Nigerian banks posted a sharp increase in first-quarter profitability, with FX revaluation gains and wider net interest margins doing most of the work as the naira found a more stable footing.
The revaluation line deserves scrutiny. Banks holding net long foreign-currency positions book gains when the naira weakens and losses when it strengthens. The first-quarter surge reflects a favourable comparative against a brutal prior-year period, not a repeatable earnings stream.
Net interest margin expansion is the more durable story. With the Monetary Policy Rate held at elevated levels, banks have repriced asset books faster than deposit costs have caught up. That gap is where the earnings are.
It is also where the risk sits. A rate-cutting cycle reverses the dynamic, and deposit competition among tier-one names has already begun to erode the funding cost advantage that the largest banks enjoyed.
Asset quality has held up better than the macro backdrop would suggest, though provisioning practices vary meaningfully across the sector and warrant a name-by-name read rather than a sector-level conclusion.
Investors treating the first quarter as a new baseline are extrapolating from a comparative distortion. The margin story is real; the revaluation story is arithmetic.