By Anthony Otaru, Abuja
For millions of Nigerians, the simple act of saving money has become a paradox.
Banks encourage customers to open accounts, promote financial inclusion and advertise digital convenience.
Yet, the reality is that keeping money in a Nigerian bank today often leads to a silent but steady loss of value.
While depositors struggle to preserve their purchasing power, commercial banks continue to announce record-breaking profits, widening a trust gap that analysts say threatens the long-term credibility of the financial system.
Nigeria’s banking sector is currently one of the most profitable in sub-Saharan Africa.
In 2025 alone, leading banks reported more than ₦2.7trn in pre-tax profits in the first half of the year, driven by a combination of high interest income, foreign exchange revaluation gains, treasury investments and non-interest revenue from service charges.
On the surface, this suggests resilience and efficiency. In reality, experts argue, it reflects a system tilted heavily in favour of institutions and against ordinary savers.
The contradiction is stark. Inflation remains in double digits, eroding household incomes and raising the cost of basic goods. Yet most savings accounts still offer interest rates in the single digits, often far below the inflation rate.
In real terms, Nigerians who save are effectively subsidising the banking system, providing cheap funds that banks recycle into high-yield investments.
Godwin Ighedosa, President of the Institute of Fiscal Studies, argues that the issue extends beyond profitability and implicates structural injustice.
“There is no doubt that Nigerian banks have become highly efficient at generating profits, even in periods of economic stress. However, this profitability is not attributable to real-sector growth or productive lending.
It is primarily driven by financial engineering, foreign exchange revaluation, asset reclassification and high interest margins,” he said.
According to Ighedosa, while banks remain insulated, the real economy continues to weaken.
Manufacturing firms face rising borrowing costs, small businesses struggle to access credit, and households are forced to borrow at punitive rates to survive inflationary pressures.
This imbalance is further complicated by the growing level of non-performing loans (NPLs). Industry estimates place the sector’s NPL ratio at around 7 per cent in 2025, above the regulatory ceiling of 5 per cent.
Traditionally, rising nonperforming loans have signalled stress within the banking system. In Nigeria, however, banks have found ways to remain profitable despite repayment challenges.
“They have shifted heavily into government securities, treasury bills and risk-free instruments. So even when the private sector is struggling, banks are still earning high returns from the state,” Ighedosa explained.
For critics, this represents a form of financial disconnection: banks are thriving in isolation from the productive economy they are meant to support.
Prof Sheriffdeen Tella argues that Nigeria’s banking model now rewards risk avoidance rather than economic development.
“Foreign exchange revaluation gains, high interest rates, staff casualisation and aggressive asset growth have become the main drivers of profitability. Banks are doing well because the system allows them to benefit from volatility and instability,” he said.
Tella noted that rather than serving as engines of industrial expansion, many banks now function as financial intermediaries between government debt and private savings.
“They borrow cheaply from depositors and lend expensively to the government. The spread is enormous, and the risk is minimal. This is good for banks but bad for development,” he added.
At the heart of the problem is the widening gap between deposit and lending rates.
While monetary policy rates remain high, savings rates remain stubbornly low. Borrowers pay between 25 and 35 per cent interest on loans, whereas depositors are fortunate to earn 8 or 10 per cent on their savings.
Lead Director of the Centre for Social Justice, Eze Onyekpere, describes this as a “systemic distortion”.
“If you save money in a bank for one year, inflation will wipe out most of its value. You may earn some interest, but it is insufficient to preserve purchasing power. In practical terms, saving has become an economic penalty,” he said.
Onyekpere argues that the Central Bank of Nigeria must move beyond broad monetary tightening and address the micro-level injustices faced by depositors.
“There should be a clear corridor between the Monetary Policy Rate and what banks pay depositors. If banks can lend at 30 or 35 per cent, then depositors should not be earning 5 or 8 per cent. The relationship must be regulated; the system is fundamentally unfair,” he argued.
He further suggested that bank profit-sharing mechanisms should be restructured to include depositors as genuine stakeholders rather than passive contributors of cheap capital.
Beyond fairness, analysts warn of more profound social consequences. When people lose faith in formal savings, they turn to informal financial systems, speculative investments or outright cash hoarding. This undermines financial inclusion and weakens the banking sector’s ability to mobilise long-term capital.
Already, there are signs of behavioural shifts. Young Nigerians increasingly prefer digital wallets, cryptocurrency platforms and cooperative savings schemes to traditional bank accounts. For many, the motivation is simple: banks no longer feel like a place to grow wealth.
Economists also warn that this dynamic could destabilise monetary policy itself. If depositors withdraw from the formal system, the CBN’s ability to transmit policy signals through interest rates becomes weaker.
“Monetary policy works best when people trust the system. If saving becomes irrational, then policy loses its social foundation,” Tella observed.
Another concern is the political economy of banking profits. Large financial institutions are among the most powerful corporate actors in Nigeria, with significant influence over policy debates.
Their profitability often masks the broader economy’s underlying fragility, creating an illusion of stability.
“Bank profits are sometimes celebrated as proof that the economy is working. But they can also hide deep structural problems—low productivity, weak industrial base and rising inequality,” Ighedosa warned.
For him, the real test of banking success is not balance sheet strength but developmental impact.
“A healthy banking system should lift industries, support entrepreneurship and protect savers. When profits grow, but poverty deepens, something is fundamentally wrong,” he said.
The current model also raises ethical questions. Banks benefit from public trust, regulatory protection and access to state instruments, yet the rewards are concentrated among shareholders and executives.
Depositors, who bear the opportunity cost of low returns, are largely excluded from the gains.
Analysts argue that without deliberate reform, the banking sector risks becoming socially illegitimate, profitable but disconnected, efficient but inequitable.
Some propose targeted policy responses: mandatory minimum deposit rates, tax incentives for real-sector lending, tighter controls on bank charges, and greater transparency in profit reporting.
Others advocate a more radical shift, including cooperative banking models and community-based financial institutions.
For Onyekpere, however, the starting point is simple: restore dignity to saving.
“People should not be punished for trusting banks. Saving is the foundation of economic stability. When savers lose, the entire society becomes poorer,” he said.
Ultimately, the debate is not about whether banks should make profits. It is about who benefits from those profits and at what cost.
In a country where inflation is high, incomes are fragile, and inequality is widening, a banking system that enriches institutions while impoverishing depositors cannot be considered healthy.
Nigeria’s banks may be strong on paper, but until their success is shared with the people whose money sustains them, their record profits will remain less a sign of economic strength and more a symbol of deepening financial imbalance.
