Why Nigerian Banks Are Turning to Government Bonds for Profit in 2025

 

Top 5 banks earning from Fixed income

In 2025, Nigeria’s major financial institutions are shifting their focus toward fixed-income investments as a key source of profit. The country’s five largest banks — Access Corporation, United Bank for Africa (UBA), Zenith Bank, First HoldCo (First Bank Holdings), and GTCO Holdings — jointly earned ₦4.8 trillion from government securities and treasury bills in the first nine months of the year.

This record-breaking figure shows a major shift in the way Nigerian banks generate income. Traditionally, banks made most of their money from lending to businesses and individuals. But in 2025, many have chosen a safer and more predictable option — government-backed investments. These instruments guarantee steady returns and come with almost zero risk of default, unlike commercial loans that depend on uncertain borrower performance.

According to Nairametrics, the banks’ combined investment in fixed-income securities jumped to ₦49.15 trillion by September 2025, compared to ₦42.20 trillion at the end of 2024 — a solid 16.5% increase in less than a year. This growth is fueled by high interest rates and the need to protect assets from inflation and currency volatility.

Breaking it down further, Access Bank led the group with ₦15.25 trillion invested, earning ₦1.3 trillion in returns. UBA followed with ₦13.59 trillion and ₦1.03 trillion earned, while Zenith Bank recorded ₦9.05 trillion in holdings and ₦1.14 trillion in income. First HoldCo and GTCO Holdings posted ₦6.35 trillion and ₦4.91 trillion in investments, earning ₦720.15 billion and ₦570.23 billion, respectively.

Although these results look impressive, loan growth tells a different story. Combined loans to customers rose by only 7.3%, from ₦39.4 trillion in 2024 to ₦42.26 trillion in 2025. This modest rise suggests that banks are now more conservative with credit distribution. Rather than taking on risky borrowers in a volatile economy, they’re choosing stable income from treasury bills and bonds.

Analysts explain that this shift reflects a strategic move to manage risk while ensuring steady earnings. With inflation pressures, high interest rates, and tight regulatory conditions, fixed-income securities have become a safe haven. By investing heavily in these assets, banks can maintain profitability without overexposing themselves to loan defaults.

At the same time, the Central Bank of Nigeria (CBN) is introducing a new S4 Real-Time Gross Settlement (RTGS) system to modernize the fixed-income market. This digital platform will make bond trading and settlements faster, more transparent, and fully automated. Once operational, it will strengthen investor confidence and improve liquidity across the sector.

Overall, the move toward government securities shows how Nigerian banks are adapting to a changing financial landscape. Their ability to earn large profits while reducing lending exposure proves they are prioritizing stability, efficiency, and long-term growth in a challenging economic environment.