Nine leading Nigerian banks have reported a combined interest expense of N1.9 trillion in the first quarter of 2025, marking a sharp 43.2% increase from the N1.33 trillion recorded in the same period last year.
This development, based on an analysis of the banks’ unaudited financial statements, signals growing funding pressures in Nigeria’s financial sector, even as total interest income from the lenders rose to N4.18 trillion within the same period.
Interest expense refers to the cost banks incur in borrowing money, particularly what they pay on customer deposits and interbank borrowings. The rising figures suggest higher competition for deposits, a tightening monetary environment, and an aggressive bid for liquidity.
Access, Zenith, UBA Lead in Interest Expenses
Access Holdings posted the highest interest income of N964.6 billion, up 58.6% from N608.1 billion in Q1 2024. However, its interest expense also surged by 71.3% to N760.47 billion, significantly eating into its net interest margins.
Zenith Bank followed closely with interest income rising 71.5% to N837.6 billion, while its interest expense grew 35.3% to N246.45 billion, reflecting the impact of rising cost of funds.
United Bank for Africa (UBA) posted a 36% growth in interest income to N599.8 billion, but saw its interest expense shoot up by 77% to N247.96 billion — one of the steepest jumps among the banks analyzed.
FirstBank, GTCO, Others Also Feel the Heat
First Bank Holdings Plc (First HoldCo) recorded a 40% increase in interest income, reaching N625.3 billion. Its interest expense rose more modestly by 18.6% to N260.09 billion, suggesting improved cost efficiency.
Guaranty Trust Holding Company (GTCO) earned N386 billion in interest income, a 41% growth, while its interest expense climbed 45.4% to N79.03 billion.
Fidelity Bank reported N256.1 billion in interest income (up 58%) and N90.65 billion in interest expense (up 28.6%).
Winners and Losers in Cost Management
Interestingly, Stanbic IBTC stood out with improved efficiency. While its interest income rose by 55.8% to N180.5 billion, the bank recorded a decline in interest expense — down 21.4% to N30.58 billion — signaling tighter cost control or better liquidity management.
On the other hand, FCMB Group witnessed an 81.2% spike in interest expense to N126.87 billion, outpacing its 71% rise in interest income, which reached N214.4 billion.
Wema Bank also saw its interest income grow by 59% to N110.3 billion, while interest expense climbed 24% to N53.74 billion.
Experts Say Net Interest Income Still Key
Reacting to the rising trend, Director and Chief Economist at Proshare Nigeria, Teslim Shitta-Bey, clarified that the primary performance measure for banks remains net interest income — the spread between what they earn and what they pay — not just gross expenses.
“Interest expense on its own doesn’t cripple a bank’s lending ability,” he said. “The crucial metric is net interest income. As long as that margin is healthy and banks remain profitable, they can still perform optimally.”
He added that despite tighter liquidity, many Nigerian banks remain strong due to high capital buffers and private placements, with some even exceeding the Central Bank of Nigeria’s capital thresholds.
Shitta-Bey also pointed to the Monetary Policy Rate (MPR) and Cash Reserve Ratio (CRR) as major instruments influencing liquidity and cost of funds. “The MPR affects borrowing costs, while the CRR controls liquidity. Banks manage capital strategically to remain competitive in such environments,” he said.
Outlook
With the Central Bank maintaining a tight monetary stance to curb inflation, analysts expect funding costs to remain elevated in the near term. However, banks with robust risk management frameworks and diversified funding sources are likely to stay ahead, even in this high-interest environment.
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