Why Nigeria’s Big Banks Are Betting Big on Government Bonds in 2025

 

Top 5 banks that earn from the fixed income

In the ever-changing landscape of Nigeria’s financial sector, the major banks have shifted their focus significantly in 2025. The top five banks — Access Corporation (Access), United Bank for Africa (UBA), Zenith Bank, First HoldCo (First Bank Holdings) and GTCO Holdings (GTCO) — have collectively earned a staggering ₦4.8 trillion from fixed-income investment securities in the first nine months of the year. This new model reflects strategic adaptation in a higher risk environment.

The figures tell the story: investments held in government securities and treasury bills by this group climbed to ₦49.152 trillion, up from ₦42.204 trillion at end of December 2024 — representing a roughly 16.5% jump. At the same time, their interest income from these securities reached the ₦4.8 trillion mark.

Breaking it down further: Access led with a ₦15.25 trillion stake, UBA followed at ₦13.59 trillion, Zenith at ₦9.05 trillion, First HoldCo at ₦6.35 trillion and GTCO at ₦4.91 trillion. In return, Access made about ₦1.3 trillion, Zenith about ₦1.14 trillion, UBA about ₦1.03 trillion, First HoldCo around ₦720.15 billion and GTCO roughly ₦570.23 billion.

What’s driving this surge? Several factors. Nigeria’s macroeconomic backdrop includes elevated interest rates and inflation, making fixed-income instruments like government bonds and treasury bills more attractive. Banks, facing uncertain credit conditions and higher risks in lending, have turned to sovereign assets which offer more predictable returns and lower default risk.

Moreover, by increasing holdings in government debt, banks preserve liquidity and reduce exposure to risky private-sector loans, which may suffer under economic stress. This conservative repositioning can safeguard balance-sheets and support profitability.

However, this shift is not without implications. The report highlights that during this period the combined loans and advances to customers for these banks rose only to ₦42.26 trillion, up about 7.27% from the ₦39.4 trillion recorded in 2024. That growth is significantly slower than the 16.46% jump in securities investments. In practice, this means banks are lending less aggressively even as they are earning more via investments.

In one case, Zenith’s loans to customers actually dropped to ₦9.37 trillion (-0.34%). Access still grew loans by about 20% to ₦12.9 trillion, UBA by ~3.51% to ₦7.19 trillion, GTCO by ~16.1% to ₦3.24 trillion and First HoldCo by ~8.98% to ₦9.55 trillion.

What this means is: banks are favouring secure, sovereign revenuers rather than riskier credit expansion. For Nigeria’s banking ecosystem, this may signal a more cautious appetite for lending amid macro uncertainty.

Additionally, regulatory developments are unfolding. The Central Bank of Nigeria (CBN) is set to migrate all fixed-income trading and settlement functions — previously under the FMDQ Securities Exchange and regulated by the Securities and Exchange Commission (SEC) — to its own Real-Time Gross Settlement / Scripless Securities Settlement System (S4) as early as November. This change places the CBN as both operator and regulator of the fixed-income market, possibly streamlining or reshaping how these investments impact bank earnings.

In conclusion: Nigerian banks are adapting by shifting more capital into government debt. For investors and industry watchers, the message is clear — given the current economic climate, fixed-income assets are increasingly central to banking profitability. The longer-term question remains: will this strategy deliver sustainable growth if lending remains constrained?