African banks reported stronger profits across the region while Nigeria emerged as an exception, according to a BusinessDay review of recent sector results, with local lenders posting weaker returns after two years of exceptional earnings.
REGIONAL PROFIT GROWTH
BusinessDay reported that many banks across Africa recorded profit increases as the sector benefited from a combination of macroeconomic factors and recoveries in core banking activities. Across a number of markets, banks had returned to solid profitability following the disruption of the pandemic, with improvements in net interest income, fee income and cost management cited as supportive factors.
In several countries, currency movements and policy rate cycles contributed to stronger headline results. In markets where local currencies experienced adjustment against hard currencies, banks recognised gains on foreign exchange positions and related revaluations. Meanwhile, elevated policy rates lifted returns on interest-earning assets in jurisdictions where central banks maintained tighter stances to control inflation, which supported margins for many institutions.
Analysts and market observers quoted by BusinessDay described the regional picture as one of cautious recovery, with profitability returning alongside renewed lending activity and stabilising asset quality in some markets. Banks that had rebuilt buffers during the previous years were able to increase lending and to capitalise on higher yields in their domestic markets, the report said.
WHY NIGERIA BECAME AN OUTLIER
By contrast, BusinessDay said Nigerian banks posted a slowdown in earnings after two years of record results. Those earlier gains had been underpinned in large part by naira devaluation gains and the boost to margins from elevated interest rates, which together supported outsized profitability in the immediate aftermath of currency adjustments and monetary tightening.
As those one-off and cyclical drivers eased, Nigerian lenders faced a more challenging comparative environment. BusinessDay highlighted that the swing in performance reflected a normalization of the extraordinary items that had inflated prior results, alongside domestic pressures including liquidity dynamics and a less supportive macro backdrop for revenue growth.
The report noted that when currency-related gains and exceptional items were stripped out, underlying profitability in Nigeria showed signs of slowing. That prompted market participants to reassess earnings expectations for local banks and to focus on the durability of revenue streams once the effects of past exchange rate movements had been fully recognised.
For investors and regulators, the divergence between regional peers and Nigeria has implications for capital planning and risk assessment. Banks that had relied heavily on currency gains to bolster earnings faced questions about how they would sustain margins, while supervisors monitored asset quality and capital buffers to ensure resilience in the absence of extraordinary income sources.
BusinessDay also drew attention to strategic responses by some lenders, including efforts to diversify noninterest income, to expand fee-based services, and to tighten cost controls. Such measures were framed as necessary to offset the volatility that comes with reliance on market-driven gains, and to build more predictable profit streams going forward.
Market participants cited in the report said the contrast between the regional trend and Nigeria underscored the importance of distinguishing between cyclical and structural drivers of bank profits. Where gains emanated from one-off revaluations, those were less likely to translate into sustainable returns, whereas improvements in core lending margins and lower impairment charges pointed to more durable performance.
The BusinessDay article placed the Nigerian experience in the broader context of a continent where banking sectors were navigating post-pandemic recovery, commodity price shifts and divergent monetary policies. It suggested that investors and regulators would need to adjust expectations for profit growth as the effects of prior currency shocks and rate cycles receded.
Sources: BusinessDay Nigeria Banking