…Say lenders prioritising low-risk instruments over private sector credit
By Chukwuma Umeorah
Eight Nigerian banks, including Access Holdings, Zenith Bank, and United Bank for Africa (UBA), have increased their investment securities to a combined N41.78 trillion in the first quarter of 2025, a 1.65 per cent rise from N41.10 trillion in December 2024.
As banks shift focus to low-risk, high-return instruments, experts warn that this trend is crowding out credit to the private sector. Economist and investment specialist, Vincent Nwani emphasized the need for depositors to take control of their finances. “When you keep money in the bank, banks are using your funds to invest, so investors should also seek opportunities to earn from their money.”
He highlighted that banks are prioritizing profit-driven ventures like treasury bills, bonds, and commercial papers, with fees and treasury instruments now outpacing loan interest as key revenue sources. “Even though banks were created to lend, they are now more focused on seeking returns,” Nwani said.
The financial statements of Ecobank, Guaranty Trust Holding Company (GTCO), Zenith Bank, Wema Bank, Access Holdings, First HoldCo, FCMB Group, and UBA reveal a strategic pivot toward investment securities such as treasury bills, bonds, and commercial papers. UBA led with N13.13 trillion in March 2025, up from N12.53 trillion in December 2024, comprising N6.21 trillion at fair value through other comprehensive income and N6.92 trillion at amortized cost. Ecobank followed with N11.01 trillion, up from N10.68 trillion, while GTCO’s securities rose to N4.62 trillion from N4.15 trillion.
Wema Bank reported a significant increase to N1.05 trillion from N900.2 billion, largely driven by N991.9 billion held at amortized cost. Zenith Bank’s securities edged up to N5.11 trillion from N5.10 trillion. However, First HoldCo and Access Holdings saw declines to N5.68 trillion and N10.79 billion, respectively, while FCMB Group’s securities slightly dropped to N1.18 trillion from N1.19 trillion.
Analysts attribute this shift to the allure of government securities with high coupon rates, which offer near-zero default risk. “If the securities are treasury securities and bonds, it means that the high coupon rates have made them more attractive than lending to the private sector,” said Teslim Shitta-Bey, Chief Economist and Managing Editor of Proshare.
He noted that despite the Central Bank of Nigeria’s 50 per cent cash reserve ratio, banks are prudently managing liquidity, with some recapitalization funds flowing into commercial papers. “The higher interest rates signal high default risks, so banks are simply being prudent,” Shitta-Bey added.
This cautious approach, however, has slowed credit growth to the private sector, which Shitta-Bey predicts will remain “relatively sluggish.” The preference for low-risk instruments underscores banks’ focus on profitability over their traditional role as lenders to the real economy.