Nigeria's five biggest banking groups posted the lowest loan-to-deposit ratios among 22 leading African lenders in 2025, according to a ranking by the Africa Report of 300 Finance Champions. The weak performance reflects how Nigerian banks prioritised strengthening their balance sheets to meet regulatory capital requirements rather than expanding lending to businesses and households, potentially constraining credit availability across the economy.
The Central Bank of Nigeria directed internationally-licensed banks to raise their minimum capital to N500 billion by the end of March 2026, announced in March 2024. Over the two-year period, banks raised nearly N5 trillion to meet this requirement, with all tier-one lenders complying. However, the Africa Report noted that this capital-raising exercise tied up funds that could have been deployed for lending and weighed on returns on equity, which account for 50 percent of the ranking's profitability measure. First HoldCo's return on equity fell from 24.2 percent in 2024 to 4.2 percent in 2025, while United Bank for Africa's declined from 22.4 percent to 10.6 percent, and Access Holdings dropped from 18.5 percent to 14.7 percent.
Additional pressures compounded the lending constraint. The naira appreciated from N1,535 to N1,436 against the dollar during 2025, reversing previous foreign-exchange gains that had boosted bank earnings. Guaranty Trust Holding Company reported a N477.8 billion reduction in gains on derivative instruments as a result. The end of regulatory forbearance on loans also forced lenders to recognise overdue exposures, pushing the sector's non-performing loan ratio from 4.2 percent in January to 7.51 percent by December. First HoldCo recorded the sharpest deterioration, with its non-performing loan ratio rising from 10.2 percent to 18 percent, the highest among assessed groups, while its capital adequacy ratio stood at 10.95 percent, below the Central Bank's required 15 percent threshold.
Zenith Bank and Access Holdings performed relatively better than their domestic peers. Zenith Bank, which ranked second overall, recapitalised in January 2025 and wrote off N1.24 trillion in losses on doubtful exposures compared with N96.5 billion in 2024, bringing its non-performing loan ratio down to 3.8 percent. Access Bank maintained its NPL ratio at 2.8 percent and reduced its cost-to-income ratio from 56.7 percent to 51.7 percent through cost-cutting measures, having focused on deposit mobilisation rather than loosening lending criteria.
The findings point to a broader challenge ahead for Nigerian lenders as the recapitalisation exercise transitions from raising capital to deploying those funds to support economic activity. With banks having strengthened their capital positions, their ability to expand credit while maintaining asset quality and profitability will become increasingly important in determining their competitiveness against African peers.
For savers, borrowers and businesses in Nigeria, constrained bank lending could limit access to credit even as lenders hold stronger capital buffers, potentially slowing private-sector financing and economic growth.