E-Financial
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: [email protected]
A new ₦50 charge on electronic money transfers above ₦10,000 is to take effect from Jan. 1, 2026, following preliminary system adjustments observed across several banking platforms ahead of the New Year.
CBN
The levy, tied to government stamp duty regulations, is separate from and in addition to regular bank transfer fees already borne by customers.
Industry sources told the News Agency of Nigeria (NAN) on Friday in Lagos that while existing bank charges would remain unchanged, customers initiating qualifying transfers would now pay both their normal transfer fees and the extra ₦50 stamp duty per transaction.
In a major shift to the current practice, the ₦50 levy which was previously borne by receivers of funds will now be paid by senders.
This implies that for every electronic transfer above ₦10,000, the sender will bear the full cost of the stamp duty alongside the standard transaction fees charged by their bank.
According to the emerging charge structure sighted on some banking platforms, the new levy applies only to transactions above ₦10,000 and will be deducted on a per-transaction basis.
Transfers below ₦10,000 remain exempt, while movements of funds between accounts owned by the same individual within the same bank are also not affected.
Analysts, however, warn that for millions of Nigerians who rely on frequent small-value transfers to meet daily needs, the additional government charge, layered on existing banking costs, could deepen financial strain for households already operating on thin margins.
Customers have in recent weeks raised concern over what they describe as a steady rise in transaction-related deductions, noting that the quiet rollout of the new ₦50 levy has heightened anxiety.
They observed that January is traditionally one of the most financially challenging months for households, driven by school fees, rent renewals, food inflation and post-holiday obligations, and questioned the timing and limited public communication around a change that directly affects routine financial activity.
Digital transfers have become central to everyday life in Nigeria, underpinning business settlements, informal trade, family remittances and emergency support.
With more than 70 per cent of transfers estimated to fall below ₦20,000, financial experts say the cumulative impact of a ₦50 charge on each qualifying transaction, when combined with existing bank fees, will significantly raise monthly transaction costs for individuals and micro and small enterprises.
For many Nigerians, the concern extends beyond the levy itself to the broader pattern of rising financial pressure that has eroded household resilience over time.
They point to the combined weight of escalating food prices, high transportation costs, stagnant incomes and a range of service charges that, in their view, “pile up quietly in the background”.
Stakeholders fear that introducing an additional government-backed charge at the start of the year, and doing so with minimal public sensitisation, may reinforce perceptions that more cost-heavy policies could be introduced in 2026 without adequate engagement or clarity.
“Why is such a significant cost being quietly introduced at the start of the year? Why was there no widespread announcement or public sensitisation? And what other policy shifts might be coming that Nigerians have not yet been informed about?” one Lagos-based small business owner asked in a chat with NAN.
As Jan. 1 approaches, many households say they are bracing for yet another financial burden in an economy where, for them, every naira already feels stretched beyond its limit.
They called on relevant authorities and regulators to provide clear guidance on the new charge structure, explain its legal basis, and ensure that customers are adequately informed about how it will affect their daily transactions.
Despite being the global epicentre of mobile money innovation, Sub-Saharan Africa remains home to tens of millions of adults who do not own a mobile money account. A new World Bank report disclosed.
According to the Global Findex Database 2025, Sub-Saharan Africa is widely celebrated as the birthplace of mobile money, a technology that has transformed how people send, receive, save, and borrow money using basic mobile phones.
“Yet, the region still accounts for one of the world’s largest concentrations of adults without mobile money accounts,” it said.
The report shows that while about 40 percent of adults in Sub-Saharan Africa had a mobile money account in 2024, up sharply from 27 percent in 2021, roughly 60 percent still do not.
The reasons, the report argues, are less about lack of awareness and more about deep structural barriers that continue to exclude large segments of the population.
According to the report, a lack of money is the single most common barrier to mobile money account ownership in the region.
For many low-income households, irregular earnings, subsistence livelihoods, and dependence on cash-based transactions reduce the perceived value of maintaining an account, even when services are widely available.
This challenge is compounded by affordability issues. Transaction fees, charges for cashing out, and the cost of maintaining an active SIM card can deter the poorest adults, reinforcing the perception that mobile money is not designed for very small or infrequent transactions.
In Nigeria, the World Bank Group has announced an estimate that 139 million in 2025 will be living in poverty despite the reforms of the federal government.
Mobile phone ownership gaps persist
Mobile money cannot function without a mobile phone, yet phone ownership itself remains uneven. The report finds that 40 percent of adults now own a mobile money account, up from 27 percent in 2021.
And those who do not have a financial account also do not own a mobile phone of any kind.
This creates a double barrier: adults who are financially excluded are often also digitally excluded.
Among those without phones, the cost of the device is cited as the primary obstacle. While basic phones are more affordable than smartphones, the report notes that even these can be out of reach for the poorest households, especially in rural areas. Without addressing device affordability, efforts to expand mobile money risk leaving behind the very groups they aim to serve.
The report disclosed that even when phones and accounts are available, digital capability remains a challenge. The report finds that only about half of mobile money account owners in Sub-Saharan Africa protect their phones with passwords, compared with much higher shares in other regions.
Limited digital literacy raises concerns about fraud, mistaken transfers, and scams, which in turn undermines trust in mobile financial services.
Trust issues are further reinforced by negative user experiences. Only about half of the adults in the region who sent money to the wrong person using mobile money reported getting it back, according to the report. Such experiences can discourage first-time users and lead dormant users to abandon their accounts.
A large untapped opportunity
Despite these challenges, the report points to a significant opportunity. In Sub-Saharan Africa, about a quarter of adults without accounts already own a mobile phone, have official ID, and have a SIM card registered in their own name, meaning they have all the prerequisites for mobile money adoption.
“Closing the gap will require coordinated action: reducing the cost of devices, expanding ID coverage, strengthening consumer protection, and designing low-cost products that reflect the financial realities of poor and rural households,” the World Bank argues.
ation for Africa, turning ambition into scalable capital and risk mitigation solutions.
Building on the successful conclusion of the 17th replenishment of the African Development Fund (ADF-17), which mobilised $11 billion for Africa’s most vulnerable countries, the African Development Bank Group and the Government of the United Kingdom convened global investors and private sector leaders in London to accelerate a new phase of private capital mobilisation for Africa’s development.
The inaugural Africa Private Capital Mobilisation Day, held on 17 December at Lancaster House, brought together more than 150 senior decision-makers from private equity firms, sovereign wealth funds, pension funds, insurers, philanthropies, and development finance institutions and export credit agencies—marking a decisive shift from dialogue to execution.
The high-level event was hosted by the African Development Bank Group in partnership with UK government institutions, the Foreign Commonwealth and Development Office, UK Export Finance and British International Investment, reflecting a shared ambition to scale private capital flows into African economies.
Speaking at the opening, African Development Bank Group President Dr Sidi Ould Tah described the event as a natural continuation of the ADF-17 replenishment process and a decisive step toward addressing Africa’s estimated $402 billion annual development financing gap.
“We will build on recent engagements with development finance institutions, export credit agencies, pension funds, sovereign wealth funds, insurers, and philanthropic partners to advance concrete initiatives under our vision for a New African Financial Architecture,” said Dr Ould Tah.
The Africa Private Capital Mobilisation Day aligns with President Ould Tah’s Four Cardinal Points vision, which focuses on unlocking Africa’s capital potential, strengthening financial sovereignty, transforming demographic growth into a dividend, and delivering resilient infrastructure and value chains.
UK Minister for Development, Jenny Chapman said, “We are delighted that President Ould Tah decided to hold the first Private Capital Mobilisation Day here in London, recognising the critical role of the City of London in mobilising investment for Africa. The UK’s shifting role—from donor to investor—will support countries who want to grow their economies and ultimately ultimately exit the need for aid.”
The programme featured focused discussions on reshaping perceptions of risk in Africa, designing innovative financial platforms, and mobilising capital in fragile and frontier markets.
New analysis on the Global Emerging Markets Risk Database delivered by the Center for Global Development presented new evidence showing that long-term lending to African borrowers has historically been significantly less risky than commonly perceived.
Sector-focused discussions underscored the strategic role of healthcare and aviation in strengthening Africa’s economic resilience, productivity and integration. Participants were introduced to two flagship initiatives championed by the Bank Group and its partners:
– The Africa Medicines and Equipment Facility, developed in partnership with the Gates Foundation, will provide African countries with predictable, timely, and affordable financing to secure essential medicines and medical equipment.
– The Integrated Aviation Transformation Programme for Africa—supported by a dedicated blended-finance facility—aims to modernise and expand Africa’s aviation ecosystem—from airports and airlines to enabling services critical to trade, tourism, and regional integration.
In parallel, President Ould Tah convened a closed-door roundtable with senior executives from approximately 30 leading institutional investors to explore the launch of an Africa-focused Private Sector Innovation Lab. The proposed platform would serve as a dedicated space to co-create new financing instruments, partnership models, and risk-sharing solutions tailored to African markets.
The outcomes of the Africa Private Capital Mobilisation Day are captured in the London Communiqué, setting out clear commitments by the African Development Bank Group and its partners to scale private capital mobilisation for Africa.
Further work will go into setting out priority actions and implementation pathways to scale private capital mobilisation for Africa, turning ambition into scalable capital and risk mitigation solutions.
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