Agusto & Co., a pan-African credit rating agency, has projected that Nigerian banks’ profit before tax (PBT) for 2025 will drop by 19.2 per cent, primarily due to higher impairment charges, reduced foreign exchange (FX) revaluation gains, and regulatory changes.
The pan-African rating agency made this known in its latest banking industry report for 2025.
It also stated that the pre-tax return on average equity is expected to fall to 27.3 per cent from 48.2per cent in 2024.
The pre-tax return on average equity measures how much a company earns from its equity before taxes.
The rating agency observed that the banks recorded high yields in the 2024 financial year, which sustained the industry’s performance. It added that the naira depreciation also supported banks’ profitability.
It would be recalled that the Central Bank of Nigeria (CBN) terminated regulatory forbearance in June 2025, requiring banks to make appropriate provisions for non-performing loans (NPLs) that were previously under temporary relief (under regulatory forbearance). This is expected to sharply raise impairment costs in the short term.
In the report, the rating agency projects the NPL ratio to reach 6.9 per cent in 2025 (up from 5.2 per cent in 2024).
“In FY 2025, we anticipate a decline in profitability indicators. The need for the appropriate provision level on the hitherto forbearance loans will drive a surge in the impairment charge,” Agusto and Co. stated.
“The decision of some banks to accelerate the provision coverage and write off some impaired loans as part of the transitional reliefs will also contribute to higher impairment charges.
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“In addition, we anticipate lower foreign currency revaluation gains that have bolstered profitability since FY 2023.
“Overall, we expect a 19.2% decline in profit before taxation with the pre-tax return on average equity plummeting to 27.3% (FY 2024: 48.2%) in FY 2025.”
The naira’s stability in 2025 (trading within ₦1,500–₦1,600/$) has limited the windfall gains from currency depreciation that boosted profits in 2024.
As a result, Nigerian banks are said to be entering a phase of slower profit growth in 2025, as the windfalls from naira devaluation and aggressive interest rate hikes begin to fade.
FX revaluation gains for major banks ( Zenith, GTCO, Access, UBA, Fidelity, and FCMB ) declined significantly to ₦240.7 billion in Q1 2025 from ₦2.58 trillion in 2024.
According to the report, many banks are likely to take advantage of the CBN’s transitional relief, which waives the mandatory 12-month waiting period for write-offs of fully provisioned impaired loans, in order to accelerate the clean-up of their loan books.
“We anticipate a surge in write-offs as some banks leverage the transition relief to address non-performing forbearance loans,” the agency stated.
High-interest environment
While the Monetary Policy Rate (MPR) remains high at 27.50 per cent, interest income growth has slowed to about 52.7 per cent in Q1 2025 (from 137.4 per cent in Q1 2024), squeezing net interest margins.
Banks are raising capital to meet CBN’s March 2026 deadline, with ₦2.5 trillion already mobilized as of August 2025. While this strengthens long-term resilience, it may temporarily divert resources from profit growth.
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The projected profit drop reflects short-term regulatory and macroeconomic adjustments rather than structural weakness.
Banks, according to Agusto & Co., are expected to emerge stronger by 2026, with improved capital buffers (coming from newly raised capital) and digital transformation strategies driving future growth.
It noted that eight banks have already met CBN capital requirements.
It revealed that the banks raised a total of ₦1.7 million in 2024 with an additional ₦800 billion raised in the first seven months of 2025.
“We anticipate the injection of an additional ₦900 billion before 31 December 2025 as more banks strive to comply with the directive ahead of the 31 March 2026 effective date,” it added.
The recapitalization drive is poised to enhance banks’ capacity to support credit expansion and economic growth.
Victor Ezeja is a passionate journalist, scholar and analyst of socioeconomic issues in Nigeria and Africa. He is skilled in energy reporting, business and economy, and holds a master's degree in mass communication.
