E-Financial
If Capital is the Answer, What Exactly is the Problem with First Holdco
By Blaise Udunze
The Olayemi Cardoso-led Central Bank of Nigeria’s 24-month compliance timeline for the recapitalization of Nigeria’s banking system is about to conclude on March 31, 2026, which is framed as an unavoidable solution to systemic fragility, weak balance sheets, and the demands of a larger, more complex economy. Bigger capital, regulators argue, will produce stronger banks.
Though First Bank may have met the CBN’s N500 billion minimum requirement, the latest financials from Femi Otedola-led First HoldCo Plc, which is the parent of Nigeria’s oldest commercial bank, offer a sobering counterpoint, revealing that capital alone cannot cure structural weakness, governance failure, or deep-rooted risk management flaws. If capital is the answer, what exactly is the problem?
What is truly astonishing to many is that beneath the headline growth in earnings lies a financial institution struggling with collapsing earnings quality, surging credit impairments, volatile fair-value exposures, and rising operating inefficiencies. First HoldCo’s numbers are not merely a company-specific disappointment; they are a mirror reflecting the deeper fault lines within Nigeria’s financial system and a warning that recapitalisation, in its current form, risks becoming another cosmetic reset rather than a genuine reform.
On the surface, the topline appears encouraging. The figures showed that gross earnings rose by 17.1 percent to N2.64 trillion in the nine months to 2025, while interest income surged by over 40 percent to N2.29 trillion. Figuring it out, investors, depositors, and analysts understand that these figures, however, are largely the product of a high-interest-rate environment driven by aggressive monetary tightening. They reflect repricing, not necessarily improved lending quality or superior balance-sheet strength. In an economy under strain, rising interest income often signals the transfer of macroeconomic stress from borrowers to banks, rather than sustainable growth.
This becomes evident once attention shifts from revenues to profitability. The performance disclosed that profit before tax declined by 7.3 percent to N566.5 billion, while profit after tax fell nearly 13 percent to N458 billion. Earnings per share dropped by a steep 27.7 percent, a sharper decline than headline profit suggests, pointing to dilution pressures and reduced value accruing to shareholders. More striking still is the full-year picture, where profit after tax from continuing operations collapsed by about 92 percent, plunging to N52.7 billion from N663.5 billion in the prior year. Such a dramatic fall cannot be explained by temporary volatility; it is the consequence of long-suppressed risks finally surfacing.
The most damaging of these risks is asset quality. The most critical figure is the impairment charges that rose by nearly 69 percent in the nine months to N288.9 billion, and by over 75 percent on a full-year basis to N748 billion, and invariably, these numbers tell a story of borrowers buckling under FX exposure, weak cash flows, and a deteriorating operating environment. They also raise uncomfortable questions about credit underwriting standards, concentration risk, and the effectiveness of internal risk controls in earlier lending cycles. After impairments, much of the benefit from higher interest income evaporated, exposing the fragility of earnings built on stressed credit.
Compounding this weakness was a sharp reversal in fair-value accounting. First HoldCo recorded a net loss of N87 billion on financial instruments measured at fair value, a stark contrast to the N549 billion gain recorded a year earlier. Due to this outcome, larger chunks of shareholders’ value were wiped out because this single swing accounted for a negative variance of over N636 billion year-on-year.
The episode highlights a dangerous dependence on market revaluations and FX-driven gains to prop up earnings, as seen that the moment conditions turn, paper profits vanish just as quickly, raising questions about the transparency, sustainability and economic substance of reported results.
Non-interest income provided little cushion. In the nine months to 2025, it declined by 44.5 percent, falling from N618.7 billion to N343.7 billion. While net fees and commission income rose by about 25 percent, the increase was too small to offset the collapse in other income lines. The result is a revenue base that is narrow, volatile, and overly exposed to market swings. Recapitalising banks without addressing this lack of income diversification simply amplifies vulnerability.
At the same time, operating costs surged. Operating expenses climbed by nearly 40 percent to N942.7 billion, while other operating expenses jumped over 43 percent on a full-year basis. Inflation, FX depreciation, energy costs, and technology spending all played a role, but the deeper issue is efficiency. Costs are rising far faster than sustainable income, eroding margins and weakening internal capital generation at precisely the moment banks are being asked to shore up capital buffers. Injecting fresh capital into institutions with broken cost structures does not resolve inefficiency; it merely postpones the inevitable days.
These financial stresses revive longstanding concerns about governance and risk culture in Nigeria’s banking system. Large impairment charges and valuation reversals do not emerge overnight. They accumulate through years of weak credit governance, excessive sector and obligor concentration, insider-related exposures, inadequate stress testing, and regulatory forbearance. Recapitalisation does not answer the most important questions: who gets credit, how risks are approved, how boards exercise oversight, and whether management is truly accountable. Without reform in these areas, more capital simply provides a thicker cushion for future losses.
Foreign exchange risk remains the system’s most dangerous and least resolved fault line. Currency devaluation inflates asset values and boosts interest income on paper, while simultaneously crushing borrowers with FX-denominated obligations. Banks may book translation or revaluation gains even as credit quality deteriorates beneath the surface. This contradiction fuels earnings volatility and undermines confidence in financial reporting. A stronger capital base does not neutralise FX mismatch risk; only disciplined risk management, credible macro policy, and transparent reporting can.
Perhaps most troubling is what First HoldCo’s results imply about regulatory credibility. Many of the impairments and valuation losses reflect risks that were visible long before they crystallised in the income statement. When losses arrive suddenly and in clusters, concerns from different quarters are raised and markets begin to question whether supervision is proactive or merely reactive. Recapitalisation without restoring trust in regulatory oversight risks being interpreted as an admission that deeper problems remain unaddressed and by extension, this erodes trust in the system and a stronger banking sector must also be a fairer and more accountable one.
Nigeria has travelled this road before. Bigger banks and higher capital thresholds have previously delivered reassuring headlines, only for familiar weaknesses to resurface in new forms. First HoldCo’s numbers demonstrate that capital adequacy, while necessary, is far from sufficient. Without the CBN confronting governance failures, asset quality deterioration, concentration risk, FX exposure, transparency gaps, and weak risk culture, recapitalisation risks will become another exercise in delay rather than reform.
The uncomfortable truth is that real stability requires more than fresh equity. It demands honest loss recognition, credible financial reporting, disciplined credit practices, diversified income streams, and regulators willing to enforce standards consistently. Until these missing pieces are addressed, recapitalisation will remain what it too often has been in Nigeria’s financial history, as a larger buffer for the same old problems, and a temporary comfort masking unresolved fragilities.
Blaise, a journalist and PR professional, writes from Lagos, can be reached via: [email protected]
Nigerians lost N25.85 billion to digital payment fraud in 2025, according to Central Bank of Nigeria (CBN).
Though the figure represents a significant decline from the N52.26 billion recorded in 2024, CBN, said the losses remained substantial for payment service providers (PSPs).
According to the report, although the value of digital payment fraud declined significantly year-on-year, when compared to the N52.26 billion recorded in the previous year, the losses remained substantial for Payment Service Providers (PSPs), underscoring the need for stronger fraud prevention measures across the industry.
In the report, the CBN, also identified systemic risks, cyber threats, the dominance of a few systemically important payment service providers, and the activities of unlicensed payment companies as major concerns confronting the financial sector.
According to the report, although the value of digital payment fraud declined significantly year-on-year, the losses remained substantial for Payment Service Providers (PSPs), underscoring the need for stronger fraud prevention measures across the industry.
“Digital payment fraud in Nigeria stood at N25.85 billion in 2025,” the apex bank said.
It noted that while this represented a considerable improvement from the N52.26 billion lost in 2024, the amount remained significant.
“Though this was lower than N52.26 billion in the preceding year, it represented a substantial loss for PSPs,” the report stated.
The CBN attributed the reduction in fraud losses to enhanced security measures implemented across the financial sector.
It said, “The lower losses in 2025 reflected improvements in monitoring, BVN-NIN integration, and tighter controls.”
Beyond fraud, the report warned that Nigeria’s rapidly expanding digital payments landscape faces increasing systemic vulnerabilities as banks and fintech companies become more interconnected through shared payment infrastructure.
According to the report, a major operational failure involving a single payment service provider could quickly spread across the financial system because of the growing dependence on integrated payment platforms.
The CBN observed that despite ongoing efforts to strengthen payment system integration, interoperability remains a significant challenge.
It disclosed that about half of fintech stakeholders continued to express dissatisfaction with the current level of system-wide interoperability.
The report stated that “about 50.00 per cent of fintech stakeholders continued to rate system-wide interoperability as poor, primarily due to the lack of universal APIs and data-sharing standards.”
The apex bank also expressed concern over the concentration of payment activities among a few Systemically Important Payment Service (SIPS) providers, warning that operational failures involving any of them could have widespread consequences.
It explained that the failure of such providers could trigger a “domino effect”, where insolvency or operational glitches in one payment service provider spread rapidly to others, disrupting the smooth functioning of the financial system.
Cybersecurity also featured prominently among the risks identified in the report.
The CBN warned that payment service providers remain vulnerable to ransomware attacks, data breaches and credential theft, noting that cybercriminals are becoming increasingly sophisticated in targeting financial institutions.
According to the report, “Banking and fintech institutions remained prime targets for ransomware, data leaks, and credential theft.”
It added that, “Cyber threats in Nigeria are no longer random cybercrimes, but increasingly targeted, organised, and identity-driven campaigns.”
The report further cautioned Nigerians against transacting with unlicensed payment companies, stressing that such entities operate outside regulatory oversight and expose users to significant financial risks.
It warned that customers using unlicensed PSPs are not protected by existing regulatory safeguards and that such operators could facilitate illicit financial activities.
“Users of unlicensed PSPs are not covered by regulatory protection that comes with effective oversight and supervision,” the CBN said.
It further warned that, “Unlicenced payment companies are gateways for money laundering which could undermine regulatory efforts and corrode public trust.”
The report underscores the growing importance of strengthening fraud detection systems, improving payment infrastructure interoperability, enhancing cybersecurity resilience, and intensifying regulatory oversight as Nigeria continues to expand its digital payments ecosystem.
Nigeria Revenue Service (NRS) yesterday announced that medium and large companies in Nigeria that earn income from cryptocurrency and other virtual asset transactions will now be subject to a 30 per cent corporate income tax.
NRS stated this in its new guidelines setting out a tax framework for cryptocurrency and other digital asset transactions.
The guidelines cover registration, record-keeping, valuation, and tax treatment for VASPs, P2P operators, and individuals in the virtual asset space.
NRS said the move is aimed at encouraging voluntary compliance and improving transparency as Nigeria’s digital asset sector grows.
The Guidelines on the Taxation of Virtual Assets, provide a comprehensive framework for the taxation of virtual asset transactions and businesses operating within Nigeria’s digital economy.
The guidelines apply to companies, individual taxpayers, Virtual Asset Service Providers (VASPs), peer-to-peer (P2P) marketplace operators and other participants in the virtual asset ecosystem
The latest framework follows the signing of the Presidential Executive Order on Virtual Assets Coordination, 2026 by President Bola Tinubu, which established a coordinated regulatory structure for cryptocurrencies, stablecoins, tokenised assets and other digital assets across government agencies.
According to the NRS, companies that derive profits from virtual asset activities will be taxed under the provisions of the Nigeria Tax Act (NTA), 2025. While small companies will continue to enjoy applicable tax exemptions under the law, medium and large companies will be liable to the standard 30 per cent corporate income tax rate.
The agency stated that taxable income under the guidelines covers a broad range of virtual asset-related activities, including cryptocurrency trading, the operation of virtual asset exchanges, transaction fees, brokerage commissions, custody and wallet services, token issuance, mining, staking, decentralised finance (DeFi) activities, investment gains and other virtual asset business operations.
According to the guidelines, “Applicable rates under the NTA include progressive rates for individuals, and 30 per cent for companies other than small companies.”
The NRS said the guidelines were introduced to provide clarity, certainty and consistency in the administration of Nigeria’s tax laws as they apply to virtual assets, adding that the framework is intended to improve transparency, encourage voluntary tax compliance and support the development of an efficient tax regime for the digital asset sector.
The agency also clarified that merely holding cryptocurrencies or other virtual assets does not constitute a taxable event.
Any appreciation in the value of a digital asset while it remains in a taxpayer’s possession will not attract income tax until the asset is sold, exchanged or otherwise disposed of through a taxable transaction.
Similarly, transfers of cryptocurrencies or other virtual assets between wallets owned and controlled by the same individual are exempt from income tax, provided there is no change in beneficial ownership.
This means that moving digital assets such as Bitcoin or Ether between personal wallets will not trigger a tax liability.
However, the exemption does not extend to transfers involving companies, partnerships, trusts, unincorporated associations or other legal entities, where different tax rules may apply.
The NRS further explained that although these non-taxable transactions do not attract immediate tax, they establish the acquisition cost for future disposals.
Consequently, taxpayers are required to maintain adequate records of acquisitions, transfers and disposals to facilitate accurate tax computations when taxable events occur.
The guidelines also reaffirm that unrealised gains on cryptocurrencies and other virtual assets are not subject to income tax. Instead, tax liability arises only when a taxable disposal takes place, aligning Nigeria’s approach with internationally recognised principles for the taxation of digital assets.
The issuance of the guidelines is expected to provide greater regulatory certainty for investors, businesses and digital asset service providers, while strengthening the government’s efforts to expand the tax base and improve compliance in Nigeria’s growing virtual asset ecosystem.
As more Nigerians adopt digital financial services, fraudsters are also finding new ways to target unsuspecting users. Nigeria has recorded more than 24.1 million compromised online accounts since 2004, with hundreds of thousands of additional cases reported in early 2026. While these figures are not limited to financial accounts, they highlight the growing exposure of personal information and login credentials online.
Fraudsters often use phishing links, impersonation and other social-engineering tactics to trick people into revealing sensitive information such as passwords, OTPs, BVN or NIN details.
To help users strengthen the security of their accounts, PalmPay provides a range of built-in protection tools. One of these is the Transaction Guard.
The feature enables users to set single, daily, or monthly transaction limits. Whenever a transaction exceeds that limit, an additional verification step; facial verification- is required before it can be completed. This helps reduce the risk of unauthorized transfers, even if an account has been compromised.
Here’s how Transaction Guard helps keep your money safe:
- Keeps User in Control
The feature gives you greater control over your account by ensuring that higher-value transactions require your facial verification before they are processed. Transaction Guard requires facial verification before eligible transactions are completed, making it harder for unauthorized users to move your funds.
- Helps Mitigate Account Takeovers
Even if your login credentials or OTP are compromised, Transaction Guard helps limit potential losses by requiring an additional verification step that fraudsters cannot easily complete.
- Reduces the Risk of Fraud
By activating this security checkpoint, Transaction Guard helps protect users against common fraud attempts, giving them greater confidence when faced with scam attacks.
In a recent interview, Femi Hanson, Head of Marketing, PalmPay said: “Nigerians are increasingly embracing digital payments in their everyday lives hence maintaining trust and confidence of users must remain a top priority. Today, security is just as important as speed and convenience. That’s why PalmPa is continuously investing in solutions that give our customers greater control over their finances. Transaction Guard is one of those security features we’ve introduced to help users add an extra layer of protection to their accounts and mitigate fraud.”
How to Activate Transaction Guard
Activating Transaction Guard is quick and easy. Simply open the PalmPay app, go to Profile, tap Security Center, select Transaction Guard, switch it on, and complete the verification process.
As digital payments become embedded in everyday life, taking advantage of built-in security features can make a significant difference. By enabling Transaction Guard, PalmPay users can better protect their accounts and enjoy a safer, more secure digital banking experience.
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