Feature/OPED
Banks Cash Out, Economy Loses Out: How Nigerian Banks’ N5.05trn Government Securities Boom is Stifling Real Growth
By Blaise Udunze
In a year when Nigeria’s economy continues to groan under the weight of inflation, unemployment, and weak purchasing power, the banking sector has once again recorded a massive windfall, not from lending to the real economy or financing innovation, but from investing in government securities.
According to data compiled by MoneyCentral, Nigerian Tier-1 banks collectively realized N5.05 trillion in income from investment securities in the first nine months of 2025 represents a staggering 42.28 percent increase over the N3.55 trillion recorded in the same period of 2024.
At first glance, this performance might seem like a testament to the banking industry’s resilience and financial ingenuity. But beneath the lustrous profit sheets lies a deeper economic dilemma that reveals how Nigeria’s banks are making more money by lending to government than by lending to people, small businesses, and industries which are the very arteries that sustain productive economic life.
It is no secret that Nigeria’s commercial banks have long found comfort in the safe, predictable yields of government securities such as treasury bills, bonds, and promissory notes. These instruments are virtually risk-free, backed by sovereign guarantees, and often deliver attractive returns in a high-interest-rate environment. For the banks, it is a perfect business model where depositors’ funds flow in at low cost, and those funds are easily parked in high-yield government paper with minimal risk or operational hassle. There is no need to worry about non-performing loans, credit analysis, or the painstaking process of supporting small and medium enterprises (SMEs).
But for the economy, it is a tragedy of misaligned priorities. While the banks luxuriate in “safe profits,” the productive sectors like agriculture, manufacturing, transport, housing, and creative industries remain starved of credit. Nigeria’s SMEs, which account for over 80 percent of employment and nearly half of GDP, face prohibitive interest rates, limited access to capital, and chronic underfunding. The result is economic stagnation disguised as stability.
The data below tells the story clearly:
– Zenith Bank realized N1.14 trillion from income from short-term government securities, which is 55.49 percent higher than 2024’s N734.14 billion.
– Access Bank made N1.13 trillion income from investment securities as at September 2025 which is 36 percent higher than 2024’s N838.14 billion.
– GTCO realized N547.77 billion income from government bonds, which is 45.68 percent higher than 2024’s N376 billion.
– United Bank for Africa (UBA) saw its income from short-term government securities rise 29.77 percent to N973.12 billion in the period under review, up from N750.48 billion the previous year.
– FirstHoldco’s income from investment securities increased 33.70 percent to N720.15 billion in September 2025, from N538.59 billion in September 2024.
Collectively, these numbers paint a clear picture of the real economy struggling to breathe, while the financial sector is growing fat on sovereign debt. This is not banking as development finance; it is banking as arbitrage. And the scale of this investment obsession is enormous. In the past teo years alone, the top 10 listed banks have channeled at least N20.4 trillion into investment securities and this huge capital could have financed millions of jobs, supported thousands of small businesses, and accelerated growth in Nigeria’s productive sectors.
This has now caught the attention of Nigeria’s tax authorities. The Federal Inland Revenue Service (FIRS) recently directed banks, stockbrokers, and other financial institutions to deduct a 10 percent withholding tax on interest earned from investments in short-term securities. Prior to this directive, short-term bills were tax-exempt to boost returns for investors. The new rule requires tax to be deducted at the point of payment on instruments such as treasury bills, corporate bonds, promissory notes, and bills of exchange.
It remains unclear how much the government expects to generate from this withholding tax. However, the FIRS clarified that investors will receive tax credits for the amounts withheld unless the deduction represents a final tax. Notably, interest on federal government bonds remains exempt from the levy. “All relevant interest-payers are required to comply with this circular to avoid penalties and interest as stipulated in the tax law,” FIRS Executive Chairman Zacch Adedeji said in the official notice.
Yield-hungry investors including banks are likely to be the most affected by this directive. In the first half of 2025 alone, Nigeria’s biggest banks realized N3.03 trillion in income from treasury bills, which represents a 60.40 percent increase from N1.89 trillion recorded in the corresponding period of 2024. GTCO, Zenith Bank Plc, United Bank for Africa Plc, Access Holdings Plc, FirstHoldco Plc, FCMB Plc, Fidelity Bank Plc, and Stanbic IBTC Holdings Plc have been in the habit of buying up domestic government bonds that offer among the highest yields in emerging markets.
By introducing this withholding tax, the FIRS aims to reduce excessive speculative investment in short-term securities and redirect liquidity into more productive parts of the economy. Whether this policy shift achieves that goal remains to be seen. In theory, taxing government securities could make lending to the private sector relatively more attractive. In practice, unless accompanied by broader structural reforms such as reducing credit risk, improving collateral enforcement, and stabilizing the macroeconomic environment, banks may simply adjust their margins and continue business as usual.
Nigeria is witnessing a growing disconnect between financial growth and economic growth. On one side is the booming financial economy, driven by banks’ trading gains, FX revaluation, and investment returns. On the other side is the struggling real economy, where factories close, youth unemployment rises, and SMEs collapse under the weight of credit starvation. The banks’ balance sheets may glitter, but the nation’s balance of welfare is grim.
As inflation eased slightly to 18.02 percent in September 2025, the Central Bank of Nigeria (CBN) cut the Monetary Policy Rate (MPR) from 27.5 percent to 27 percent. While this move signals a dovish tone, it does little to change the fact that the cost of credit remains astronomically high. Commercial lending rates hover between 25 percent and 35 percent, which is completely out of reach for most small businesses. Meanwhile, banks can earn double-digit, risk-free returns on treasury bills. Faced with that choice, which banker would lend to a farmer or manufacturer?
Beyond the figures, this trend has human consequences. Every SME denied a loan represents jobs not created, taxes not paid, and innovations never realized. Every startup that shuts down for lack of funding represents a family’s dashed hopes. Every manufacturer operating below capacity because of working capital shortages translates into lost exports and higher import dependence. When banks turn away from development finance, the ripple effect touches every household ranging from the market woman running a petty trade to the tech entrepreneurs across the country.
Several factors explain why banks prefer the comfort of government securities to the challenge of real-sector lending. Many SMEs operate informally, without proper records or collateral, making them unattractive to traditional lenders. Nigeria’s judicial system often makes loan recovery slow and uncertain, discouraging risk-taking. Exchange rate instability and inflation distort business forecasts, making long-term lending risky. Banks also find it easier to meet liquidity and capital adequacy ratios by holding government paper. Executive bonuses and performance metrics are tied to quarterly profits, not long-term economic impact. These factors form an entrenched ecosystem of incentives that rewards speculation over production, in a system where financial stability comes at the cost of real growth.
If Nigeria must break free from this cycle, a paradigm shift is needed, one that redefines the purpose of banking in national development. The CBN and fiscal authorities must create differentiated incentives for banks that channel a higher percentage of their loan portfolio to productive sectors such as agriculture, manufacturing, renewable energy, and technology. Tax rebates, lower cash reserve ratios, or credit guarantees can help de-risk these loans. Nigeria’s collateral registry, credit bureaus, and bankruptcy laws need modernization to reduce perceived risk, while the legal system must guarantee faster resolution of credit disputes.
Government, through the Bank of Industry (BOI) or similar agencies, can establish a blended-finance vehicle that matches public capital with private lending, allowing banks to co-finance SME projects with shared risk. Many small businesses fail to access credit because they lack proper documentation or business plans. A coordinated financial literacy program, supported by banks and chambers of commerce, could improve their readiness for formal credit. Ultimately, change must come from the top. Bank CEOs and boards must see themselves not just as profit managers but as nation builders. The sustainability of their profits depends on the health of the economy that surrounds them.
If this imbalance persists, Nigeria risks becoming a country where banks thrive and industries die. The long-term cost is profound. Economic growth will remain consumption-driven rather than production-led. Unemployment will worsen as SMEs fold up. Government borrowing will continue to crowd out private investment. The naira will weaken due to import dependence and weak export diversification. Financial capitalism, without developmental conscience, will only deepen inequality and discontent.
The time has come for Nigeria’s banking industry, regulators, and policymakers to make a collective choice: between easy profits and enduring prosperity. It is not enough to celebrate trillion-naira incomes if the nation remains trapped in jobless growth. It is not enough to report record balance sheets while millions of Nigerians remain unbanked and unemployed. True financial innovation lies not in exploiting yields, but in empowering people. The banks that will define the next decade are those that look beyond treasury bills, especially those that find value in the dreams of Nigerian entrepreneurs, in the resilience of its farmers, and in the creativity of its youth.
The story of Nigeria’s N5.05 trillion securities income is not just about numbers; it is about choices and their consequences. It reveals a financial system that has lost sight of its developmental mission, a government too dependent on debt, and an economy where growth has become disjointed from human progress. Yet, it is not too late to change course. The recent 10 percent tax on short-term securities should be the first step toward a deeper reform as one that forces a reallocation of capital from paper to people, from speculation to production.
As yields fall and monetary policy adjusts, the smart banks will be those that read the writing on the wall knowing that the future of finance in Nigeria lies not in government debt, but in the real economy because it is the only economy that truly matters. Because in the end, a nation cannot prosper when its banks are rich and its people are poor.
Blaise, a journalist and PR professional writes from Lagos, can be reached via: bl***********@***il.com
By Louis Strydom
Last year, I argued in my piece Lean Carbon, Just Power that a limited and temporary increase in African carbon emissions is justified to meet the continent’s urgent electrification needs.
That position was not a retreat from climate ambition. It laid out a credible lean-carbon pathway that reconciles power systems development realities with climate arithmetic.
The central question remains: not whether emissions must fall, but how much temporary headroom is tolerable to accelerate energy prosperity for a continent responsible for roughly 4% of global CO2.
The flexibility equation
The future of Africa’s electrification is neither “all renewables tomorrow” nor “gas indefinitely”. Intermittent renewables alone cannot power the continent’s fragile grids at scale. Solar and wind require highly dispatchable power capacity to ensure the reliability of the system.
The real choice is not between renewables and fossil fuels in the abstract; it is between flexible firm power that complements solar and wind, and the de facto alternative: the increasing reliance on high-emissions diesel backup and widespread grid instability.
I argue that a realistic transition strategy must embrace “a capped carbon overdraft”: a strictly bounded, time-limited deployment of flexible power plants running on gas that supports the deployment of renewables and declines according to a binding schedule. This strategy means accepting minimal, temporary emissions to allow for a faster, cleaner and more resilient clean transition.
The response to this argument drew serious scrutiny. Three objections deserve a direct answer.
First: Does the case for flexible thermal power hold on a full life cycle basis?
It does. Our power system studies in Nigeria, Mozambique, and Southern Africa consistently reach the same conclusion – the least-cost long-term system is renewables-led, with flexible engines balancing variability. That holds across capital, fuel, maintenance, carbon pricing, and decommissioning. South Africa’s Integrated Resource Plan 2025, approved in October, makes the point concretely: it projects 105 GW of new capacity by 2039 with renewables as backbone, yet includes 6 GW of gas-to-power by 2030 explicitly for grid stability. Even the continent’s most industrialised economy concludes it needs dispatchable thermal capacity to underpin a renewables-heavy system. The question is not whether firm power is needed, but how to make it as clean and flexible as possible.
Second: Does this argument talk over Africa’s ambition to leapfrog fossil fuels?
No. It is designed around that ambition. Wärtsilä launched the world’s first large-scale 100% hydrogen-ready engine power plant concept in 2024, certified by TÜV SÜD, with orders opening in 2025. Ammonia engine tests now demonstrate up to 90% greenhouse gas reductions versus diesel. These are not roadmaps. They are ready-to-use technologies. The honest difficulty is timing. Sub-Saharan grids averaged 56 hours of monthly outages in 2024. The African diesel generator market is growing at nearly 7% a year, projected to reach 1.3 billion dollars by 2030. Nigerian businesses spend up to 40% of operational costs on fuel for backup power. That is the real counterfactual – not a continent neatly powered by sun and wind, but a billion-dollar diesel habit deepening every year the grid stays unreliable. Even Germany is tendering 10 GW of hydrogen-ready gas plants with mandated conversion by 2035 to 2040. If Europe’s largest economy needs transitional thermal flexibility to backstop an 80% renewables target, insisting low-income African nations skip that step is not climate leadership. It is development deferred.
Third: Does the carbon comparison include full life cycle methane?
It must. Methane leakage materially worsens the climate profile of gas-to-power because methane is a far more potent greenhouse gas than CO₂. If leakage exceeds a few per cent of production, gas loses its advantage over coal on a 20-year timeframe.
But the IEA notes that 40% of fossil methane emissions could be eliminated at no net cost with existing technology. My claim that gas has a lower footprint than coal is conditional on aggressive methane management – eliminating flaring and venting, enforcing measurement under frameworks like the EU Methane Regulation and OGMP 2.0. Without those conditions, the arithmetic fails. But the real choice in most African markets is not between pristine gas and pristine renewables. It is between ageing coal, a growing fleet of unregulated diesel generators, and new fuel-flexible plants that start or transition to gas and convert to hydrogen or ammonia on a contractual schedule. Displacing diesel and coal with well-managed gas in future-fuel-ready engines cuts CO₂, local pollution, and water use now, while building the infrastructure for fuels that eliminate fossil dependence.
The critics are right to demand rigour, full life cycle accounting, methane transparency, and credible timelines. Those are exactly the conditions that make a lean-carbon pathway work. Africa does not seek permission to pollute. It seeks the tools to end energy poverty while peaking emissions early and declining fast. Build engine power plants that run on available fuel today. Mandate their conversion tomorrow. The carbon overdraft stays small. The payback stays fast. And the technology to switch to sustainable fuels is already here.
Louis Strydom is the Director of Growth and Development for Africa and Europe at Wärtsilä Energy
You’re back home after mudik (homecoming), the suitcases are unpacked, and the excitement of being with family for Eid already feels like a long time ago. But just because Eid is over doesn’t mean the special connection of being with family has to fade. Here are the best group chat features for beating the post-Raya blues.
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Keep The Vibe Going by Sharing Ramadan Highlights
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Keep the Memories Rolling with Status: Your Status feed doesn’t have to go quiet just because you’re back home. Post the most memorable throwback photos from the Eid reunion and add questions to spark responses like “What was your favourite Raya dish?” Add music and stickers to Status to keep the energy alive.
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Express Yourself with Text Stickers: Turn inside jokes, family slogans, or a favourite Eid quote into a Text Sticker. It’s a quick, personalised way to add some warmth and humour to the group chat.
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Skip the Stock Cards, Use Meta AI for a Personal Touch: Don’t just send a generic “Hi” or “Good morning” in the family chat. Use Meta AI to make your personalised greeting card or quickly transform a single photo into an animated image to send a heartfelt, animated check-in.
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Schedule The Next Reunion
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Plan Your Next Post-Raya Get-Together: The blues often hit when the fun ends. Keep spirits up by creating a new Event in the group chat right away. Add event reminders so everyone doesn’t miss the opportunity to connect.
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Schedule a Call, Don’t Just Say “Call Me”: Carry on the family tradition of staying connected, even when you’re miles apart. Tap + then Schedule a call in the Calls tab to lock in a regular “Post-Raya Check-in” video call. Send a reminder so everyone can join on time.
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Keep the Raya Spirit Alive by Getting Everyone Involved
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Assign yourself a fun “tag” in the family group: Are you the one who always ends up cooking? Or the one who plans the itinerary for family trips? Or the master of GIFs who keeps everyone amused? Use the Member Tag feature in the group to give yourself a witty, funny, or practical role—”Next Event Planner” or “Tech Support Guru,” maybe?. Member tags can be customised for each group you’re in.
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Share a Spontaneous ‘I Miss You’ Video: Did you just see something that reminded you of the reunion? Press and hold the camera icon to record a spontaneous Video Notes message. It’s faster than typing and instantly brings warmth and real-time emotion back into the group.
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Digital Hugs: Making the Long-Distance Moment Count
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Share a Moving Memory: Don’t just send a still photo. Share a Live or Motion Photo to capture the ambient sound and movement of a recent Eid moment. It makes your memories feel more vivid, personal, and real—a perfect antidote to feeling disconnected.
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Your Group Chat Background: Create a vibe with Meta AI: Don’t settle for a plain background for your family group chat. Use Meta AI to generate unique, custom chat wallpapers that reflect something uniquely memorable to your family: be it food, travel or a sport that unites everyone. Every time you open the chat, you’ll feel the warmth, not the distance.
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Make Sure No One Misses Out
No More FOMO: Send the Conversation History: Just added a family member who couldn’t make it to mudik? When adding a new member, you can now send up to 100 recent messages with the Group Message History feature. No need to recap; let them catch up instantly and feel included from the first tap.
By Olumide Balogun
Nigerians are natural explorers. Whether finding the best supplier in Balogun market, hunting down a recipe for party jollof, or looking for the most affordable flight out of Lagos, we are always searching.
Today, human curiosity is expanding, and the way Nigerians express it is evolving. We are speaking to our phones, snapping photos of things we like, and asking incredibly complex questions. For the Nigerian business owner, understanding this shift is a massive opportunity to get discovered by eager customers.
Here are four ways AI is rewriting how Nigerians search, along with simple steps to ensure your business is exactly what they find.
1. Visual Discovery is the New Normal
People are increasingly using their cameras to discover the world around them. Picture someone spotting a brilliant pair of sneakers in traffic and wanting to know exactly where to buy them. Today, shoppers simply take out their phones and search visually.
Tools like Google Lens now process over 25 billion visual searches every single month, and many of these searches are from people looking to make a purchase.
How to adapt: Your product’s visual appeal is paramount. Make sure you upload clear, high-quality images of your products to your website and social media. When a customer snaps a picture of a bag that looks like the one you sell, having great photos ensures your business pops up in their visual search results.
2. Conversations Replace Simple Keywords
Shoppers are asking highly nuanced, conversational questions. They are typing queries like, “Where can I find affordable leather shoes in Ikeja that are open on Sundays and do home delivery?”
To handle these detailed questions, new features like AI Overviews act like a superfast librarian that has read everything on the web. It provides users with a perfectly organised summary and links to dig deeper.
How to adapt: Answer your customers’ questions before they even ask. Create detailed, helpful content on your website and fully update your Google Business Profile. List your opening hours, delivery areas, and unique services clearly. This ensures the technology easily finds your details and recommends your business when a customer asks a highly specific question.
3. Intent Matters More Than Exact Words
Predicting every single word a customer might use to find your product is a huge task for any business owner. Thankfully, modern search technology focuses on the underlying need behind a search.
If someone searches for “how to bring small dogs on flights,” AI understands that the person likely needs to buy an airline-approved pet carrier. The technology looks at the true intent of the shopper.
How to adapt: You no longer need to obsess over guessing exact keywords. By using AI-powered campaigns, you allow the technology to understand your products and match them to the customer’s true needs. Your business will show up for highly relevant searches, bringing you customers who are actively looking for solutions you provide.
4. Smart Assistants Handle the Heavy Lifting
Running a business in Nigeria requires incredible hustle. Managing digital marketing on top of daily operations takes significant time and energy. The next frontier in digital advertising introduces agentic capabilities, which hold a simple promise of delivering better results for your business with much less effort.
The technology now acts as your personalised assistant.
How to adapt: You can simplify your marketing by using the Power Pack of AI-driven campaigns, including Performance Max. You simply provide your business goals, your budget, and your creative assets like photos and videos. The AI automatically finds new, high-value customers across Google Search, YouTube, and the web. It adapts your ads in real time to match exactly what the shopper is looking for, allowing you to focus on running your business.
The language of curiosity is constantly expanding. Nigerians are discovering brands in entirely new ways using cameras, voice notes, and highly specific questions. By understanding these behaviours and embracing helpful AI tools, you can let the technology connect eager customers directly to your digital doorstep.
Olumide Balogun is a Director at Google West Africa
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