FBN Holdings, Fidelity Bank, Four Others Rake N2.35trn From Loans And Advances In 2023

FBN Holdings Plc, Fidelity Bank Plc, and four other banks generated a total of N2.35 trillion in interest income from loans & advances to customers, Investment securities, and loans and advances to banks in the 2023 financial year, reaping from the 18.75 per cent monetary policy rate of the Central Bank of Nigeria (CBN).

The amount raked in by the six banks which also include Stanbic IBTC Holdings Plc, Wema Bank Plc, Sterling Financial Holdings Company Plc, and FCMB Group Plc in 2023, is a 61.1per cent increase over N1.46trillion reported in 2022 financial year.

MPR is the baseline interest rate on which every other interest rate used within an economy is built.

The apex bank at its Monetary Policy Committee (MPC) in July 2023, and the last for the year, chaired by the sacked acting governor, Folashodun Shonubi, raised its benchmark interest rate to 18.75 per cent from 18.5 per cent in a bid to curb inflation which was 24.08 per cent then, up from 22.79 per cent in June same year. The MPC in January 2023 raised its benchmark lending rate from 16.5 per cent to 17.5 per cent in a sustained push to control inflation which was 21.9 per cent and ease pressure on the naira.

In December 2023, Nigeria ended the year with a rise in inflation to 28.92 per cent, reflecting a continued increase in prices of goods and services across the country, according to the National Bureau of Statistics (NBS).

Given the increase in MPR, the money market indicator of CBN revealed that the average prime lending rate moved to 14.17 per cent in December 2023 from 13.85 per cent in December 2022. However, the maximum lending rate in the banking sector dropped to 26.62 per cent in December 2023 from 29.13 per cent reported by CBN in December 2022.

A prime rate or prime lending rate is an interest rate used by banks, usually the interest rate at which banks lend to customers with good credit while the Maximum lending rate refers to the rate charged by banks for lending to customers with low credit rating.

InsideBusinessNG’s computation from the unaudited result and accounts for the full year ended December 31, 2023, of the six banks, showed a total N2.35 trillion income for the year, and the breakdown showed that Fidelity Bank scooped N457.5billion interest income in 2023, representing an increase of 54.79 per cent from N295.58billion in 2022, while FBN Holdings reported N917.71billion interest income in 2023, an increase of 66.27 per cent over N551.94billion income on loans and advances reported in 2022.

As Stanbic IBTC declared N270.59billion interest income in 2023 from N152.67billion in 2022, Wema Bank announced N181.87billiion interest income in 2023 from N108.04billion reported in 2022.

In the period under review, Sterling Financial Holdings Company posted N163.22billion interest income from N128.43billiion in the corresponding period, while FCMB Group announced N355.68billion interest income in 2023, a growth of 62 per cent from N219.55billion reported in 2022.

Analysts expressed that the average lending rate in the banking sector has increased amid a hike in MPR to 18.75 per cent and JPMorgan Chase & Co, in a report, according to its economists expected the CBN to maintain the MPR at 18.75 per cent for the foreseeable future.

while the banks have the major beneficiaries of the MPR, the Chief Executive Officer of Centre for the Promotion of Private Enterprise (CPPE), Muda Yusuf told INSIDEBUSINESS that the victims of the 18.75 per cent MPR are the investors in the real economy and other entrepreneurs in the economy.

He said the MPR at 18.75 per cent is an additional burden on business, resulting in a spike in the cost of credit.

“Interest rate on loans will increase, production costs will increase, sales will drop, profit margins will shrink and investors’ confidence will be negatively impacted”, explained Yusuf who urged the CBN to pay greater attention to financial system stability at this time.

“Recent developments in the global financial system underscores the imperative of cautious interest rate hikes,” he added.

The Chief Research Officer of InvestData Consulting Limited, Omordion Ambrose admitted that businesses need a lot of credit facilities to survive but noted that in an environment like Nigeria where the lending rate is astronomical, many enterprises, especially small and medium scale, might find it extremely difficult to survive as their products will remain uncompetitive and the cost of production and the sale prices to consumers will remain high.”

He added that “A hike in interest rate is a manufacturers’ nightmare as it stifles productivity and expansion”.