Debtors incur N8.4tn in interest payments to Nigerian banks in 2024

Nigerian banks had a remarkable year in 2024, benefiting from a high-interest rate environment that significantly boosted their earnings from loans to customers.

An analysis of ten publicly traded banks on the Nigerian Exchange revealed that these banks collectively earned a staggering N8.41 trillion in interest from customer loans, more than double the N4.08 trillion from the previous year.

The surge in interest income follows the Central Bank of Nigeria’s (CBN) aggressive monetary policies, which included raising the benchmark interest rate to 27.5% in 2024. This move was aimed at controlling inflation and stabilizing the economy. The sharp rate hikes created a favorable environment for banks, which responded by raising their lending rates and significantly increasing income from loan interest.

Banks see growth in loan portfolios

By the end of 2024, the total loan portfolio of these banks reached N51.36 trillion, reflecting a 37.6% year-on-year increase. This growth was driven by a combination of rising loan demand and higher interest rates, which allowed banks to increase their earnings from loans.

• Banks also saw a boost in earnings from other financial assets such as government securities, corporate bonds, and interbank placements, which generated N6.66 trillion in interest income—up from N2.7 trillion in 2023.
• Overall, interest income accounted for a large portion—72.4%—of the total earnings for these banks. The remainder came from fees, commissions, trading income, and other services.

Despite the overall growth, the banks experienced pressure on funding costs, as the Central Bank’s tight monetary stance drove up the cost of funds. Some banks also faced an increase in non-performing loans (NPLs), with the average NPL ratio climbing from 4.1% in 2023 to 4.5% in 2024.

Top earners from customer loans in 2024

• #5: Fidelity Bank – N626.3 billion
  Fidelity Bank earned N626.3 billion in interest from loans in 2024, a 72% rise compared to the previous year. The bank’s loan portfolio grew by 42% to N4.39 trillion, and interest on loans yielded 17%.
• #4: UBA – N779.7 billion
  UBA earned N779.7 billion from loan interest in 2024, nearly double the N391.9 billion in 2023. The bank’s loan book expanded by 33% to N6.95 trillion, with an average loan portfolio of N6.09 trillion for the year.
• #3: First HoldCo – N1.36 trillion
  First HoldCo, the parent company of First Bank of Nigeria, generated N1.36 trillion from customer loan interest, a 124% increase from 2023. The group’s loan portfolio expanded by 38% to N8.77 trillion, and interest on loans averaged 18%.
• #2: Zenith Bank – N1.52 trillion
  Zenith Bank earned N1.52 trillion from loan interest in 2024, marking a 126% rise compared to the previous year. The bank’s loan book grew by 52% to N9.97 trillion, with an average loan portfolio of N8.26 trillion.
• #1: Access Corporation – N1.63 trillion
  Access Corporation, the parent company of Access Bank, earned N1.63 trillion in interest from loans in 2024, a 118% increase from 2023. The bank’s loan portfolio rose by 43% to N11.49 trillion, positioning it as the top lender with an average loan portfolio of N9.76 trillion.

Implications for the banking sector

The performance of Nigerian banks in 2024 illustrates the significant impact of rising interest rates on their profitability. However, this surge in interest income has not come without challenges. Higher interest rates also led to increased borrowing costs, which in turn affected borrowers’ ability to meet their obligations.
Additionally, the higher interest rate environment contributed to a rise in non-performing loans (NPLs), indicating that the growth in loan income was somewhat offset by a deterioration in loan quality.
As we look to 2025, the outlook for the banking sector remains positive in terms of interest income, although concerns over loan quality and the impact of high borrowing costs may persist.