Nigerian banks recorded an extraordinary $1.7bn in foreign exchange gains in 2023, according to the 32 page McKinsey report titled From potential to performance: A snapshot of African banking. The FX windfall accounted for an estimated 40 per cent of total operating income for Nigeria’s top banks and was 100 times larger than FX gains in 2022, exposing the profound impact of the country’s foreign exchange liberalisation on the financial sector.
The report did not specify the top five lenders; however, based on industry rankings, the top five banks in Nigeria are Access Bank, United Bank for Africa, Zenith Bank, First Bank of Nigeria, and Guaranty Trust Holding Company.
“In 2023, following the liberalisation of Nigeria’s foreign exchange market, the top five banks by market share recorded over $1.7bn in foreign exchange gains, representing about 40 per cent of their total operating income, 100 times the exchange gains in 2022,” the report released on Tuesday noted.
The remarkable surge was driven by the liberalisation of Nigeria’s foreign exchange market, allowing banks to capitalise on currency movements while mitigating the revenue drop caused by the devaluation of the naira. Analysts note that for several top-tier banks, this single-year FX gain exceeded their total operating income from the previous year, signalling both opportunity and heightened exposure to currency risk.
When President Bola Tinubu assumed office, his administration, in collaboration with the Central Bank of Nigeria, initiated steps to liberalise and unify the foreign exchange market. Prior to these reforms, Nigeria operated multiple official exchange rates, each applied to different classes of transactions. This system made forex trading opaque and created opportunities for arbitrage, where traders could exploit differences between market rates.
In June 2023, the Central Bank of Nigeria abolished these multiple windows and adopted a market-driven ‘willing buyer, willing seller’ approach, anchored on the Investors & Exporters window. Under this new framework, the value of the naira would henceforth be determined more directly by market supply and demand, reflecting real economic conditions.
Further, the report noted that the gains from the FX windfall came with regulatory pressures. The Federal Government introduced a 70 per cent retrospective levy on realised FX profits, encouraging banks to focus on sustainable service offerings and prudent risk management rather than purely speculative gains.
Despite the levy and rising capital requirements, Nigerian banks remain resilient. Institutions such as Access Bank have diversified revenue streams, with foreign operations now contributing 23 per cent of total operating income, helping to cushion the sector against local currency shocks.
The report further emphasised that while corporate banking continues to generate the bulk of new revenue, retail and SME banking segments are growing rapidly, fuelled by digital payments, agency banking, and partnerships with fintech players like OPay and Moniepoint. These trends indicate that Nigerian banks are not only navigating volatility but are also positioning themselves for sustainable growth in a digital-first economy.
