Business

Banks In Earnings Windfall Under High Interest Rate Regime

Published

2 years ago

July 10, 2023

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.

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.

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.

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.

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.

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.

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.

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

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.

“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.

“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.”

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.

“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

Business

Confusion Over Euro-Africa CCI’s $250m Investment In Edo

Published

21 hours ago

September 29, 2025

Editor

The $250m investment deal Governor Monday Okpebholo claimed to have secured during his recent trip to Scotland is generating ripples over capacity of the European African Chamber of Commerce and Industry (EACCI) to make such a huge investment.

The EACCI, headed by a Drector General, Dr. Kingsley Obasohan, is not known to have made any prior investment in Edo State or any part of the country.

Obasohan, who attended the Edo State Global Investment Summit virtually, announced the $250m investment.

He said the investment would be made for a period of three years.

An online search was launched to unravel the EACCI as well as the man Obasohan.

A number on the site was answered by a lady who claimed not to understand English language.

Several foreign partners were listed on the site as board members and advisory council.

Some closed associates of Obasohan said he would have to get clearance from the Board members before talking to journalists on the issue.

Spokesman for the Edo Peoples Democratic Party, Daniel Noah Osa-Ogbegi, said the party would hold Governor Okpebholo accountable to Edo people and demanded clarity on the $250m investment from Glasgow.

Osa-Ogbegi said the proposed investment has become a source of embarrassment to Edo people because of unfolding information about EACCI.

He said the party would shine light on fiscal management practices that appeared to ignore transparency and responsibility.

Secretary to the State Government (SSG), Umar Musa Ikhilo, had earlier said those that attended the Glasgow summit were interested in keying into the SHINE agenda of Governor Okpebholo.

“One of the chambers of commerce that attended, the European African Chamber of Commerce and Industry signed an MoU with the Edo State Government to invest a sum of $250 million over the next three to five years.

“Last year, diaspora remittances were the second-highest source of foreign income in Nigeria after crude oil, over $20 billion, but only 2% of that went into investment. We are creating a vehicle to help convert more of that into direct investments.”

He added that a delegation from Scotland was expected to visit Edo State in the coming months to explore specific investment projects as a follow-up to the summit.

Business

Dangote Hits Out At PENGASSAN, Says Union ‘Serial Saboteurs, Serving Oligarchs’

Published

2 days ago

September 28, 2025

Editor

The management of Dangote Petroleum Refinery has berated the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), accusing the union of decades-long sabotage of Nigeria’s oil and gas sector and serving the interests of its leaders rather than ordinary Nigerians.

In a statement issued at the weekend, the refinery described PENGASSAN’s latest directive to cut crude oil and gas supplies to the facility as another act of economic sabotage designed to inflict untold hardship on Nigerians.

“Indeed, over time, the Association has consistently proved itself as serving interests other than those of Nigerians and Nigerian workers,” the statement declared.

Dangote recalled that in 2007, when the Federal Government sold its moribund Port Harcourt and Kaduna refineries to Blue Star Consortium, led by the Dangote Group, for $750 million, it was PENGASSAN and its ally, the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG), that sabotaged the deal. “It is now obvious to everyone that the FGN’s decision at the time was the right one and that PENGASSAN and NUPENG ignominiously wrote their names on the wrong pages of history,” the company said.

The refinery also faulted the union’s role in the much-publicised rehabilitation of the Port Harcourt Refinery, describing it as a “ruse” which PENGASSAN “knowingly celebrated despite being a scam on Nigerians.” The statement further accused the union of opposing amendments to the Petroleum Industry Act (PIA) that would have freed up federal liquidity and attracted private-sector funding into Nigeria’s upstream oil ventures.

Beyond policy obstruction, Dangote Refinery accused the association of mismanaging billions of naira in annual check-off dues to allegedly bankroll the “lavish lifestyles” of its leaders, without accountability to members. By contrast, the refinery highlighted its own record of economic contributions within a short period, citing road construction, worker training, the creation of thousands of Nigerian jobs, and a compensation structure that “outdistances the best in the Nigerian oil and gas industry.”

“The Dangote Group is the highest employer of labor in Nigeria and the highest contributor to the tax revenues of Nigeria and its sub-nationals. What comparable social responsibility has PENGASSAN, with its billions of Naira in annual check-off dues and subscriptions, lived up to?” the statement queried, challenging the union to publish its audited accounts for the past ten years. “Can it publish publicly its account for the last 10 years and list out its corporate responsibility activities within that timeframe?”

The refinery insisted that PENGASSAN’s recent directive to withdraw services and cut off essential fuel supplies, including but not limited to petrol, diesel, kerosene, cooking gas and aviation fuel was reckless, lawless and dangerous. It said the order is not about protecting Nigerian workers, but it is about a cabal of oligarchs weaponising hardship against over 230 million Nigerians.

“In the process, it (PENGASSAN) cares little if at all about the unbearable hardship and terror it would thereby inflict on all Nigerians, including but not limited to the provision of essential services in our hospitals and medical facilities, schools (nursery and right up to tertiary and research institutions), emergency services, communications facilities, transportation systems, etc,” it said.

Dangote Refinery called on the Federal Government and security agencies to step in immediately to protect the facility and the nation’s energy security, stressing that the union must not be allowed to “bully Nigerians into chaos and economic sabotage.”

According to Tribune Online, the federal government has announced readiness to broker peace between Dangote Refinery and PENGASSAN, inviting both to a meeting scheduled for Monday.

Business

Fuel Scarcity Looms As PENGASSAN Stops Gas, Crude Supply To Dangote Refinery

Published

3 days ago

September 27, 2025

Editor

The industrial dispute between the Dangote Petroleum Refinery and the Petroleum and Natural Gas Senior Staff Association of Nigeria took a dramatic turn on Saturday as the union ordered seven branches to cut off crude oil and gas supplies to the $20bn facility.

In a letter dated September 26 and signed by its General Secretary, Lumumba Okugbawa, the union accused the refinery’s management of sacking its members in retaliation for exercising their constitutional right to join the union.

The union’s move marks an escalation in the standoff, with PENGASSAN accusing the refinery of anti-labour practices and the unlawful sack of its members.

In the directive issued to its branch chairmen, PENGASSAN instructed its branch chairmen in key upstream and midstream oil companies, including TotalEnergies, Chevron, Seplat, Shell Nigeria Gas, Oando, and Nigerian Gas Infrastructure Company, to immediately cut off all crude oil and gas supplies to the refinery.

The directive comes after PENGASSAN alleged that Nigerian workers were sacked by Dangote Refinery after joining the union, claiming that management also withdrew staff buses and denied entry to locals while allowing expatriates access.

The union threatened to picket the refinery if the situation was not addressed.

In a statement on Friday, the refinery clarified that only a small number of workers were affected by what it described as a reorganisation aimed at preventing acts of sabotage within the facility. It said over 3,000 Nigerians remain in employment, rejecting claims of mass layoffs.

Dangote maintained that the restructuring was necessary after what it described as recurring acts of sabotage in different units of the refinery, which posed serious risks to human lives and operations.

As a result, PENGASSAN instructed its branches in TotalEnergies, Seplat, Chevron, Oando, Shell Nigeria Gas, Renaissance, and NGIC to cut gas supply to the refinery immediately.

The union described the move as “illegitimate” and accused the refinery of spreading misinformation instead of addressing the matter through dialogue.

“As you are aware, the Management of Dangote Petroleum Refinery has disengaged our members in reaction to the exercise of their constitutional right to being unionized.

“They have gone further on a mission of misinformation and propaganda to justify this illegitimacy rather than engaging meaningfully with us to right the wrong.

“Consequent to these, you are hereby directed to cut off gas supply to NGIC effective immediately. All crude oil supply valves to the Refinery should be shut. The loading operation for vessel headed there should be halted immediately,” the directive read.

The union further mandated the NGIC Chairman to ensure strict compliance with the order and told all branch chairmen to give regular updates on the action taken.

“NGIC Chairman, ensure that gas supply to the Refinery is cut off effective immediately. All chairmen on this summons are to report promptly the progress of the directive. Kindly accept the assurances of our highest esteem. Thank you,” the statement read.

Reaffirming its solidarity, PENGASSAN ended the directive with its slogan: “Injury to one! Injury to all!”

On Thursday, the company announced it would suspend petrol sales in naira from September 28 following the exhaustion of its crude-for-naira allocations.