Nigeria’s banking industry is projected to grow steadily at an average annual rate of seven percent, reaching an estimated $16 billion in market size by 2030, according to a new report by McKinsey & Company.

The report, which highlights the evolving dynamics of financial services across the continent, also revealed that Africa’s banking sector generated about $99 billion in revenue in 2024, underscoring the industry’s resilience and expanding role in economic development.

The consulting firm noted that Nigeria remains one of the continent’s most important banking markets, alongside South Africa, Egypt, Morocco, and Kenya, which together account for roughly 70 percent of Africa’s total banking revenues.

Despite persistent macroeconomic challenges, including currency volatility, Nigerian banks have continued to outperform many of their African peers in profitability.

Analysts attribute this to repriced loan books, elevated interest rates, and significant foreign exchange gains recorded in recent years.

The report observed that while corporate banking has historically contributed the largest share of revenue growth in Nigeria between 2019 and 2024, retail and small and medium-scale enterprise (SME) segments have expanded at a faster pace.

This growth has been largely driven by increased adoption of digital payments, mobile banking platforms, and agency banking networks, which are helping to unlock previously underserved markets.

Nigeria’s banking landscape is also becoming more competitive, with gradual consolidation underway.

The share of total domestic banking assets controlled by leading institutions rose from 59 percent in 2019 to 64 percent in 2024, reflecting a growing push toward scale and efficiency.

Across Africa, South Africa remains the single largest contributor to banking revenues, generating about $26.4 billion in 2024—more than a quarter of the continent’s total income—highlighting the concentration of financial strength in a handful of economies.

Lending continues to dominate as the backbone of banking revenues, accounting for just over $30 billion, or about 30 percent of total industry earnings in 2024. This segment is projected to remain the largest revenue pool, with potential to reach approximately $52 billion by 2030.

The report pointed to a notable disconnect between strong underlying growth and headline figures, explaining that while African banks recorded an average annual revenue growth of 17 percent between 2020 and 2024 in constant currency terms, this performance is often masked by currency depreciation in key markets such as Nigeria.

In Nigeria, the liberalisation of the foreign exchange market in 2023 significantly boosted bank earnings. The top five banks recorded over $1.7 billion in foreign exchange gains, accounting for about 40 percent of their total operating income—an extraordinary jump compared to the previous year.

However, rising inflation and currency devaluation have also increased credit risks among Nigerian banks.

Non-performing loans classified as stage 3 grew by 57 percent annually between 2022 and 2024, reflecting mounting pressure on borrowers.

Regulatory interventions have followed, including a retrospective windfall tax on foreign exchange gains and higher capital requirements introduced by the Central Bank of Nigeria. These measures are aimed at strengthening financial system stability while encouraging banks to focus on sustainable income sources.

Looking ahead, the report emphasised that Nigeria’s banking sector is entering a critical phase defined by consolidation, digital transformation, and a race for scale.

Recent policy actions, including increased minimum capital requirements, are already driving mergers and acquisitions, as banks seek to build stronger balance sheets and compete more effectively in a rapidly evolving financial ecosystem.

At the same time, the rollout of open banking frameworks is expected to transform how financial data is accessed and used, potentially shifting control from institutions to customers and enabling new entrants to offer integrated financial services.

With over 160 million active internet subscriptions and a predominantly young population, Nigeria presents a significant opportunity for banks to deepen financial inclusion through technology-driven solutions tailored to digital-first consumers and MSMEs.

The report concludes that banks which successfully combine scale, innovation, and disciplined risk management will be best positioned to capture future growth, not only in Nigeria but across Africa’s fast-evolving banking landscape.
By Chima Nwokoji
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