Nigeria’s Banking Boom Masks a Weak Economy

Nigeria’s banking sector is swelling with record profits and trillion-naira balance sheets, yet the economy remains alarmingly stagnant. Despite hosting some of Africa’s biggest lenders, including Access Bank, Zenith Bank, UBA, and FBN Holdings, Nigeria was missing from the International Monetary Fund’s latest list of the continent’s fastest-growing economies.

Across Africa, banks are getting richer. According to African Business magazine’s 2025 ranking of the continent’s top 100 banks, total Tier 1 capital has risen to $126 billion from $120 billion in 2024. But in Nigeria, that growth tells a different story, one of financial expansion without economic transformation.

In simple terms, Nigeria’s banks are thriving while the economy falters.

The irony is striking: a financial sector bursting with liquidity while the real economy struggles to breathe. The IMF projects Nigeria’s GDP growth at just 3.9% in 2025, far below the 6% to 8% growth rates seen in Rwanda, Benin, and Côte d’Ivoire. These smaller economies are racing ahead, driven by industrial growth, policy stability, and investment-friendly reforms.

Nigeria’s banks, by contrast, have fattened their balance sheets largely through asset revaluations, foreign exchange gains, and idle deposits often channelled into risk-free government securities. What appears as growth is, in many cases, inflationary accounting rather than real-sector lending. Three-quarters of the industry’s celebrated “assets” are actually liabilities, customer deposits that reflect public confidence, not productive capital.

This dependence on short-term deposits makes the system fragile. When deposits are withdrawn, liquidity vanishes, exposing a financial structure built more on paper wealth than real capital depth. Lending to manufacturing and agriculture remains limited, and borrowing costs, often above 27%, keep small businesses locked out of affordable finance.

As a result, banks excel at financial intermediation without true economic connection, mobilising deposits without transforming them into engines of growth. In healthier economies, deposits fuel investments and job creation. In Nigeria, they fuel balance sheets and dividend payouts.

While East African lenders like Kenya’s Equity Group and KCB are expanding regionally and driving productive lending, Nigerian banks continue to chase rankings instead of real economic impact. East Africa now contributes 21 banks to Africa’s top 100, up from 13 in 2022, a reflection of genuine financial inclusion and enterprise-led growth.

The IMF’s omission of Nigeria from its high-growth list is symbolic. It reflects a giant economy growing in numbers but shrinking in substance. Inflation remains high, foreign investment has stalled, and industrial productivity is weak.

The Central Bank of Nigeria (CBN) Governor, Yemi Cardoso, maintains that reforms are “yielding visible results” and putting the economy “on the path to stability, inclusiveness, and innovation-driven growth.” Yet, the data tells a sobering story. Stability cannot be claimed when inflation hovers around 18 percent and credit to the real economy remains stagnant.

If reforms were truly inclusive, they would translate into affordable loans, industrial growth, and improved living standards, not just favourable rhetoric at global forums. The system’s obsession with liquidity and asset expansion has created a hollow core: a banking industry rich in nominal value but poor in innovation, capital efficiency, and real-sector engagement.

For Nigeria’s policymakers and bankers, the question is no longer how large the assets appear, but what those assets are doing for the economy. True financial strength lies in purposeful intermediation, lending based on business potential and productivity rather than collateral.

To achieve this, banks must raise long-term funds through bonds, equity, and partnerships with pension and insurance institutions, allowing them to finance infrastructure, agriculture, and manufacturing sustainably. Regulators must also reward banks that fund the real economy and discourage those that park capital in government securities.

Ultimately, Nigeria’s financial future depends on a shift from liquidity comfort to innovation confidence. The nation needs banks that create wealth, not just count it. Only when balance sheet growth translates into inclusive credit and productive investment will Nigeria’s banking sector become a true engine of national development rather than a symbol of inflated success.