Deposit Money Banks in Nigeria earn N1.55trn from diversification to Investment Securities in Q1

Money Deposit Banks in Nigerian that invested in government/investment securities are now enjoying juicy yields as income from treasury bills have risen to an all-time high.

The largest lenders collectively earned N1.55 trillion in income from treasury bills and government bonds in the first three months of 2025 which is 64.12 percent higher than 2024’s N948.05 billion, according to data gathered by MoneyCentral.

“In a high yield environment, they optimise their balance sheet to invest more in government securities than issuing loans. In the last couple of years, it has been a major driver of revenue,’’ said an analyst who does not want his name mentioned.

There has been elevated yields in the fixed income market on the back of rising interest rates as the central bank embraces an aggressive monetary policy to curb rising inflation.

In 2024, the Central Bank of Nigeria (CBN) ramped up Open Market Operations (OMO), with outstanding OMO bills nearly doubling to NGN2.47trn by year-end, while implementing a cumulative 875 basis point hike in the Monetary Policy Rate (MPR) to 27.50% by December.

These efforts pushed average Treasury bill yields to 24.12% (from 8.20% in 2023). However, these policies came at a steep cost. Interest expenses on CBN securities alone surged to NGN4.48trn, accounting for about 90% of the Bank’s total interest expense.

In line with tighter liquidity conditions, the Federal Government also leaned heavily on short-term borrowing, issuing N13.40trn in T-Bills — more than double the N6.47trn issued in 2023.

In the first four months of 2025 (January to April), the CBN has issued N4.57 trillion in OO Bills, at an average rate of 21.78%, according to data from Meristem Research.

Easy money like income from treasury bills makes banks reluctant to extend credit to the real sector of the economy as they are mandated to pack cash with the central bank as evidenced in a high cash reserve ratio.

For instance, Guaranty Trust Holding Company (GTCO) Plc earned N168.11 billion from income from government securities, which is higher than N151.32 billion income from loans and advances.

In a related development, United Bank for Africa (UBA) raked in N289.05 billion from treasury bills and government bonds, which is higher than N229.35 billion income from loans and advances.

Nigerian banks do not give out loans as their peers in other countries as the country’s benchmark loans to deposit (LDR) ratio of 50 percent is one of the lowest in the world.

The Apex bank has reduced the LDR ratio from 65 percent to allow lenders to comply with the cash reserve ratio.

Zenith Bank realised N328.81 billion from income from government securities; Access Holdings, N334.75 billion; FirstHoldCo, N222.32 billion; Fidelity Bank, N63.96 billion; First City Monument Bank, N60.34 billion, and Stanbic IBTC Holdings, N65.21 billion.