Analyst says Nigerian banks are shifting from FX-driven profits to real, performance-based earnings.
- +Olumide Sole: Nigerian Banking Sector Going Through Transition Stage
Head of Financial Institutions Research at Renaissance Capital, Olumide Sole, has said Nigeria’s banking sector is undergoing a major transition from unusually high profits driven by foreign exchange gains to more sustainable earnings based on core banking performance.
Head of Financial Institutions Research at Renaissance Capital, Olumide Sole, has said Nigeria’s banking sector is undergoing a major transition from unusually high profits driven by foreign exchange gains to more sustainable earnings based on core banking performance.
Speaking during an interview on ARISE News on Monday, Sole explained that recent years saw banks record inflated profits due to macroeconomic conditions rather than operational strength.
He noted that foreign exchange gains played a significant role in boosting bank earnings across the industry.
“In 2023 and 2024, the sector as a whole was recording abnormal profit… we see FX gain in outsized positions.”
According to him, that phase is ending, as the current environment is forcing banks to rely more on their actual business performance.
“Now, reality has changed. Profit, the growth of profit now is more of what each bank is bringing to the table.”
Sole stated that this shift marks a return to fundamentals, where earnings will be driven by lending activities, asset quality, and operational efficiency rather than external windfalls.
He emphasized that the transition reflects a normalization of the banking sector after a period of exceptional gains.
“So now it’s more of what each bank and what each player… is bringing to the table.”
He added that the new phase will require stronger discipline from banks, as they adjust to a less favorable macroeconomic environment.
Sole concluded that while the era of outsized profits may be ending, the transition will ultimately lead to a more stable and realistic banking sector.
