business-focused payment product, coming ten years after the company was founded with the goal of simplifying payments for businesses using modern technology.
In Nigeria alone, the company says its systems process trillions of Naira every month, supporting more than 300,000 businesses and millions of customers. According to Paystack, this growth highlighted a broader need beyond payments, prompting the decision to build a more comprehensive financial offering.
Paystack MFB will begin lending to businesses before expanding to consumers. It will also offer banking-as-a-service (BaaS) products to companies building financial products and treasury management products.
The company explained that while payments are a critical part of the financial journey, businesses and individuals increasingly require a full financial operating system. This includes the ability to store money securely, move funds easily, gain clarity from financial data, and access tools that support long-term growth. Developers, Paystack added, also need reliable, secure, and compliant infrastructure to build new financial solutions efficiently.
To address these needs, Paystack said it has established Paystack Microfinance Bank as a separate and independent entity from Paystack Payments Limited.
The new microfinance bank operates with its own license, governance structure, and product roadmap, although it will work closely with its sister company.
“By adding Paystack MFB to our family of brands, we’re finding the right balance through combining the rapid innovation of a tech-first platform with the stability of traditional banking,” said Ms Amandine Lobelle, Paystack’s chief operating officer.
Last year, it launched its controversial consumer payments app Zap, and now it is taking a step further with the company securing regulatory backing to become a deposit-taking institution. According to a statement, the bank will be guided by the same principles that shaped Paystack’s early success, including reliability, simplicity, transparency, and trust.
Paystack MFB has begun operations with a small group of early members and plans a gradual rollout to more businesses and individuals. The company also announced the opening of a waitlist for interested users and confirmed it is recruiting a dedicated team to help build its long-term banking infrastructure.
By Modupe Gbadeyanka
The Economic and Financial Crimes Commission (EFCC) has helped First Bank of Nigeria to recover the sum of N802.4 million from a suspect, Mr Kingsley Eghosa Ojo, who unlawfully took possession of over N1.3 billion belonging to the bank.
The funds were handed over the financial institution by the Benin Zonal Directorate of the anti-money laundering agency on Monday, January 12, 2026, a statement on Tuesday confirmed.
First Bank approached the EFCC for the recovery of the money through a petition, claiming that the suspect received the money into his account after system glitches.
The commission in its investigation; discovered that the suspect, upon the receipt of the money, transferred a good measure of it to the bank accounts of his mother, Mrs Itohan Ojo and that of his sister, Ms Edith Okoro Osaretin, and committed part of the money to completion of his building project and the funding of a new flamboyant lifestyle.
With the recovery of the money from the identified bank accounts, the EFCC handed it over in drafts to First Bank.
While handing over the lender, the acting Director for the Directorate, Mr Sa’ad Hanafi Sa’ad, stressed his organisation would continue to discharge its mandate effectively in the overall interests of society.
“The EFCC Establishment Act empowers us to trace and recover proceeds of crime and restitute the victim. In this case, First Bank was the victim and that is exactly what we have done.
“We will continue to discharge our duties to ensure that fraudsters do not benefit from fraud and that economic and financial crimes are nipped in the bud,” he said.
In his response, the Business Manager for First Bank in Benin City, Mr Olalere Sunday Ajayi, who received the drafts on behalf of the bank, commended the EFCC for the swiftness and the professionalism it brought to bear in the handling of the matter and expressed the bank’s gratitude to the commission.
He described the EFCC as one of Nigeria’s most effective and reliable institutions.
Meanwhile, Mr Kingsley and all other suspects in the matter have been charged to court for stealing by the EFCC.
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