How Banks’ ₦4.8 Trillion Fixed-Income Earnings Could Affect Nigeria’s Economy

 

Top 5 banks earning from fixed income

In a remarkable financial development, Nigeria’s leading banks — Access Corporation, United Bank for Africa (UBA), Zenith Bank, First HoldCo (FBN Holdings), and GTCO Holdings — collectively recorded an impressive ₦4.8 trillion from fixed-income investments during the first nine months of 2025.

This revelation, published by Nairametrics, highlights how the country’s largest financial institutions are adapting to an unpredictable economic environment. With inflation pressures, currency volatility, and high borrowing costs shaping the market, banks are moving toward safer investment vehicles such as government securities and treasury bills.

Massive Growth in Fixed-Income Portfolios

According to the report, the combined value of government securities held by the top five banks climbed to ₦49.15 trillion as of September 2025, compared to ₦42.20 trillion in December 2024. This represents a strong 16.5% growth in less than a year — a clear indication that the banking sector has found stability and profitability in fixed-income markets.

These fixed-income investments — primarily federal government bonds, treasury bills, and CBN-backed securities — provide guaranteed returns. They are considered one of the safest options in Nigeria’s financial landscape, especially during periods of market uncertainty.

Access Bank Leads the Pack

Breaking down the performance, Access Bank maintained its dominance with over ₦15 trillion in fixed-income holdings, generating approximately ₦1.3 trillion in returns. UBA followed with investments worth ₦13.59 trillion, while Zenith Bank reported ₦9.05 trillion. First HoldCo and GTCO Holdings were not far behind, holding ₦6.35 trillion and ₦4.91 trillion respectively.

This strategy has strengthened the earnings profile of these banks, helping them post record-breaking profits even as the broader economy struggles with inflation and sluggish growth.

Reduced Lending to the Real Sector

However, while profits are surging, loan growth is slowing down. Data shows that total loans and advances to customers rose modestly by 7.3%, from ₦39.4 trillion in 2024 to ₦42.26 trillion in 2025.

This indicates a cautious lending approach. Banks are becoming more conservative, preferring government-backed securities over lending to the private sector. For businesses, especially small and medium-sized enterprises (SMEs), this poses a challenge, as access to affordable credit becomes increasingly limited.

Economists warn that this trend, if sustained, could create a credit gap in Nigeria’s economy. When banks channel most of their liquidity into government securities, fewer funds are available to finance entrepreneurship, industrial expansion, and job creation — the key drivers of economic growth.

Why Banks Prefer Fixed Income

The preference for fixed-income assets is driven by several factors. High interest rates have made government bonds extremely lucrative, while inflation and foreign exchange volatility have made lending riskier. Fixed-income investments also offer predictable cash flow, helping banks maintain strong liquidity positions and minimize credit risk.

From a financial management standpoint, this is a defensive but smart move. It shields banks from non-performing loans while securing stable returns in a turbulent market.

CBN’s Role and Future Outlook

The Central Bank of Nigeria (CBN) is also playing a crucial role in modernizing the market. Its upcoming S4 Real-Time Gross Settlement (RTGS) system will revolutionize how fixed-income instruments are traded and settled. The platform promises faster, more transparent transactions and enhanced efficiency across the banking ecosystem.

Analysts believe that this modernization will attract more institutional investors, deepen market liquidity, and further strengthen Nigeria’s fixed-income infrastructure.

Balancing Profitability and Economic Growth

While the strategy has strengthened bank profitability, it raises questions about economic inclusiveness. If credit to the private sector continues to shrink, it could slow industrial output, hinder startups, and delay Nigeria’s overall recovery.

Therefore, industry experts suggest a balanced approach — where banks continue leveraging fixed-income profits while also supporting productive sectors through strategic lending.

In essence, Nigeria’s banking giants have mastered the art of navigating a challenging economy. Their ₦4.8 trillion earnings from fixed-income investments not only showcase financial resilience but also highlight the evolving dynamics of the nation’s financial system. Going forward, the balance between profitability and economic impact will determine how sustainable this strategy truly is.