When you hear that Nigerian banks earned ₦1.7 trillion abroad, it sounds impressive — almost like a jackpot. But what does that figure really mean for the banks, their investors, and Nigerians like you and me? How do they earn this money abroad? Is it sustainable? And how does it fit into the bigger story of Nigeria’s banking sector?
This article takes you through the full picture. We’ll unpack what the ₦1.7 trillion foreign earnings represent, how Nigerian banks make money overseas, the impact on the domestic economy, and what the future holds. We’ll avoid fluff or jargon and focus on pure, verifiable facts, so you get a clear understanding.
Understanding What ₦1.7 Trillion Foreign Earnings Mean
Let’s start with the basics. When reports say Nigerian banks earned ₦1.7 trillion abroad, they’re talking about income generated outside Nigeria’s borders, mainly in foreign currencies. This includes profits from subsidiaries, branches, and investments in other countries, particularly across Africa and in key global financial hubs.
Why is this important? Because it reflects banks’ ability to diversify income streams beyond the sometimes volatile Nigerian domestic market and currency. The foreign earnings usually come in stable currencies like US dollars, euros, or pounds, which can strengthen banks’ overall profitability especially when converted back to naira — particularly during times of naira depreciation.
How Nigerian Banks Earn Abroad – Key Drivers
Nigerian banks operate beyond Nigeria in two main ways:
Regional Subsidiaries and Branches
Leading banks such as Access Bank, United Bank for Africa (UBA), and Zenith Bank have established subsidiaries in countries across Africa, including Ghana, Kenya, South Africa, and the UK. These subsidiaries generate profit from lending, trade finance, and other banking services.
Cross-border Remittances and Diaspora Services
Nigerian banks benefit hugely from remittance inflows, especially from Nigerians living abroad. Through partnerships with fintech companies and international payment platforms, banks earn fees from processing these cross-border transactions.
Trade Finance and Foreign Currency Transactions
Banks earn fees and interest from facilitating import/export trade and foreign exchange services, especially in countries where Nigerian businesses operate.
Investment Income
Some Nigerian banks invest in foreign government and corporate bonds or other financial instruments, generating interest and capital gains.
Together, these revenue streams form the foreign earnings base.
The Domestic Impact of Foreign Earnings
Foreign earnings contribute significantly to Nigerian banks’ bottom lines, and here’s how that matters domestically:
Bolstering Capital Adequacy
Foreign earnings, often in stable currencies, help banks build stronger capital buffers, crucial under regulatory requirements like Basel III.
Improving Profitability
When converted to naira, foreign income can offset pressures on domestic earnings, especially in times of naira weakness or tight local credit markets.
Supporting Lending
Stronger earnings abroad give banks capacity to increase lending at home, supporting businesses and economic growth.
Enhancing Shareholder Returns
Healthy foreign earnings translate to better dividends and share prices, which benefit investors, including pension funds and retail shareholders.
Yet, over-reliance on foreign earnings can risk exposure to currency volatility and geopolitical risks outside Nigeria.
The Influence of Naira Depreciation and FX Markets
A key reason foreign earnings appear large in naira terms is currency devaluation. When the naira weakens against the dollar or euro, converting foreign profits inflates their naira value.
For example, if a bank earns $10 million abroad:
- At ₦360 per dollar, that’s ₦3.6 billion.
- At ₦460 per dollar, that’s ₦4.6 billion.
This difference significantly impacts reported profits.
However, the Central Bank of Nigeria has recently tightened foreign exchange policies, reducing arbitrage opportunities. Also, tax policies now include levies on foreign earnings, which could temper the growth of such income streams.
The takeaway is that while FX movements boost reported foreign earnings, banks are increasingly looking for stable, recurring income rather than relying on currency gains.
Detailed Earnings Breakdown of Top Nigerian Banks
Looking at individual banks clarifies how foreign earnings shape their financials:
- Access Bank reported a pre-tax profit of ₦867 billion recently, with more than 20% coming from overseas operations, especially in East and West Africa, and the UK.
- Zenith Bank, one of the most profitable banks, benefits from subsidiaries in Ghana and the UK. Its foreign income forms a key part of its ₦450+ billion profit.
- United Bank for Africa (UBA) has the broadest African footprint, operating in over 20 countries plus offices in the US and Europe. Its foreign earnings helped it report nearly ₦170 billion profit.
- Stanbic IBTC, part of Standard Bank Group, benefits from its pan-African presence and wealth management fees.
Across the board, banks report foreign income
as a significant growth driver, though domestic loans and fees remain central.
Macroeconomic & Regulatory Factors Shaping Bank Earnings
Several wider economic and policy factors influence bank earnings in Nigeria and abroad:
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Inflation and Interest Rates: Nigeria’s persistent inflation and policy rate adjustments affect lending margins, impacting domestic profitability.
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Monetary Policy & FX Controls: The Central Bank’s evolving approach to foreign exchange affects banks’ ability to repatriate profits and manage currency risks.
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Regulatory Capital Requirements: Implementation of Basel III requires higher capital buffers, encouraging banks to diversify income sources, including foreign earnings.
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Taxation on Foreign Income: New levies on overseas profits reduce net foreign earnings but encourage reinvestment in Nigeria.
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Digital Transformation Policies: Support for fintech and open banking drives non-interest income growth and cross-border remittance flows.
All these factors interplay to shape how Nigerian banks strategize their earnings mix.
Comparative Insights & Peer Benchmarks
How do Nigerian banks stack up against peers in Sub-Saharan Africa and emerging markets like the BRICS?
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Nigerian banks maintain a relatively low cost of risk (~1.8%), outperforming many regional peers.
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Profitability metrics such as Return on Equity (ROE) and Return on Assets (ROA) place Nigerian banks among the best in Africa.
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However, operational efficiency, measured by cost-to-income ratio, is still higher than some peers, suggesting room for improvement.
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Asset quality remains stable, with non-performing loan ratios below 5%, and credit losses expected to peak soon.
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While Nigerian banks dominate in asset size within Africa, their credit-to-GDP ratio remains low compared to countries like South Africa and Kenya, indicating potential for growth in domestic lending.
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In dollar terms, Nigerian banks’ profits trail some South African and Egyptian banks, reflecting the impact of currency depreciation on international comparisons.
Overall, Nigerian banks punch above their weight in profitability and asset quality but have opportunities to enhance efficiency and deepen lending.
Future Outlook & Strategic Directions
What’s next for Nigerian banks to sustain and grow their earnings?
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Digital Innovation: Banks are heavily investing in digital banking platforms, expanding fee-based income through mobile apps, agency banking, and payment services.
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Fintech Partnerships and Diaspora Engagement: Integration with fintech firms enables seamless cross-border payments and access to diaspora remittances, a growing and stable revenue source.
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Regional Expansion and Acquisitions: Leading banks are acquiring and growing subsidiaries across Africa and beyond to build foreign earnings organically rather than relying on currency gains.
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Capital Strengthening: Recapitalisation efforts and Basel III compliance are pushing banks to increase reserves, enabling more measured growth and risk management.
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Sustainable Finance and SME Lending: Banks are embracing environmental, social, and governance (ESG) frameworks and expanding credit to SMEs, vital for economic diversification.
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Cybersecurity and Operational Efficiency: Investment in fraud prevention, AI, and operational streamlining is critical as digital banking usage skyrockets.
This multi-pronged strategy signals a shift from dependence on FX revaluation to building a sustainable, diversified, and tech-driven banking model.
What ₦1.7 Trillion Foreign Earnings Mean for Nigerian Banking
₦1.7 trillion in foreign earnings is more than just a headline. It marks a strategic turning point for Nigerian banks as they evolve from a naira-dependent model to a diversified, regional financial powerhouse.
While FX depreciation played a role in boosting reported profits, the sustainability of earnings now depends on real growth in foreign operations, digital services, diaspora banking, and SME lending.
For bankers, this means focusing on long-term value creation rather than short-term FX gains. For investors, it means weighing growth potential in loans, fees, and regional presence. And for everyday Nigerians, it promises better banking services, greater access to finance, and a more resilient economy.
In essence, Nigerian banks are writing a new chapter — one of innovation, regional influence, and financial strength that could position them as major players not only in Africa but on the global stage.
If you want to delve deeper into specific banks’ strategies or the fintech ecosystem supporting these changes, that’s a conversation we can have next.
