As FX gains fade, Nigerian banks focus on non-interest income, leveraging fees, commissions, and digital innovations to sustain growth

As the extraordinary foreign exchange gains that banks enjoyed following the harmonisation of the FX market taper off, market watchers say lenders are increasingly focusing on alternative non-interest income streams.

Also read: Naira exchange rate gains as FX inflows strengthen

Experts at Meristem Securities, in their November 2025 Banking Sector Highlights, noted that while interest income will continue to drive growth, banks are actively seeking new ways to diversify revenue.

“Beyond interest income, more banks are making efforts to grow their non-interest income, especially after the extraordinary FX gains made in the last two years as a result of the naira devaluation and depreciation. The ability to grow non-interest components like fees and commissions, hinged on increased demand and the impact of digitalisation, would help boost the non-interest revenue stream,” Meristem said.

Following President Bola Tinubu’s FX market harmonisation in 2023, which led to naira depreciation and a windfall for banks, the National Assembly imposed a windfall tax.

Six banks reportedly paid about N205.59bn in 2024 alone.

Analysts expect gross earnings growth to moderate in 2025 as banks transition into a more normalised earnings environment, although the high Monetary Policy Rate (27%) supports continued interest-driven growth.

Non-interest income remained robust for several banks.

By the third quarter of 2025, nine financial institutions earned about N2.81tn from account maintenance fees, commissions, e-business, and other charges — a 24.10 per cent increase from the same period in 2024.

Access Holdings saw a slight dip in non-interest income (-2.32% YoY) due to FX revaluation losses, while other operating income (+110.31% YoY) and fees and commission (+49.53% YoY) helped cushion the impact. Similarly, Sterling Financial Holding and United Bank for Africa experienced offsetting gains and losses in trading and fees.

Meristem highlighted that the Central Bank of Nigeria’s revised asymmetric corridor has lowered banks’ effective borrowing cost, enhancing their capacity to extend credit, though lending rates are unlikely to decline significantly.

“Although the liquidity expansion gives banks additional capacity to extend credit, it is unlikely to translate into a significant reduction in lending rates to the real sector. Loan pricing is expected to stay elevated as banks work to meet the 50% loan-to-deposit ratio while keeping non-performing loans in check,” the analysts noted.

The CBN confirmed that 16 banks have now met recapitalisation requirements, up from 14 in September 2025.

Speaking at the 2025 Parthian Economic Discourse, Bismarck Rewane of Financial Derivatives warned that the banking sector is undergoing a shift in competitive dynamics.

“The bargaining power of the banking system is getting weaker. Digital financial services like OPay and Moniepoint are dominating advertising slots and consumer attention. The banking sector is going through a change to make it more efficient… clients have become sophisticated and resistant to increases.”

Also read: Naira appreciates by over 8% following CBN’s new FX platform

The evolving landscape suggests that Nigerian banks must innovate beyond traditional interest-based earnings to remain competitive in an increasingly digital, fee-driven environment.