Market News

There was no respite for deposit money banks in Nigeria in the first half of 2025 as double-digit inflation, regulatory charges and naira reforms by the Central Bank of Nigeria (CBN) plodded profitability and competitiveness.

According to THISADAY checks, the combined operating expenses of just 10 banks stood at N3.3 trillion in H1 of 2025, about 22.2 per cent increase when compared to N2.7 trillion the previous year.

The banks include: Ecobank Transnational Incorporated (ETI), First Holdings, Plc ,Zenith Bank Plc, United Bank for Africa (UBA) Plc, FCMB Group Plc, Sterling Financial Holding Plc, Wema Bank, Stanbic IBTC Holdings Jaiz Bank Plc and Guaranty Trust Holding Company Plc (GTCO).

Nigeria’s inflation rate stood at 22.22 per cent June 2025 from 34.19 per cent June 2024 after its rebased by the National Bureau of Statistics (NBS).

Currently at 20.12 per cent in August 2025, analysts have predicted further increase in these Companies’ OPEX this year, stressing that its impact may cut down on earnings and dividend payout to shareholders.

Also, Naira depreciated to N1,532.00 against the dollar as of June 2025, from N1,469.69 against the dollar June 2024, influenced with Government decisions to remove subsidy on Premium Motor Spirit (PMS) and Central Bank of Nigeria (CBN) policy on Naira at the foreign exchange market.

Aside from inflationary pressure, other key factors that contributed to the banks’ OPEX include; wages and salaries, Deposit insurance premium, Asset Management Corporation of Nigeria (AMCON)’s 0.5 per cent sinking funds levy, among others.

THISDAY analysis of the 10 banks’ audited/unaudited results filed with the Nigerian Exchange Limited (NGX) showed that they posted N3.08 trillion profit before tax during the period under review, about 6 per cent drop from N3.26 trillion reported in H1 2024 amid mixed performance.

Further breakdown of the results showed that Ecobank reported the highest operating expenses in H1 2025, followed by Zenith Bank and First Holdco.

While Ecobank declared N853.65 billion OPEX, about 17 per cent increase over N728.73 billion in H1 2025, Zenith Bank announced N581.43 billion OPEX, representing an increase of 23 per cent from N472.08 billion declared in H1 2024. 

First Holdco declared N552.83 billion OPEX, an increase of 24 per cent from N445.69 billion posted in the corresponding period of 2024.       

Analysts have linked the rise in the lenders’ operating expenses to inflationary pressure, naira devaluation and upward salary reviews.

Commenting, the CEO, Centre for Promotion of Private Enterprise (CPPE), Dr Muda Yusuf said inflationary pressures remain a key concern in the Nigerian economy, both for businesses and the citizens.

He highlighted that implications of high inflation rate include escalation of production and operating costs for businesses, leading to erosion of profit margins, drop in sales, decline in turnover and weak manufacturing capacity utilization, high food prices which impacts adversely on citizens welfare and aggravates poverty.

He further stated that weak purchasing power, which poses significant risk to business sustainability and price volatility, which undermines investors’ confidence are major implications of high inflation pressure.

He explained that the major drivers of inflation and cost in the economy include exchange rate depreciation, which has a significant impact on headline inflation, “especially the core sub index and liquidity challenges in the foreign exchange market impacting adversely on manufacturing output.”

He added, “High transportation costs affecting distribution costs across the country. This is also reflected in the huge differential between farm gate prices and market prices; monetization of fiscal deficit (CBN financing of deficit) is highly inflationary because of the liquidity injection effects on the economy. This becomes worrisome when statutory thresholds are exceeded and high transaction costs at the nation’s ports increases production and operating costs of businesses.”

On his part, the Vice President, Highcap securities Limited, Mr. David Adnori said that managing operating expenses effectively was essential for banks to maintain profitability and competitiveness in the market while ensuring the delivery of high-quality services to customers.

He observed that banks would aim to optimise their operating expenses while balancing the need for investment in technology, infrastructure, and employee training to meet evolving customer demands and regulatory standards.

He also projected that the non-performing loans of the Nigerian Deposit Money Banks were predicted to rise in 2025 following the economic slowdown in the country.

He recommended that addressing those factors required a combination of measures, including improving credit risk management practices, enhancing regulatory oversight, promoting economic stability, and implementing sound corporate governance standards within banks.