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Paradox of Profitability: Nigeria’s Banks, Bogus Earnings, and Recapitalisation Dilemma

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Paradox of Profitability Blaise Udunze

By Blaise Udunze

Nigeria’s economy has been buffeted by storms in recent years with currency volatility, galloping inflation, surging interest rates, and dwindling consumer purchasing power. Yet, amid these macroeconomic headwinds, corporate organisations, especially banks, continue to post eye-popping profits.

Five of Nigeria’s top 10 banks reported a combined pre-tax profit of N4.6 trillion in 2024, a 70 per cent increase from the previous year with Zenith Bank and Guaranty Trust Holding Company crossing the trillion-naira mark for the first time.

This paradox raises a fundamental question: how are banks thriving on paper in an economy where businesses are shutting down, households are under severe strain, and government debt is ballooning?

As of the first half of 2025, the banking industry finds itself at a crossroads. Barely months after announcing staggering profit results, some in excess of N500 billion amongst commercial banks are now scrambling to meet the Central Bank of Nigeria’s (CBN) recapitalisation directive. Many are racing back-to-back to the capital market to raise fresh funds.

Behind the strong showing of the market leaders lies a deeper concern: a number of smaller commercial banks and regional players are still struggling to formulate credible recapitalization strategies.

Adding to the puzzle is the CBN’s decision to bar lenders from paying dividends and bonuses, insisting that earnings must be preserved to strengthen capital buffers.

For the average Nigerian, the contradiction is glaring: how can banks boast of record profits yet struggle to raise capital to meet regulatory requirements?

Analysts argue that much of these “profits” are not the outcome of robust productivity or genuine market expansion but rather accounting gains from naira devaluation, speculative positions, high interest rate spreads, loopholes in financial reporting, and arbitrary charges.

Profits on Paper, Weak Capital in Reality

Nigerian banks are witnessing a slowdown in profit growth in 2025 as the extraordinary windfalls from naira devaluation and high interest rates taper off.

Data from the Nigerian Exchange Limited (NGX) show that the combined after-tax profit of nine major lenders, including Zenith, GTCO, Access, UBA, Fidelity, Wema, Stanbic IBTC, FCMB, and FBN Holdco rose marginally by 0.74 per cent to N1.35 trillion in Q1 2025, compared to the record 274.3 per cent surge posted a year earlier.

Much of the earlier profit boom was driven by the floating of the naira in mid-2023 and subsequent devaluations, which allowed banks to book huge foreign exchange revaluation gains simply by holding dollar assets. However, analysts warn these paper gains were non-cash items that added little to banks’ real capital strength.

The apex bank has since barred lenders from deploying such gains for dividends or operating expenses, insisting they be held as buffers against future currency shocks.

With foreign exchange gains now normalising and credit expansion still sluggish, analysts say banks’ reliance on one-off windfalls has exposed underlying weaknesses in core operations such as lending, deposit mobilisation, and fee income.

“The era of abnormal profit growth is over,” said Tony Brown, a banking analyst in Abuja. “The numbers looked strong on paper, but the real test will be how banks sustain earnings through traditional banking activities.”

“The so-called profits are accounting gymnastics,” a Lagos-based analyst said. “They look good in shareholder reports but add little to the core equity needed for recapitalization.”

Banks Profit as Rate Hikes Widen Interest Spreads, squeeze Borrower 

Nigerian banks are cashing in on wide interest rate spreads, boosted by the CBN’s tight monetary stance, which has kept the policy rate at 27.5 per cent into 2025. While lending rates have soared into double digits, deposit rates remain low, leaving savers shortchanged and borrowers under pressure.

Analysts say this asymmetric response allows banks to preserve profitability at customers’ expense. “Simply buying government Treasury bills with customers’ deposits was enough for banks to return profit with yields reaching 25 per cent,” said Abuja-based analyst, Chike Osigwe. “On top of that, they charge high lending rates while paying much less to depositors.”

Professor Uche Uwaleke, President of the Capital Market Academics of Nigeria (CMAN), noted that Tier-1 banks are declaring huge profits despite weak economic growth. He warned of a growing disconnect between banks’ fortunes and struggling sectors like manufacturing and agriculture, stressing the need to ensure customers and the real economy share in banking gains.

Mirage of profits powered by Arbitrary Charges

Nigerian banks’ record profits in 2024 have been linked not only to monetary policy tailwinds but also to a surge in arbitrary charges imposed on customers. Despite CBN’s repeated sanctions for breaching its Guide to Charges, lenders continue to rack up billions from fees on transfers, withdrawals, ATM use, account maintenance, SMS alerts, and other deductions.

With over 312 million active bank accounts, these charges now contribute more to profitability than traditional lending or FX operations. Five tier-1 banks alone posted N4.6 trillion in pre-tax profit in 2024, a 69.5 per cent jump from the previous year.

“Banks have turned customers into easy prey,” said financial reform advocate Dr Bruno Agbakoba. Consumer advocate Mrs Toun Adeniran added that households and SMEs are being “drained by unexplained deductions.” A former CBN official admitted enforcement is “a challenge” despite sanctions. In the words of one customer, Nigeria’s banking system has become “a pain in the neck” profitable for lenders, but punishing for households and enterprises struggling to survive in a hostile economic environment.

Critics also warn that this reliance on “blood profits” discourages innovation and credit expansion, further widening the gap between banks’ fortunes and the struggles of businesses and households. Michael Owhoko, a Public Policy Analyst, warned that instead of boosting their image, the massive profits of Nigerian banks are fueling negative public perception, as many views their practices as harmful to individuals and especially small and medium businesses.

Why Banks Are Quietly Rationing Liquidity

Towards month ends, Nigerians are been frustrated by stalled online transfers, frozen mobile apps, and endless queues at ATMs and banking halls. While banks blame “network issues,” analysts say the real problem runs deeper.

With naira devaluation, inflation, and the CBN’s tight monetary stance squeezing liquidity, banks are quietly restricting access to cash to stabilise their books. “When banks throttle withdrawals or delay digital transactions, it is often a survival tactic,” a Lagos-based analyst explained, noting that recapitalization pressures have worsened the strain.

The CBN’s new recapitalisation directive has raised minimum capital thresholds for banks, forcing many institutions to restructure their balance sheets. With dividend payouts curtailed and fresh capital requirements looming, banks are under immense pressure to conserve every naira they can. Restricting customer access through “network downtimes” has quietly become one of the industry’s unspoken strategies.

Banks Race to Meet New Capital Thresholds

With inflation and naira depreciation eroding the old capital base, the CBN has raised minimum capital requirements: N500 billion for international banks, N200 billion for national banks, N50 billion for regional and merchant banks, and N20 billion and N10 billion for national and regional non-interest lenders, respectively. All banks must comply by April 2026.

So far, nine (9) banks: including Access Holdings, Zenith Bank, Stanbic IBTC, Wema Bank, Lotus Bank, Jaiz Bank, Providus Bank, Greenwich Merchant Bank and GTBank have met the target. FirstBank’s oversubscribed rights issue brought in N187.6 billion, with a N350 billion private placement underway. GTBank recently surpassed the benchmark after a N365.85 billion rights issue, raising its capital to N504 billion.

Mid-tier lenders such as FCMB and Fidelity Bank are still raising funds, though analysts expect them to succeed given strong investor appetite. Fitch Ratings noted that most banks are likely to meet the new thresholds ahead of deadline.

While the policy aims to fortify Nigeria’s banking system against shocks, it has exposed the contradiction between glossy profit declarations and actual capital adequacy. If profits were as robust as reported, banks would not be racing to the capital market or wooing investors for fresh injections.

Dividend and Bonus Restrictions

To compound matters, the CBN recently restricted dividend payouts and executive bonuses. This move, while unpopular among shareholders, underscores the regulator’s concern that banks are not retaining enough earnings to build capital buffers.

This temporary suspension, according to the CBN, is part of a broader strategy to reinforce capital buffers, improve balance sheet resilience, and ensure prudent capital retention within the banking sector.

Meanwhile, Nigerian banks paid a record N951 billion in dividends to shareholders in 2024, representing an 87 per cent increase from the previous year.

For investors, it has been a rude awakening. Shareholders were promised juicy returns based on the record profits, but now the CBN is saying those same banks can’t afford to pay dividends. Something doesn’t add up.

Shadows of Creative Accounting in Banking Sector

Allegations of creative accounting continue to dog Nigeria’s banking sector, with analysts warning that dazzling profit numbers may not always reflect underlying reality. While not all institutions engage in such practices, the structural weaknesses of the financial system create room for manipulation.

“The financial sector regularly distorts earnings through creative accounting,” warns Bolatito Bickersteth of research firm Stears. “A significant portion of profit often lies in non-cash items, making true viability difficult to assess.”

One common tactic is the smoothing of earnings through frontloading expenses or deferring liabilities. Provisions for bad loans, for instance, are sometimes delayed, making banks appear healthier than they are. Similarly, loan books are often overstated, with risky credits classified as performing or backed by inflated collateral. This practice was central to the 2009 banking crisis that forced the CBN to sack several CEOs. Mercy Okon, Investment Research Specialist at Parthian Securities, emphasizes the systemic impact, “Huge profits seen in banks were due to unrealized FX gains, heightened interest income, and boosted transaction fees, not necessarily loan growth or real sector lending.”

Another area of concern is tax arbitrage, where lenders exploit gaps between tax rules and CBN guidelines to minimize taxable profits. Beyond that, some institutions reportedly use subsidiaries and offshore accounts to mask losses or inflate revenues, creating balance sheets that look stronger than reality.

Experts also fault the country’s weak auditing culture. Many banks rely on local audit firms with close management ties, raising doubts about independence and compliance with global reporting standards. As a result, governance lapses often escape scrutiny until crises erupt.

The big irony, analysts note, is that while Nigerian banks are declaring record profits, they are simultaneously racing to raise fresh capital under the CBN’s recapitalisation directive.

This contradiction, underscores the distortions created by weak oversight and questionable accounting practices.

The Public Illusion of Prosperity

The paradox points to a deeper credibility gap in Nigeria’s corporate financial reporting. To the public, banks appear prosperous, yet in reality, they are thinly capitalized and vulnerable to systemic shocks.

The irony is not lost on Nigerians who endure soaring lending rates, endless bank charges, and poor service delivery, only to be told that their banks are both profit-rich and capital-poor at the same time.

Way Forward:

To restore trust in Nigeria’s banking sector, regulators must enforce stricter consumer protection policies and closely monitor arbitrary charges. Agencies like the FCCPC and NGOs should actively safeguard customer interests, while the CBN ensures fair pricing and balance between lending and savings rates.

Some existing policies driving excessive fees need urgent review to avoid discouraging use of banking services and undermining the cashless policy, especially in an underbanked society.

Banks, on their part, must prioritize transparency, empathy, and integrity to rebuild reputation, while tighter financial disclosures, stronger corporate governance, and truly independent audits are essential for sustainable growth.

The recapitalization drive is long overdue, especially given the rising risks from a fragile economy, dollar shortages, and exposure to sovereign debt. However, unless transparency improves in financial reporting, the cycle of bogus profits and weak fundamentals will persist.

The recapitalization process should be paired with reforms in disclosure standards and stricter audit independence to ensure that profit figures reflect genuine financial strength.

Until then, the paradox remains: Nigerian banks that claim to be “rolling in profits” are the same institutions struggling to muster the funds needed to secure their future.

Blaise, a journalist and PR professional writes from Lagos, can be reached via: bl***********@***il.com

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The Role of TV in Preserving African Stories and Identity

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Preserving African Stories

Scroll through social media today, and you will notice something interesting: everyone is either reacting to a series, quoting a movie line, or debating a character as though they personally know them. Beneath the memes and binge-watch culture, however, lies something deeper. Television remains one of the most powerful tools shaping how Africans see themselves, remember their history, and tell their own stories. In a continent as diverse and expressive as Africa, that matters more than ever.

TV as a Cultural Archive, Not Just Entertainment

Long before streaming algorithms began shaping our viewing habits, television was already preserving African identity. From Nollywood dramas that capture the rhythm of everyday Lagos life to documentaries exploring Maasai traditions and Ghanaian folklore, TV has served as a living archive of the continent’s stories.

It preserves more than entertainment; it preserves language, culture, humour, values, and shared experiences. Unlike fleeting social media content, television allows stories to unfold with depth, exploring the realities of family, tradition, ambition, and modern African life without reducing them to stereotypes. That is the power of TV: preserving not just stories, but perspective.

Why Representation on TV Still Matters

There is a subtle but important truth: if people do not see themselves on screen, they may begin to believe their stories are not worth telling. This is why African TV content is more than entertainment; it is affirmation.

Seeing a character who speaks like you, struggles like you, or celebrates like your community does something powerful. It validates identity and challenges outdated narratives that have historically defined Africa through external lenses.

This is where MultiChoice Group, through platforms such as DStv and GOtv, plays an important role. They do not simply broadcast content; they help distribute cultural memory at scale.

GOtv, DStv, and the Everyday African Viewer

Think about a typical evening in many African homes: the TV is on in the background, someone is laughing at a comedy show, another person is watching a local series, and someone else is catching up on the news. That shared viewing experience remains very real.

Through platforms such as DStv and GOtv, African households are exposed to a blend of local storytelling and global content. More importantly, they have helped amplify African-produced content by bringing Nollywood films, African reality shows, talk shows, and documentaries into mainstream rotation.

It is not just about access. It is about visibility.

A young filmmaker in Lagos today is more likely to believe their story matters because they have seen similar stories broadcast widely. A child in Accra grows up hearing familiar accents and seeing environments that look like their own on screen, not as exceptions, but as the norm.

TV Is Also Shaping Modern African Identity

African identity is not static; it is evolving. Television reflects that evolution in real time.

Today, audiences see:

  • Young Africans balancing tradition and modern dating culture

  • Stories tackling mental health in African households

  • Fashion and music influences spreading through TV series

  • Political satire shaping public conversation

Conversations that were once confined to homes are now being explored on screen, giving audiences the language to discuss issues that were previously unspoken.

In many ways, television is doing what oral tradition has always done: passing stories, values, humour, warnings, and history from one generation to the next. The difference is that today’s griots are writers, directors, and broadcasters.

The Future: From Watching to Owning Our Narratives

The next stage of African storytelling is not just about being seen; it is about ownership.

As more African creators produce content and platforms continue to invest in regional storytelling, television becomes more than a mirror. It becomes a tool for shaping how Africa is represented to itself and to the world.

While streaming continues to grow, television, particularly accessible platforms such as GOtv, remains one of the most effective ways to reach everyday audiences across different income levels and regions. After all, storytelling only matters if people can access it.

African stories are not new. They have always existed in families, on streets, in markets, in history books, and through oral traditions. What television has done, and continues to do, is give those stories a stage wide enough for millions to experience them at once.

The next time you watch a local series or documentary on DStv or GOtv, remember that you are not just being entertained. You are participating in the preservation of African identity itself.

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The Future of AI in Nigerian SMEs: Overcoming Barriers to Implementation

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Kehinde Ogundare 2025

By Kehinde Ogundare

Ask a tech entrepreneur in San Francisco what AI means for their business, and they are likely to talk about competitive advantage, product differentiation, and scale. Ask a small business owner in Kano or Onitsha the same question, and the conversation shifts entirely.

For many Nigerian SMEs, the priority is keeping the lights on, managing costs, and finding sustainable ways to grow in a challenging economic environment. This difference in perspective explains why the global AI conversation, often shaped by assumptions about stable infrastructure, deep capital, and abundant technical talent, frequently fails to address the realities facing Nigerian SMEs.

This matters because Nigerian SMEs are not a peripheral concern. In 2024 alone, MSMEs contributed 46.32% to Nigeria’s GDP, accounting for 96.9% of businesses and 87.9% of employment. These businesses are the backbone of the Nigerian economy, and if AI is going to mean anything for Nigeria’s development, it has to work for them in the daily conditions they actually operate in.

However, research drawing on empirical data from 144 Nigerian SMEs found that inadequate infrastructure, low digital literacy, skills shortages, and regulatory gaps are collectively preventing them from meaningfully engaging with AI. Awareness of AI is high and growing. What is missing is a clear and honest conversation about what adoption actually requires in this specific context. The barriers are real, but none of them are insurmountable. The question is whether the tools, pricing models, and support structures being offered to Nigerian SMEs are designed with those barriers in mind, or whether they have been built for another market entirely.

Subscription models making AI affordable for small businesses

When most small business owners hear “AI,” they imagine expensive software, specialist consultants, and a hefty upfront bill.

That assumption is not entirely wrong, but it describes a particular way of buying technology, not AI itself. The shift that makes AI genuinely accessible at the SME level is the move away from large, one-time capital purchases towards tools that charge a predictable monthly subscription. Businesses can pay for what they use, scale back when necessary, and avoid the debt that a major technology investment can create.

The deeper opportunity here is consolidation. Many SMEs are already spending money across multiple disconnected tools—one for invoicing, another for customer records, another for stock tracking—none of which talk to each other. An integrated platform that handles several of these functions together, with AI built in, can actually cost less than the sum of those separate subscriptions while giving business owners a clearer picture of their operations.

With margins already under pressure, any technology a business adopts needs to visibly show an increase in productivity or bottom line. Subscription-based, integrated platforms, priced transparently and honestly, are the model that best fits this reality.

Infrastructure challenges demand a mobile-first approach

No conversation about technology in Nigeria is complete without confronting the infrastructure problem, and AI is no exception. Nigeria continues to face major infrastructure barriers, including limited broadband access, unreliable power supply, and high data costs, all of which constrain deeper AI adoption. These are structural features of the operating environment that any sensible technology strategy must account for today.

The electricity situation alone is significant. The World Bank estimates that the lack of stable electricity costs Nigeria’s economy approximately $26.2 billion annually, equivalent to about 2% of GDP, forcing many businesses to run on expensive diesel generators. That cost ripples outward.

In practical terms, AI tools built for Nigeria cannot assume a stable broadband connection or a computer that is always powered on. The tools that will actually get used are the ones that work on a smartphone, consume minimal data, and can function offline when connectivity drops, syncing back up when it returns. The mobile phone is already how many Nigerian SME owners run their businesses. AI that meets them there, rather than demanding infrastructure they do not have, is AI that has a genuine future in this market.

The direction is clear: build capability from within, using tools that make that possible. Recent AI performance research reveals that 64% of African workers are already actively using AI at work, signalling massive grassroots readiness and driving forward-thinking organisations across Nigeria, Kenya, and South Africa to aggressively prioritise internal upskilling frameworks to bridge the talent gap.

As the policy groundwork is being laid, the commercial ecosystem is beginning to respond. What remains is a clear-eyed acceptance that AI tools built for this market need to look different from those built for markets with different realities. Low cost, low bandwidth, and usability for non-technical people are not modest ambitions; they are the actual requirements. Build for those realities, and AI has a real future in Nigeria’s SME economy.

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When Leaders THRIVE: Yetunde B. Oni’s Candid Counsel to Lateef Jakande Leadership Academy

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When Leaders THRIVE Yetunde B. Oni

Union Bank’s Managing Director and Chief Executive Officer sat with 30 of Nigeria’s most promising young leaders for a frank conversation on character, relationships and the discipline of growth.

Out of 25,000 applicants, only 30 earned a place. That single figure tells you how rare the room was when Yetunde B. Oni, Managing Director and Chief Executive Officer of Union Bank of Nigeria, recently sat down with a cohort of the Lateef Jakande Leadership Academy.

The Academy, a Lagos State Government initiative established in honour of Alhaji Lateef Kayode Jakande, the state’s first civilian governor, exists to raise a generation of ethical and capable young leaders. Its fellows are drawn from across professions, sectors and ethnicities, and shaped through a fellowship facilitated by the Africa Leadership Initiative, West Africa (ALI WA), whose work on values and principled leadership has become a quiet engine behind some of the country’s most thoughtful emerging talent.

It was into this gathering that Mrs Oni brought not a corporate address, but a conversation. Honest, personal and at times disarming, she spoke about the philosophies that have carried her through a career spanning more than three decades, the setbacks she has had to surmount, and the values that opened doors she never expected to walk through.

She gave them a framework to hold on to. She called it THRIVE.

The six principles

T — Take ownership of your relationships. Leadership, she argued, begins with the deliberate stewardship of the people around you. Relationships are not incidental to a career. They are infrastructure.

H — Honour God. She spoke openly about faith as a steadying force, an anchor that keeps ambition tethered to something larger than the self.

R — Recharge and refresh. Mental and physical health, she insisted, are not luxuries to be deferred until the work is done. Leaders who neglect their well-being eventually have less to give.

I — Invest in your growth. Continuous and heavy investment in personal development is, in her telling, the price of staying relevant. The learning never ends.

V — Value your work. She pressed the fellows on identity and brand. What do you stand for? Do you create value? Who, in truth, are you? The questions were not rhetorical.

E — Embrace setbacks. Failure, she said, is not the opposite of progress but a part of it. The leaders who endure are the ones who learn to metabolise disappointment rather than be defeated by it.

The people behind the leader

If one theme threaded the entire conversation, it was relationships. Mrs Oni was candid that she did not arrive at the top of Nigerian banking alone. She credited the steady support of family, her parents and her husband, alongside the mentors, friends, coaches and sponsors who shaped her at different stages.

She drew a sharp and useful distinction between a mentor and a coach, two roles often conflated and rarely understood, and she traced much of her progress back to a foundation of Nigerian cultural values: hard work, honesty and integrity, courtesy and respect. These, she told the fellows, are not relics. They are the very qualities that have earned her trust and opened doors throughout her journey.

“You need people,” was the message, delivered without sentiment. Relationships, she explained, must be managed and nurtured with the same seriousness one brings to any other discipline. Time must be managed with equal care.

On believing, and risking

Perhaps the most resonant moment came when Mrs Oni spoke about self-belief. She admitted that becoming the MD/CEO of Standard Chartered Bank, Sierra Leone, did not cross her mind – not because she was unqualified, but because she didn’t think she would get it. Encouraged by her husband, she applied anyway, and she got it!

That appointment would later see her make history as the first woman to lead a Standard Chartered Bank operation in her market.

The Union Bank of Nigeria appointment told a similar story. She had not even known the position existed after the CBN’s intervention. It came to her through relationships; through the quiet networks of people who knew her work and recommended her name while she was unaware in faraway Sierra Leone.

The lesson she left with the fellows was unambiguous. Believe in yourself. Take the risk. Put in for the thing you are not yet certain you deserve, because the opportunity you are waiting for may be one you cannot see, reaching you through someone you have not yet met.

Why this matters

Engagements of this kind are easy to underestimate. They produce no headlines about balance sheets and no immediate line on a financial statement. Yet they speak to something Union Bank has long understood: that institutions endure when they invest in people, and that leadership is built one honest conversation at a time.

Credit is due to the Africa Leadership Initiative, West Africa, whose facilitation of the Lateef Jakande Leadership Academy continues to shape young Nigerians of real promise, and to the Academy itself for the rigour of a process that turned 25,000 hopefuls into 30 fellows ready to lead.

For Yetunde B. Oni, the afternoon was less about what she had achieved than about what she was willing to give: her time, her story and her counsel, offered freely to those coming after her. It is, in the end, what the best leaders do. They light the path for the next generation, and they THRIVE.

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