Nigeria’s banking sector is projected to expand significantly over the next five years, with its total revenue pool expected to reach about $16 billion by 2030, according to a new industry report by global consulting firm McKinsey & Company.
The report said the anticipated growth will be driven by industry consolidation, rising digital banking adoption, stronger regulatory frameworks, and deeper financial inclusion, as banks reposition themselves to compete in a rapidly evolving financial ecosystem.
McKinsey noted that Nigeria’s banking market is forecast to grow at a compound annual growth rate (CAGR) of about seven per cent, reflecting steady expansion in lending, digital payments, and banking services targeting individuals and small businesses.
The projection comes amid sweeping reforms introduced by regulators to strengthen the sector’s resilience in the face of economic volatility, currency fluctuations, and rising competition from financial technology firms.
Despite macroeconomic challenges in recent years, Nigerian banks have continued to rank among the most profitable financial institutions in Africa. The report attributed this to a combination of higher interest rates, loan repricing strategies, and significant gains from foreign exchange transactions.
A major contributor to recent banking profits has been the liberalisation of Nigeria’s foreign exchange market in 2023, which created substantial income opportunities for banks.
According to the report, the five largest Nigerian banks collectively generated more than $1.7 billion in foreign exchange-related income, accounting for approximately 40 per cent of their operating revenue during the period.
However, regulators have moved to limit excessive dependence on FX-related earnings, encouraging banks to strengthen their core operations and develop more sustainable revenue streams.
The report also highlighted a shift in the composition of banking revenue over the past few years.
Between 2019 and 2024, corporate banking remained the largest contributor to new revenue growth, as banks expanded their services to large companies and multinational corporations.
However, retail banking and the small and medium-scale enterprise (SME) segment recorded faster growth, supported by the rapid spread of digital financial services, agency banking networks, and mobile payment platforms.
Another key trend identified in the report is the growing influence of financial technology companies, which are increasingly competing with traditional banks across several segments of the financial services market.
Fintech firms such as OPay and Moniepoint have built large customer bases by offering digital payment solutions, savings wallets, debit cards, and business management tools for individuals and small enterprises.
McKinsey noted that OPay has exceeded 50 million downloads on the Google Play Store, while Moniepoint has emerged as one of the leading merchant acquirers in Nigeria, competing directly with banks in payment processing and financial services.
These fintech platforms have gained traction by leveraging technology to scale rapidly and reach underserved customers across the country.
To remain competitive, Nigerian banks have significantly increased their investment in digital infrastructure, with some institutions spending tens of billions of naira annually on software upgrades, data systems, and electronic banking platforms.
The report further noted that industry consolidation is gradually reshaping the banking landscape, as larger institutions expand their market dominance.
Between 2019 and 2024, the share of domestic banking assets held by the country’s largest banks rose from 59 per cent to 64 per cent, reflecting a gradual concentration of market power among leading financial institutions.
The Central Bank of Nigeria (CBN) has also introduced tougher capital requirements as part of efforts to strengthen the sector.
Under the new regulatory framework, international banks are required to increase their minimum capital base from ₦50 billion to ₦500 billion, while national banks must raise their capital from ₦25 billion to ₦200 billion by March 2026.
The apex bank has also restricted dividend payments and other capital distributions for banks operating under regulatory forbearance in order to reinforce their financial positions.
Although depreciation of the naira has reduced banking revenues when converted to dollars, Nigerian banks are increasingly seeking growth opportunities outside the domestic market.
For instance, Access Bank’s international operations now account for about 23 per cent of its total operating income, reflecting a growing strategy among Nigerian banks to diversify their revenue streams through cross-border expansion.
The report also highlighted Nigeria’s demographic and technological advantages as key drivers of future growth in financial services.
Nigeria currently has more than 160 million active internet subscriptions, while over 60 per cent of the population is under the age of 25, creating one of the largest digitally connected youth populations in Africa.
This demographic structure is expected to accelerate the adoption of digital banking and financial technology solutions across the country.
McKinsey further noted that the introduction of open banking regulations in Nigeria will intensify competition within the financial sector.
The framework will allow customers to share their financial data across different institutions, enabling fintech firms and other technology-driven companies to develop new services using existing banking infrastructure.
Across Africa, the report said the banking sector has recorded strong growth in recent years.
Between 2020 and 2024, banking revenues on the continent expanded at a compound annual growth rate of about 17 per cent in constant currency terms, compared with the global average of seven per cent.
However, currency depreciation across several African economies has reduced the sector’s growth when measured in dollar terms.
According to the report, Africa’s banking revenue increased from $81 billion in 2020 to $99 billion in 2024, representing a CAGR of 5.2 per cent.
The African banking industry also remains highly concentrated, with five major markets-South Africa, Nigeria, Egypt, Kenya, and Morocco-accounting for about 70 per cent of total banking revenue on the continent.
South Africa alone generated more than $26.4 billion in banking revenue in 2024, making it Africa’s largest financial market.
Overall, McKinsey estimated that Africa’s total banking market could reach approximately $107 billion in 2025, highlighting the sector’s scale and long-term potential.
Looking ahead, the report emphasised that Nigerian banks must continue to strengthen their digital capabilities, expand financial inclusion, and pursue strategic consolidation in order to sustain growth in an increasingly competitive environment.
However, it cautioned that challenges such as high inflation, exchange-rate volatility, and relatively low income levels could affect the pace of growth in the sector if not effectively managed.
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