Foreign Subsidiaries Account for 28% of Profits as Tier-One Banks' Earnings Reach N3.86 Trillion

Foreign subsidiaries of Nigeria’s top four tier-one banks contributed 28 percent of total after-tax profits in 2024, underscoring the growing importance of cross-border operations in mitigating domestic economic pressures, currency devaluation, and regulatory hurdles.

Despite a challenging year marked by elevated inflation and aggressive interest rate hikes by the Central Bank of Nigeria (CBN), the banking sector remained resilient, benefiting from foreign exchange gains and a sharp rise in interest income.

Interest income for Access Holdings, GTCO, UBA, and Zenith Bank surged by 121.6 percent year-on-year, reaching N9.51 trillion in 2024.

An analysis by BusinessDay revealed that these four banks—Access Holdings Plc, Zenith Bank Plc, United Bank for Africa (UBA) Plc, and Guaranty Trust Holding Company (GTCO) Plc—generated N1.09 trillion in after-tax profit from their foreign subsidiaries in 2024, up from N496 billion in 2023.

This is as foreign operation contributions grew by 110.7 percent compared to a 45 percent growth in domestic earnings, showing a clear divergence in momentum.

“Banks are responding to Nigeria’s economic volatility by rebalancing their exposure. Foreign subsidiaries now serve as a stabilising force,” said Amaka Ojei, a Lagos-based bank analyst.

Tesleemah Lateef, a research analyst, said that Nigerian banks’ expansion into the African market lacks a specific major driving force.

“Instead, most of these banks have it stated in their objective plan to expand to the African market as a growth initiative, not necessarily for immediate profit,” Lateef said.

According to Lateef, “The management sees the expansion as a positive step that aids in diversification.

“By expanding, banks are not only growing but also able to diversify their operations. This diversification serves as a protective measure against shocks, which is another reason why Nigerian banks are making strides in the African market,” Lateef said.

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The Numbers behind the trend

UBA leads the pack with over 45.3 percent of its profits coming from its African subsidiaries and the UK. Access Holdings continues its aggressive expansion into East and Southern Africa, thereby gaining a 43.3 percent share, while GTCO and Zenith see more modest growth, amounting to 18.9 percent and 9 percent, respectively.

UBA stands out as the clear leader, leveraging its well-established network across 20 African countries, including Ghana, Liberia, Kenya, Uganda, Mali, Tanzania, Senegal, Guinea, Côte d’Ivoire, and Gabon.

The bank also operates branches in Benin, Sierra Leone, Burkina Faso, Chad, Congo Brazzaville, Mozambique, Cameroon, Congo DRC, Zambia, and the United Kingdom.

Of its 20 subsidiaries, 18 recorded after-tax profits, with UBA Cameroon leading at N64.4 billion, followed by UBA Côte d’Ivoire with N55.7 billion. However, UBA Kenya and UBA Tanzania reported after-tax losses.

Overall, UBA’s after-tax profits grew by 162.5 percent, reaching N452.3 billion in 2024 compared to N172.3 billion in 2023.

Meanwhile, Access Holdings recently expanded its footprint in East Africa by acquiring operations in Tanzania and establishing a new African office.

Other foreign subsidiaries include Ghana, the UK, Gambia, South Africa, Rwanda, Congo, Zambia, Gambia, Sierra Leone, Guinea, Mozambique, Kenya, Botswana, Cameroon, and Angola.

Collectively, Access Holding Plc’s foreign operations generated N351.4 billion in after-tax profit in 2024 from 16 offshore subsidiaries tracked by BusinessDay.

GTCO, with eight subsidiaries in Ghana, Sierra Leone, Liberia, Cote D’Ivoire, Gambia, Kenya Group, Kenya Group, Kenya Group and the United Kingdom, generated N195.2 billion in 2024 from its foreign operations, up from N98 billion in 2023.

Apart from GT Bank Tanzania, which reported a loss, other subsidiaries all reported profits during the period.

On the other hand, Zenith subsidiaries reported the lowest profit across the surveyed tier-1 banks, with N93.2 billion from N88.08 billion during the surveyed period.

With its subsidiaries’ operations across Ghana, Sierra Leone, Gambia, and the UK making inroads with record profits.

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What are Q1 numbers saying?

The first quarter of 2025 numbers look positive, as Access and GTCO, which reported their foreign subsidiaries’ performance, amounted to N107 billion and N67.5 billion, respectively.

However, Zenith and UBA didn’t report their subsidiaries’ performance during the period.

For instance, Zenith Bank reported an after-tax profit of N19.8 billion from its rest of Africa subsidiaries and N24 billion from its Europe operations.

Why does it matter?

Regional expansion is not without its pitfalls. Operating in multiple jurisdictions exposes banks to varying regulatory regimes, political instability, and currency translation risks.

While profits may grow in stable foreign currencies like the CFA or USD, converting them back into naira, especially under Nigeria’s tight capital control regime, can be challenging. Moreover, geopolitical risks, such as coups or civil unrest in parts of West and Central Africa, pose ongoing operational threats.

Licensing, compliance, and anti-money laundering frameworks also differ by country, increasing overhead and requiring constant vigilance.

With foreign subsidiaries contributing nearly one-third of profits in 2024, analysts predict that figure could rise in 2025, especially if FX and inflation challenges persist locally.

According to the National Bureau of Statistics, Nigeria’s headline inflation dropped to 23.71 percent in April, a rise that will likely lead monetary policymakers to cut rates when they meet on May 19 and 20.

The inflation dropped despite the naira depreciating by 4.50 per cent to an average of N1,595.05 to the dollar in April from N1,526.37 in March. This raised the cost of imports, particularly for import-dependent goods, likely driving an uptick in the core index.

Olayemi Cardoso, the central bank chief acknowledged that inflation remains “elevated”, he however noted that “it’s less sticky than before”, fanning hopes that the macroeconomic stability may, in the near term, put the authorities in the right terms to ease monetary controls after hiking borrowing rates throughout last year.

“If we continue with our course of orthodox monetary policy, which has already shown results, then inflation will moderate over time. Alongside that, interest rates will also begin to ease,” Cardoso said at the launch of the World Bank’s Nigeria Development Update in Abuja.

The Monetary Policy Committee has maintained Nigeria’s benchmark interest rate at 27.5 percent, the same level it was set at during its February 2025 meeting.