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Banks In Earnings Windfall Under High Interest Rate Regime

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There are indications that banks are reaping huge returns from the rising interest rate environment following Central Bank of Nigeria, CBN, inflation targeting interest rate regime.

Already the first quarter 2023, Q1’23, results of some of the leading banks are pointing in this direction as their earnings from lending activities rose Year-on-Year (YoY) by 46.02 percent during the period.

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This sharp rise followed a mark-up in their lending rates in response to a steady upward adjustment in the benchmark interest rate, Monetary Policy Rate (MPR) by the CBN.

In its bid to check inflationary pressure, the CBN had started interest rate hike in the third quarter of 2022, which culminated to a rise in the MPR to 18.5 percent as at May 24, 2023, a third-consecutive hike this year.

The development also resulted in a record rise in borrowing cost to its highest since the monetary policy rate was adopted in 2006.

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READ ALSO: CBN Limits Daily Transactions Via Contactless Payments

This also contributes to the headaches of the real sector of the economy as manufacturers complain of their operations being shackled by high cost of funding while banks rake in strong earnings.

Financial statements of the banks for the review period showed that the banks raked in N1.39 trillion as interest on loans, a 46.02 percent increase compared to N954.1 billion in Q1’22.

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The banks are Access Holdings Plc, Stanbic IBTC Holdings Plc, Guaranty Trust Holding Company (GTCo) Plc, United Bank for Africa (UBA) Plc, FBN Holdings Plc, Fidelity Bank Plc, Unity Bank Plc, Ecobank Transnational Incorporated (ETI) Plc, Union Bank of Nigeria Plc, Wema Bank Plc, Zenith Bank Plc and FCMB Group Plc.

Recall that Financial Vanguard had exclusively reported that the rising interest rate is now choking companies as funding costs for 30 companies previously analysed by Financial Vanguard spiked by 19.9 percent to N79.34 billion in Q1’23 as against N66.17 billion in the corresponding period in 2022.

A breakdown of the banks interest income showed that though the banks recorded growth in their loan book, earnings from lending rose faster than the loan portfolio.

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The banks’ loan book for the period grew by 18.7 percent to N29.47 trillion from N24.84 trillion in Q1’22, a 27.32 percentage point slower than the growth margin in interest income.

However, investment analysts fear that the steady increase in banks lending rates may trigger an increase in Non-Performing Loans (NPLs) as customers may now struggle to repay the loans.

They opined that the trend puts Nigeria’s manufactured goods and services at competitive disadvantage, making imports more attractive than exports.

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Banks’ earnings from lending activities

FBN Holdings Plc recorded the highest increase in its interest income as its earnings from lending activities jumped by 64.1 percent to N179.61 billion from N109.45 billion in Q1’22. Meanwhile, its loan book grew by 29.1 percent to N3.95 trillion in Q1’23 from N3.06 trillion in the corresponding period in 2022.

READ ALSO: Forex Scarcity Persists As CBN Resumes Intervention

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UBA, which grew its loan book by 15.8 percent, followed, recording a 53.41 percent increase in its interest income to N191.88 billion from N125.08 billion in 2022.

Stanbic IBTC Holdings Plc was the third with 52.8 percent increase to N50.42 billion from N33 billion in 2022. The bank’s loan book grew by 22.45 percent to N1.2 trillion from N980 billion in the corresponding period in 2022.

Zenith Bank followed with a 51.6 percent increase in its interest income to N191.63 billion in Q1’23 from N126.38 billion, while its loan book grew by 13.5 percent to N4.03 trillion.

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Others are Access Holdings Plc with 46.31 percent increase to N254.12 billion; GTCO Plc (43.63% to N82.52bn); Fidelity Bank (42.5% to N86.003bn); FCMB Group (41.4% to N66.04bn); Wema Bank (35.4% to N33.88bn) and Ecobank (32.7% to N207.22bn).

Unity Bank, the only bank whose loan book shrinked (-34.9%) during the period, posted an 11.1 percent increase in its interest income to N10.58 billion from N9.52 billion in the corresponding period in 2022.

Perpetuates import dependence, may trigger NPLs growth – Experts

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In his views, David Adonri, Vice Chairman, Highcap Securities, said that high interest rate environment perpetuates Nigeria’s dependence on importation as rising interest rate makes local manufacturing and exports uncompetitive.

He stated: “As a result of the contractionary monetary policy of CBN since 2022, interest rates have continued to increase in the economy. Banks have transferred this rate hike to their customers by increasing the cost of credit.

“Rising interest rates have also increased the yield on public debt to which banks are the highest subscribers. All these have facilitated the banks’ interest income which has risen remarkably by 46.02% within one year.

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“While banks are enjoying the bonanza, borrowers and consumers are groaning under the escalating cost of doing business and rising inflation attendant to high cost of funds.

READ ALSO: BREAKING: DSS Arrests Ousted CBN Governor, Emefiele

“With globalization and liberalization of trade, rising cost of funds put Nigerian produced goods and services at a competitive disadvantage internationally, making imports to be cheaper than export. This perpetuates import dependence and erodes productive employment in Nigeria.”

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Victor Chiazor, Head Research and investment at FSL Securities, said: “The combined growth of 46.02% in interest income reported by the banks for the first quarter of 2023 was largely as a result of the high interest rate environment which was triggered by the Nigerian central bank’s desire to halt the rising inflation rate by increasing its monetary policy rate.

“The high interest rate environment increased the banks earnings on interest income, but, on the flip side, also increased the banks interest expense as customers demanded more returns for both their deposits and placements with the banks.

“We also observed that the banks’ net interest income grew during the period as their income margins improved during the period.

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“The high interest rate environment would reduce the demand for new loans while we may also see increased non-performing loans and impairment by the banks as consumers struggle to repay such loans due to the high interest element.”

Mallam Garba Kurfi, Managing Director/CEO, APT Securities and Fund, said: “As you are aware, the CBN kept increasing MPR after every MPC sitting, which gives banks the opportunity to increase the interest charge on the given loans. That increased their income on the already given loans.”
VANGUARD

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FG Offers Up To 16.54% Yield On September Savings Bonds

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The Federal Government, through the Debt Management Office, is offering investors annual yields of up to 16.541% on its September 2025 Federal Government of Nigeria Savings Bonds.

The DMO, in a circular on its website on Monday, announced that the subscription window opens immediately and will close on Friday, September 5, 2025, with settlement scheduled for September 10, 2025.

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Coupon payments will be made quarterly on March 10, June 10, September 10, and December 10 and will be paid directly to investors.

The DMO offered investors two subscription categories of the Federal Government Savings Bond.

READ ALSO:DMO Unveils July FGN Savings Bond As CBN Offers N250bn In Treasury Bills

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The first is a two-year bond, which will mature on September 10, 2027, and attracts an annual interest rate of 15.541 per cent.

The second is a three-year bond, set to mature on September 10, 2028, with a higher annual interest rate of 16.541 per cent.

The two-year bond interest rate rose to 15.541% in September 2025, up from 14.401% in August.

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Similarly, the three-year bond recorded an increase to 16.541% in September, compared to 15.401% in the previous month.

The FGN Savings Bond programme, launched in 2017, aims to deepen the domestic bond market, promote financial inclusion, and give retail investors access to secure, low-risk government securities.

READ ALSO:Family Kicks As UK Varsity Sacks Nigerian Grandmother

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Each bond unit is priced at ₦1,000, with a minimum subscription of ₦5,000 and additional subscriptions in multiples of ₦1,000. Individual investors can subscribe up to ₦50 million.

On the status of FGN Savings Bonds, DMO noted it “qualifies as securities in which trustees can invest under the Trustee Investment Act; Qualifies as Government securities within the meaning of Company Income Tax Act (“CITA”) and Personal Income Tax Act (“PITA”) for Tax Exemption for Pension Funds, amongst other investors.

“Listed on The Nigerian Exchange Limited (and); qualifies as a liquid asset for liquidity ratio calculation for banks.”

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The office said the bond is “backed by the full faith and credit of the Federal Government of Nigeria and charged upon the general assets of Nigeria.”

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NNPCL Reduces Fuel Price After Dangote Refinery’s Adjustment

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The Nigerian National Petroleum Company Limited has reduced its premium motor spirit pump price on Thursday, according to DAILY POST.

It was confirmed that NNPCL retail outlets in the Federal Capital Territory, Abuja, have reduced their pump price to N890 per litre from N945.

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This new fuel price has been reflected in NNPCL retail outlets such as mega station Danziyal Plaza, Central Area, Wuse Zone 4, Wuse Zone 6, and other of its filling stations in the nation’s capital.

READ ALSO:N5bn Damage: NNPCL Secures Appeal Court Victory Against Ararume

The latest downward review of fuel price in NNPCL outlets represents an N55 reduction in fuel pump price.

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It was reduced to N890 per litre this afternoon, down from N945,” an NNPCL fuel attendant told DAILY POST anonymously on Thursday.

This comes a Nigerian filling station, MRS Empire Energy, on Thursday adjusted their fuel pump price to N885 and N946 per litre, down from N910 and N955 per litre.

The latest fuel price reduction trend is unconnected to Dangote Refinery’s ex-depot petrol price adjustment by N30 to N820 per litre from N850 and the price of crude oil in the international market.

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Dangote Refinery Reduces Fuel Price

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Dangote Petroleum Refinery has announced a reduction in the ex-depot (gantry) price of Premium Motor Spirit, PMS, commonly known as petrol, by N30, from N850 to N820 per litre, effective from August 12, 2025.

This was disclosed in a statement by the company’s spokesman, Anthony Chijiena, on Tuesday.

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The 650,000-barrel-per-day plant said the move is part of its unwavering commitment to national development, assuring the public of a consistent and uninterrupted supply of petroleum products.

READ ALSO:Dangote Refinery Gets New CEO

In line with our dedication to operational excellence and sustainable energy solutions, Dangote Petroleum Refinery will commence the phased deployment of 4,000 CNG-powered trucks for fuel distribution across Nigeria, effective August 15, 2025,” said Chijiena.

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The announcement comes as the refinery prepares to commence direct fuel distribution nationwide. The development is expected to lead petroleum product marketers to reduce their pump prices in the coming days.

In Abuja, the retail fuel price stood between N885 and N970 per litre as of Tuesday evening.

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