[BangHitz] From Loans to Securities: How Nigeria’s Banks Are Changing Their Income Mix

The business model of banks in Nigeria is evolving — fast. Recently released financial data reveals that five of the largest commercial banks in the country collectively earned ₦4.8 trillion from fixed-income investment securities in the first nine months of 2025. The institutions in question — Access Corporation, United Bank for Africa, Zenith Bank, First HoldCo and GTCO — are leaning more heavily into sovereign debt and away from traditional lending as a major source of profit.

Traditionally, banks generate income by taking deposits from customers and lending those funds out to individuals and businesses at a markup. The loans earn interest and support economic activity. But the new trend is one where banks are re-allocating huge portions of their assets into government securities and treasury bills — essentially, lending to the government rather than to businesses. The data show these banks’ total investment in such securities reached approximately ₦49.152 trillion, rising from about ₦42.204 trillion at the end of 2024 — a noteworthy ~16.5% increase. In the same timeframe, the total interest income from these investments hit ~₦4.8 trillion.

In more detail: Access had invested ~₦15.25 trillion, UBA ~₦13.59 trillion, Zenith ~₦9.05 trillion, First HoldCo ~₦6.35 trillion, and GTCO ~₦4.91 trillion. Earnings from those holdings were about ₦1.3 trillion for Access, ₦1.14 trillion for Zenith, ₦1.03 trillion for UBA, ₦720.15 billion for First HoldCo and ₦570.23 billion for GTCO.

So what drove this re-allocation? Several dynamics, including macroeconomic shifts: inflation and rising interest rates reduce the attractiveness of some commercial loans (especially when borrowers are under pressure). The risk of default grows. In contrast, government securities are seen as safer, especially in a sovereign context where default risk is very low relative to private-sector lending.

Another key factor: liquidity and risk management. Banks under regulatory and market pressure are choosing assets that generate predictable income without as much risk. By increasing holdings in government bonds, they effectively lock in yield and protect their exposure to volatile business environments.

However, one effect of this shift is that consumer and business lending is slowing. Data show the combined loans and advances to customers for these banks rose just ~7.27% in the same period (to about ₦42.26 trillion from ~₦39.4 trillion). Compared with their investment securities growth (~16.46 %) it’s clear where the focus lies.

Specifically: Zenith Bank’s loans dropped by 0.34% to ₦9.37 trillion; Access grew to ₦12.9 trillion (+20%); UBA to ₦7.19 trillion (+3.51%); GTCO to ₦3.24 trillion (+16.1%); First HoldCo to ₦9.55 trillion (+8.98%).

The shift in bank income composition may have multiple implications: for banks, improved profitability and lower risk; for customers and businesses, potentially fewer credit opportunities or higher borrowing costs; for the economy, a slower credit expansion could dampen growth, especially among SMEs which rely heavily on bank loans.

Regulatory and structural changes compound the shift. The CBN’s plan to move fixed-income trading/settlement into its S4 RTGS platform is significant. This move may increase market efficiencies, transparency and oversight, but could also alter competitive dynamics and profit margins for banks heavily invested in fixed income.

In sum, the emerging trend is one of banks reshaping their profit engines — away from traditional lending towards investment in government securities. For shareholders, this may signal stronger returns and more stable income. For the broader economy, watching how lending evolves in response will be critical.