Nigeria’s banking industry could expand its revenue pool to about $16 billion by 2030, driven by consolidation, rapid digital adoption, and tighter regulatory reforms aimed at strengthening the financial system, according to a new report by global consulting firm McKinsey & Company.
The report highlights how structural changes in the banking sector are reshaping the competitive landscape, with traditional banks increasingly investing in technology and expanding their services to remain competitive in the face of rising fintech disruption.
According to McKinsey, Nigeria’s banking market is projected to grow at an average compound annual growth rate (CAGR) of around seven per cent, supported by increasing financial inclusion, deeper penetration of the retail and small business segments, and the continued expansion of digital financial services.
The projection comes at a time when Nigeria’s financial system is undergoing major reforms, including a significant increase in minimum capital requirements for banks. The policy is designed to strengthen banks’ balance sheets, encourage consolidation, and enhance the resilience of the financial system amid economic volatility.
Despite macroeconomic pressures in recent years, the report noted that Nigerian banks remain among the most profitable in Africa, largely due to higher interest rates, repricing of loan portfolios, and substantial foreign exchange gains.
One of the key drivers of recent profitability has been the liberalisation of Nigeria’s foreign exchange market in 2023, which generated significant earnings for major lenders.
McKinsey noted that the five largest banks in Nigeria recorded more than $1.7 billion in foreign exchange-related income, accounting for approximately 40 per cent of their operating income during the period.
However, regulators have since taken steps to discourage excessive reliance on foreign exchange windfalls, urging banks to diversify their income streams and strengthen core banking operations.
The report further revealed that corporate banking generated the largest share of new revenue growth between 2019 and 2024, as banks focused on large corporate clients and multinational businesses.
Nevertheless, the retail and small and medium enterprise (SME) segments recorded faster growth, largely driven by the expansion of digital payments, agency banking networks, and mobile financial services across the country.
McKinsey also highlighted the rising influence of financial technology companies, which have emerged as strong competitors to traditional banks.
Platforms such as OPay and Moniepoint have gained millions of users by offering digital payment services, savings wallets, debit cards, and business management tools tailored to individuals and small enterprises.
The report noted that OPay has surpassed 50 million downloads on the Google Play Store, while Moniepoint has become one of Nigeria’s leading merchant acquirers, challenging banks in the payments ecosystem.
These fintech firms are rapidly expanding by leveraging digital channels and agent networks to reach previously underserved customers, particularly in the retail and SME markets.
In response, Nigerian banks have increased their technology spending significantly, allocating tens of billions of naira annually to upgrade software infrastructure, digital platforms, and electronic banking systems.
The report also pointed to growing consolidation within the banking sector, with larger institutions gradually increasing their market share.
Between 2019 and 2024, the largest banks raised their share of domestic banking assets from 59 per cent to 64 per cent, reflecting an industry trend toward stronger and more dominant financial institutions.
To further strengthen the sector, the Central Bank of Nigeria (CBN) has introduced new capital thresholds requiring international banks to increase their minimum capital base from N50 billion to ₦500 billion, while national banks must raise their capital from ₦25 billion to ₦200 billion by March 2026.
The regulator has also restricted dividend payments and other capital distributions for banks operating under regulatory forbearance as part of measures to reinforce their financial stability.
Although the depreciation of the naira has reduced banking revenues in dollar terms, some Nigerian banks are offsetting the impact by expanding their presence in international markets.
For example, the report noted that Access Bank now generates about 23 per cent of its total operating income from foreign operations, highlighting the growing importance of cross-border expansion in sustaining growth.
McKinsey also underscored the role of demographic and technological factors in shaping the future of Nigeria’s banking industry.
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 a large pool of digitally connected customers.
This demographic trend is expected to accelerate the adoption of mobile banking, digital payments, and other technology-driven financial services.
The introduction of Nigeria’s open banking framework is also expected to intensify competition by enabling customers to share their financial data across institutions, allowing new entrants to build innovative services on top of existing banking infrastructure.
Across Africa, McKinsey said the banking sector has experienced strong expansion in recent years.
Between 2020 and 2024, the industry recorded annual revenue growth of about 17 per cent in constant currency terms, compared with the global average of seven per cent.
However, currency depreciation in several African economies significantly reduced headline growth.
In dollar terms, the continent’s banking revenue increased from $81 billion in 2020 to $99 billion in 2024, representing a CAGR of 5.2 per cent.
The report noted that the African banking industry remains highly concentrated, with five major markets – South Africa, Nigeria, Egypt, Kenya, and Morocco – accounting for nearly 70 per cent of total revenue.
South Africa alone generated over $26.4 billion in banking revenue in 2024, making it the continent’s largest financial market.
McKinsey estimated that Africa’s overall banking sector could reach about $107 billion in market size by 2025, reflecting strong long-term growth potential despite ongoing economic challenges.
Looking ahead, the report stressed that Nigerian banks must continue to adapt to the rapidly evolving financial landscape by expanding digital capabilities, strengthening operational efficiency, and pursuing strategic consolidation.
However, it cautioned that risks remain, including persistent inflation, exchange-rate volatility, and relatively low income levels, which could affect the pace of financial sector growth in the coming years.