Nigerian banks dominate the NGX with N16.28 trillion in market cap, strong dividends, and heavy daily trading, making them attractive for both income and growth investors.
• Investors should focus on profitability, dividend consistency, efficiency (ROE), and key risk metrics like Non-Performing Loan (NPL) ratio and Capital Adequacy Ratio (CAR). Valuation ratios such as P/E and P/B must be compared with sector averages to spot undervalued or overpriced stocks
• Tier-1 banks (FUGAZ) offer stability and reliable dividends, while Tier-2 banks provide higher risk-reward opportunities for investors willing to tolerate more volatility.
The banking sector is often described as the heartbeat of every economy because it provides the backbone for financial intermediation connecting people who have money with those who need it.
In Nigeria, banks are regulated by the Central Bank of Nigeria (CBN) through the Banking and Other Financial Institutions Act (BOFIA). Listed banks also fall under the oversight of the Securities and Exchange Commission (SEC); while trading and disclosure are supervised by the Nigerian Exchange Group (NGX).
A major turning point came in 2004 when the former CBN Governor Charles Soludo raised the minimum capital requirement from N2 billion to N25 billion, forcing a wave of mergers that left stronger, more capitalized institutions.
Two decades later, in 2024, the CBN raised the bar again, with new minimum capital thresholds ranging between N250 billion and N500 billion. This moves underscores just how central banks remain to Nigeria’s financial system and capital markets.
For investors, banks are attractive because of their profitability, dividend payouts, and market liquidity. The sector routinely pays hundreds of billions of naira in dividends and accounts for trillions in market capitalization on the NGX.
In this article, we explain how to approach investing in Nigerian bank stocks.
Banks listed on the NGX
Currently, about 13 banks are listed on the Nigerian Exchange. Like individuals, these banks are not all equal.
• Tier 1 banks (FUGAZ): FirstBank Holdco, UBA, GTCO, Access Holdings, and Zenith Bank. These are Nigeria’s largest and most influential banks.
• Tier 2 banks: Fidelity Bank, FCMB, Stanbic IBTC, Ecobank Transnational Incorporated (parent of Ecobank Nigeria), Wema Bank, Sterling Holdings, Jaiz Bank, and Unity Bank.
Note: Jaiz is the only non-interest (Islamic) bank among the listed players. Some banks operate internationally, some are local, and a few are regional.
For this article, we focus strictly on the publicly listed banks.
Size and market strength
As of December 2024, Nigerian listed banks collectively controlled assets worth about N169.48 trillion, up from N112.39 trillion in 2023.
Assets matter because they reflect the scale of deposits (liabilities) and loans (assets) that drive bank earnings.
From a market perspective, by July 2025, banks had a combined market capitalization of N16.28 trillion, roughly N6 trillion higher than year-end 2024.
Banking stocks are also among the most liquid on the NGX consistently ranking in the top five traded stocks. For investors, this liquidity makes it easier to buy and sell shares quickly.
Unsurprisingly, the FUGAZ banks dominate on key indicators like total assets, gross earnings, and customer deposits.
Access Holdings leads in total customer deposits, while Zenith commands the largest retail deposit base, an edge that provides access to cheaper funding.
Smaller banks can still be rewarding, but investors must weigh the risks more carefully.
How banks make money
Nigerian banks earn income from multiple streams:
1. Net interest income: The difference between interest charged on loans and interest paid on deposits.
2. Fees and commissions: Charges on transactions, payments, loan syndications, advisory services, and other activities.
3. Trading and investment income: Revenue from FX trading, hedging, financial instrument trading, and market revaluations. (In 2024, many banks booked exceptional profits from foreign exchange revaluation.)
4. Non-banking subsidiaries: Many banks now operate holding structures that allow them to diversify into pensions, asset management, and other financial services.
Risks and capital adequacy
When buying bank stocks, investors must consider risk. The biggest is credit risk borrowers defaulting on loans. This is measured by the Non-Performing Loan (NPL) ratio.
To safeguard the system, the CBN enforces prudential ratios such as:
• NPL Ratio: The share of loans not being repaid. Lower is better.
• Capital Adequacy Ratio (CAR): A measure of a bank’s ability to absorb potential losses without harming shareholders’ funds. Higher is safer.
Key Takeaway – For investors, banks with lower NPLs and higher CARs signal stronger resilience.
Profitability and dividends
Profitability is at the core of why investors buy bank stocks. Profits drive dividend payments, which remain a key attraction in the Nigerian market.
• In 2024, Zenith Bank reported the highest profit after tax but not the highest dividend per share.
• GTCO paid the highest dividend per share at N8.03.
• Over a five-year horizon, Zenith paid the highest cumulative dividend, rewarding shareholders with over N2.4 trillion.
Takeaway: Look for consistency. A high one-off dividend is nice, but sustainable payouts signal long-term reliability.
Efficiency matters
Beyond profit size, check how efficiently banks use their capital. Return on Equity (ROE) is a useful metric here.
• In 2024, Wema Bank posted a higher ROE than some Tier-1 banks, showing efficiency even at a smaller scale.
• Return on Asset also shows how well they are sweating their assets.
• Another key efficiency factor is what is called the Cost to Income ratio which shows how much banks spend relative to their income.
• GTCO has for years had the least cost to income ratio at around 45%. Some banks have as high as 70%. Cost to income ratio.
Valuation: Knowing if it’s cheap or expensive
Before deciding which bank stock to buy, investors must look at valuation. Key ratios include:
• Price-to-Earnings (P/E) Ratio: How much investors are paying for every N1 of earnings.
• Price-to-Book (P/B) Ratio: Compares share price to net assets per share.
• Price-to-Sales (P/S) Ratio: Compares share price to revenue.
Takeaway – Always compare a bank’s ratios to the sector average.
• If P/E is higher → investors are paying a premium (possibly justified by strong growth prospects).
• If P/E is lower → stock may be undervalued relative to peers.
Where and how to buy
Investors can buy bank stocks directly from the NGX through licensed stockbrokers or via online/mobile trading apps. On the NGX indices:
• Premium Board: UBA, Zenith, and FirstBank Holdco.
• Main Board: GTCO and most other listed banks.
Final thoughts
The banking sector remains one of the most profitable and liquid on the NGX. Its consistent dividend history makes it attractive to income investors, while its growth and scale appeal to long-term investors.
Still, risks abound. Banks are tightly regulated by the CBN, and policy changes whether in FX, interest rates, or capital rules can swing profits sharply.
Bottom line: For dividend stability, Tier-1 banks are the safest bets. For higher risk-reward potential, smaller Tier-2 banks like Fidelity, Wema, or Sterling may appeal but they require more scrutiny.
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