E-Financial

Richer Banks, Poorer Economy: The Hidden Crisis in Nigeria’s Financial System

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5 months ago

October 20, 2025

Ugo Onwuaso

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By Blaise Udunze

Across Africa, banks are getting bigger but not necessarily better. From South Africa’s Standard Bank to Morocco’s Attijariwafa and Egypt’s National Bank, financial institutions are boasting record balance sheets, higher Tier 1 capital, and growing regional footprints. According to African Business magazine’s 2025 ranking of the continent’s top 100 banks, Africa’s total Tier 1 capital climbed to $126 billion, up from $120 billion in 2024.

But behind this glowing façade of balance sheet expansion lies a troubling irony, especially in Nigeria. Despite being home to some of the continent’s most visible lenders, Nigeria is missing from the International Monetary Fund’s latest list of Africa’s fastest-growing economies. While Nigerian banks such as Access Bank, Zenith Bank, UBA, and FBN Holdings feature among Africa’s top 20 in assets, their impact on real economic growth remains painfully limited.

In simpler terms, Nigeria’s banks are becoming richer without making the economy stronger.

It is one of the defining contradictions of modern Nigerian finance, where a banking sector keeps ballooning in size even as the real economy struggles to breathe. The IMF projects Nigeria’s GDP growth at 3.9 percent in 2025, below the 6-8 percent threshold that defines Africa’s fastest-growing economies. Meanwhile, smaller nations such as Rwanda, Benin, and Côte d’Ivoire are racing ahead, driven by reforms, industrial growth, and investment-friendly policies.

So why is Africa’s largest economy growing so slowly even with “Africa’s biggest banks” at its helm? The answer lies in how these banks make their money and how little of it trickles into productive enterprise.

Nigeria’s leading banks have swollen their balance sheets largely through asset revaluations, foreign currency adjustments, and customer deposits that sit idle or are channeled into risk-free government securities. What looks like growth on paper often reflects inflationary asset repricing, not expanded lending to manufacturers, agribusinesses, or small and medium enterprises (SMEs).

Three quarters of the industry’s celebrated “assets” are actually liabilities owed to the public. These are deposits that banks temporarily hold, not capital they generated or invested productively. This dependency on depositors’ funds reveals a system that looks rich in assets but is, in essence, shallow in innovation and weak in capital depth.

A banking system overly reliant on deposits is inherently fragile. Deposits are short term and confidence sensitive and can flee quickly during periods of policy uncertainty. Unlike equity or long term capital, they offer little cushion against shocks. This overdependence creates a false picture of liquidity but hides structural weakness. Nigeria’s banks may look stable, but their foundations are vulnerable, like a tower built on shifting sands of depositor confidence rather than the rock of sustainable capital formation.

Loans to the manufacturing and agricultural sectors remain a small fraction of total credit, while lending rates often hover above 27 percent. Many small businesses that form the backbone of job creation and innovation still cannot access affordable financing. Instead, banks have mastered the art of financial intermediation without real interconnection, mobilizing deposits but not transforming them into engines of growth.

This disconnect reveals a deeper issue with weak capital efficiency. In a healthy financial system, deposits are converted into productive loans that stimulate investment, create jobs, and boost exports. But in Nigeria, the ratio of bank loans to GDP remains among the lowest in Sub-Saharan Africa. Banks appear more comfortable storing wealth than stimulating enterprise. Treasury bills and government bonds, with minimal risk and decent yields, have become the preferred playground for Nigeria’s banking giants. The result is a financial system that thrives on fiscal inertia rather than productive dynamism.

Contrast Nigeria’s sluggish growth with the dynamism in East Africa, where banks like Kenya’s Equity Group and KCB are expanding aggressively, driving credit to real sectors and supporting regional trade. East Africa now contributes 21 banks to Africa’s top 100, up from just 13 in 2022, reflecting genuine growth in financial inclusion and productive lending. While Nigeria’s banks chase continental rankings, Kenya’s and Rwanda’s banks are quietly fueling economic revolutions.

Nigeria’s exclusion from the IMF’s list of Africa’s fastest-growing economies is symbolic. It tells a story of a giant whose growth is increasingly superficial. The IMF praised countries like Rwanda and Benin for fiscal discipline, macroeconomic stability, and structural reforms, as these are all areas where Nigeria continues to struggle. Despite policy adjustments and modest improvements in non-oil sectors, Nigeria’s economy remains shackled by inflation, currency instability, and policy uncertainty. These same constraints discourage banks from taking real sector risks.

In effect, the financial system mirrors the broader economy and is large in size yet underperforming in substance. When banks announce trillion-naira asset bases, it makes for good headlines but poor development economics. The irony is that asset expansion without capital productivity is like pumping air into a balloon, which is impressive in size but fragile in substance.

While the Central Bank of Nigeria’s Governor, Yemi Cardoso, insists that the nation’s economic reforms are “yielding visible results” and placing the country “on the path to stability, inclusiveness, and innovation-driven growth,” evidence on the ground paints a more sobering picture. The CBN’s optimism, though politically convenient, contrasts sharply with the structural realities of Nigeria’s financial system and the broader economy.

If reforms were truly delivering inclusive and innovation driven growth, it would be reflected in stronger credit access, industrial productivity, and improved living standards, not just in favourable rhetoric at global meetings. Yet, Nigeria’s banking sector remains dominated by balance sheet expansion rather than productive lending. Three quarters of the industry’s celebrated “assets” are actually liabilities to public deposits temporarily held, not capital generated through innovation or investment in the real economy.

This disconnect between financial growth and real-sector development underscores a deeper fragility. Banks continue to rely heavily on short-term deposits while shying away from financing manufacturing, agriculture, and small enterprises with the engines of inclusive growth. The result is an economy where the numbers look impressive on paper, but households and industries still struggle with high borrowing costs, limited credit, and declining purchasing power.

Far from demonstrating reform-driven resilience, Nigeria’s economic structure remains hollow at the core of a system rich in nominal assets but poor in capital depth and innovation. Macroeconomic stability cannot be claimed when inflation hovers around 18.02 percent, foreign investment inflows stagnate, and job creation lags far behind population growth.

In essence, what the CBN presents as progress is, in many respects, statistically false if stability is achieved through monetary tightening and exchange rate adjustments rather than genuine economic transformation. Until reforms translate into tangible outcomes of affordable credit, industrial renewal, and sustainable job creation, the claims of inclusiveness and innovation-driven growth will remain more aspirational than real.

For Nigeria’s regulators, analysts, and policymakers, the question is no longer how large the banks’ assets appear, but what those assets are doing for the economy. True strength must come from innovation in financial intermediation, capital efficiency, and credit diversification; support for real sector growth; and regional competitiveness on the African and global stage.

For Nigerian banks to translate asset expansion into real economic impact, the next frontier must be purposeful intermediation, where financial growth feeds productive enterprise, not just paper wealth. That begins with rethinking the credit model by lending based on business potential and cash flow viability, not just collateral. By partnering with fintechs and development institutions, banks can use data driven credit assessments to reach small manufacturers, agribusinesses, and innovators who drive job creation.

Beyond lending, true strength will come from building deeper capital bases and reducing dependence on short-term deposits. Banks must raise long-term funds through bonds, equity, and partnerships with pension and insurance institutions so they can finance industrial and infrastructure projects sustainably. Regulators, too, must align incentives with development by rewarding banks that channel credit into productive sectors and penalizing those that merely recycle deposits into government securities.

Ultimately, Nigeria’s banking future depends on a mindset shift from comfort in liquidity to confidence in innovation. The country does not need banks that only count wealth but those that create it. When balance sheet expansion begins to translate into accessible credit, inclusive growth, and industrial renewal, Nigeria’s banks will cease to be symbols of inflated success and become true instruments of national transformation.

Blaise, a journalist and PR professional writes from Lagos, can be reached via: [email protected]

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E-Financial

SEC Revokes Registration of Kensington Agro Trading Limited

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4 hours ago

March 4, 2026

Ebere Melum-Nwogbo

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Securities and Exchange Commission (SEC) has revoked the registration of Kensington Agro Trading Limited as a capital market operator with immediate effect.

In a public notice issued by the Commission, the regulator announced that Kensington Agro Trading Limited’s registration as a Commodity Broker/Dealer and Collateral Manager has been withdrawn, effectively stripping the company of its authority to operate within Nigeria’s capital market.

According to the notice, the revocation was carried out pursuant to the powers vested in the Commission under Section 61(6) of the Investments and Securities Act, 2025, as well as Rule 34(1) of the SEC Rules and Regulations 2013, as amended.

The SEC stated that the decision takes immediate effect and urged all stakeholders to take note of the development.

“Accordingly, commodity exchanges, the investing public, commodity traders, and all capital market stakeholders are advised to discontinue capital market-related dealings with the company,” the Commission said.

The directive means that Kensington Agro Trading Limited is no longer authorised to engage in any capital market activities under the regulatory oversight of the SEC. Market participants have been cautioned to avoid entering into transactions or maintaining business relationships with the firm in its former capacity as a registered operator.

While the notice did not specify the reasons for the revocation, such regulatory actions are typically taken in line with the Commission’s mandate to ensure compliance with extant laws, protect investors, and maintain market integrity.

The SEC, headquartered in Abuja, reiterated its commitment to upholding transparency, investor protection, and strict adherence to regulatory standards in Nigeria’s capital market.

The Commission’s action underscores its continued enforcement drive aimed at sanitizing the market and ensuring that only duly registered and compliant operators are permitted to function within the ecosystem.

Stakeholders and members of the public are encouraged to verify the registration status of capital market operators through official SEC channels before engaging in investment-related transactions.

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E-Financial

NRS Targets N40trillion in Tax, Royalty Revenue in 2026

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4 hours ago

March 4, 2026

Chike Onwuegbuchi

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Nigerians’ commitment to paying taxes has produced historic results. In 2025, voluntary compliance propelled the Nigeria Revenue Service (NRS) to collect a record ₦28.3 trillion, exceeding its target of ₦25.2 trillion and setting the stage for an even more ambitious 2026.

Dr. Zacch Adedeji, the Executive Chairman of NRS, while hailing the development recorded in 2025, announced that the service is targeting ₦40.7 trillion in tax and royalty collections for 2026, a 44% increase over last year.

The projection reflects reforms consolidating petroleum and mineral royalties under the NRS, streamlining a process previously handled by over 60 federal agencies, including the Nigerian Upstream Petroleum Regulatory Commission and the Nigeria Customs Service.

“With legislative support, we are confident of achieving this,” Dr. Adedeji said at a stakeholders’ roundtable organized by the House of Representatives Committee on Appropriations in Abuja.

The reforms, anchored in the Nigeria Revenue Service Establishment Act, 2025, signed by President Bola Tinubu, formalized the NRS and launched the most comprehensive tax overhaul in decades. By consolidating fragmented revenue collection, the NRS has strengthened efficiency, reduced compliance burdens, and expanded the tax base, particularly in non-oil sectors.

Finance Minister Mr. Wale Edun emphasized that the reforms aim to reduce reliance on Ways and Means financing and unsustainable subsidy arrangements funded by the Nigerian National Petroleum Company Limited.

Meanwhile, Chairman of the House Committee on Appropriations, Rep. Abubakar Bichi, during the stakeholders’ roundtable organized by the House of Representatives Committee on Appropriations in Abuja, assured that legislative oversight will ensure credibility, transparency, and accountability in revenue collection and enforcement.

The NRS’s new mandate signals more consistent enforcement, reduced regulatory overlap, and closer scrutiny of non-oil sectors and mineral operators. For investors, the reforms indicate a centralized revenue administration and a broader, more reliable tax base, potentially reducing macroeconomic volatility if targets are met.

Dr. Adedeji, speaking at the Nigeria Deposit Insurance Corporation (NDIC) Annual Strategic Stakeholders Retreat, emphasized that Nigeria’s journey toward a one-trillion-dollar economy depends heavily on trust.

“Strong bank capitalization and effective enforcement give confidence to the system. When people know their funds are safe, whether one naira or billions, they are more willing to save, invest, and participate in nation-building,” he said.

The NRS has also strengthened collaboration with key stakeholders, including a courtesy visit from KPMG executives, who commended the leadership and timely implementation of new tax laws, pledging continued professional engagement in support of national economic growth.

In another strategic engagement, Dr. Adedeji and Minister of State for Finance, Dr. Doris Uzoka-Anite, met with Central Bank of Nigeria Governor, Olayemi Cardoso, to align fiscal and monetary policies, further promoting sustainable national development.

With strong momentum from 2025 and a clear vision for 2026, the NRS aims not only to boost domestic revenue but also to strengthen public trust, enhance compliance, and drive national development. As Dr. Adedeji emphasized, “Your compliance strengthens our economy and drives national development.”

Nigeria’s taxpayers can take pride in their role in this historic achievement, and in shaping the country’s economic future.

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E-Financial

Nigeria’s Net Reserves Surge 50% to $34.8bn in 2025 – CBN Governor

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4 hours ago

March 4, 2026

Ugo Onwuaso

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Nigeria’s net foreign exchange reserves surged to $34.80 billion by end-2025, Central Bank Governor Olayemi Cardoso disclosed, marking a 50.58 percent rise of $11.69 billion from $23.11 billion in 2024.

Nigeria's Net Reserves Surge 50% to $34.8bn in 2025 – CBN Governor

CBN

The figure—a 772.18 percent leap or $30.81 billion improvement from 2023’s $3.99 billion—exceeds 2023’s gross reserves of $33.22 billion, signaling robust external financial buffers after adjusting for short-term liabilities like FX swaps and forwards.

Gross external reserves simultaneously grew from $40.19 billion in 2024 to $45.71 billion in 2025, up $5.52 billion, providing a truer gauge of capacity to meet immediate obligations.

Cardoso credited stronger external fundamentals, FX management transparency, and monetary reforms boosting investor confidence and exchange rate stability.

The CBN remains focused on reserve adequacy for macroeconomic balance and seamless FX operations. Cardoso noted in February 2026 that gross reserves continued climbing amid reform momentum.

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