Nigerian banks are expected to record weaker profits this year despite raising trillions of naira in fresh capital to strengthen their balance sheets, according to a new industry report by Agusto & Co. Limited.
In a recent report, the pan-African credit rating agency projected a 19.2 per cent drop in profit before tax in 2025, warning that rising loan impairments and tighter monetary policy would erode gains from revenue growth.
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“The funding pressure emanating from the contractionary stance of the monetary authority and the absence of foreign currency revaluation gains as the exchange rate stabilises will also moderate the Industry’s performance. Thus, we anticipate a 19.2 per cent decline in the profit before taxation in FY 2025,” it said.
The report highlighted the impact of the Central Bank of Nigeria’s decision to end regulatory forbearance, which had allowed banks to defer recognising some bad loans.
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With that measure withdrawn, lenders are now forced to downgrade underperforming loans, pushing the industry’s impaired loan ratio to 6.9 per cent by December 2025, up from 5.2 per cent at the end of last year. The figure would exceed the CBN’s 5 per cent benchmark.
“Agusto & Co. believes the regulatory forbearance termination will impact the quality of the Industry’s asset portfolio. The downgrade of underperforming loans, hitherto classified as stage 2 exposures, based on the regulatory forbearance, will expand the stage 3 loan portfolio.
“Thus, we expect the impaired loan ratio to further increase to 6.9% (FYE 2024: 5.2%) by 31 December 2025, higher than the 5% regulatory guidance.”
It however said rising impairment charges from accelerated provisions on underperforming loans will weigh heavily on profitability.
The report noted that capital raising has dominated banking activities since the CBN issued a new minimum paid-up capital directive in March 2024.
Banks have raised about N2.5 trillion between 2024 and July 2025, largely from existing shareholders, with more expected before the March 2026 deadline. Eight banks have so far met the requirement, although some funds are still undergoing regulatory verification.
Despite these efforts, Agusto & Co. said profitability will come under strain. It projects that the sector’s pre-tax return on average assets will fall to 2.2 per cent in 2025 from 3.7 per cent in 2024, while pre-tax return on equity will decline to 27.3 per cent from 48.2 per cent.
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The industry is also adjusting to structural changes. Alpha Morgan Bank joined the market in December 2024, bringing the number of licensed banks to 36 as of July 2025, though that will be tempered by the planned merger between Providus Bank and Unity Bank.
Agusto & Co. nevertheless expects revenues to rise, supported by higher transaction volumes and the deployment of fresh capital in a high-yield environment.
But it stressed that these gains will be undermined by rising funding costs, the absence of foreign currency revaluation gains as the naira stabilises, and a heavier burden of impaired loans.
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