With the Monetary Policy Rate (MPR) currently at 18 percent, a total of 10 banks spent N542.8billion on customers’ deposits in the first quarter (Q1) ended March 31, 2023, an increase of 71.83 percent from N315.91 billion reported in the first quarter of 2022.
The banks include; Guaranty Trust Holding Company (GTCO) Plc, Zenith Bank Plc, United Bank for Africa (UBA), Ecobank Transnational Incorporated (ETI), and Access Holdings Plc.
Others are Fidelity Bank Plc, Union Bank of Nigeria, Stanbic IBTC Holdings Plc, FCMB Holdings, and Wema Bank Plc.
The Central Bank of Nigeria (CBN) at its second Monetary Policy Committee (MPC) in 2023 increased MPR to 18 percent from 17.5 percent in an aggressive push to contain the raising inflationary pressure in Nigeria.
In January, the MPC raised its benchmark lending rate from 16.5 percent to 17.5 percent in a sustained push to control inflation and ease pressure on the naira.
THISDAY analysis of the bank’s expenses on customers’ deposits and borrowings in Q1 2023 revealed that most Tier-1 banks reported high-interest expenses on deposits from customers as the interest rate on saving deposits moved from 4.29 percent in January 2023 to 4.58 percent in March 2023.
For instance, Zenith Bank reported N70.84billion interest expenses in Q1 2023, an increase of 174.11 percent from N25.84billion reported in Q1 2022, while GTCO declared N21.93billion interest expenses in Q1 2023, an increase of 63.18per cents from N13.44billion in Q1 2022.
The significant increase in GTCO interest expenses was primarily driven by the higher fees expensed on customer deposits that rose by 57.3per cent to N19.94 billion.
Likewise, costs of borrowings grew by 60.6 percent to N1.03 billion in Q1 2023, and financial institutions’ deposits rose by 794.7 percent to N85.00 million, coming in higher in the period under review.
On his part, UBA Plc posted N72.25 billion in interest expenses in Q1 2023, representing an 80 percent increase from N40.21billion in Q1 2022, while Ecobank announced N84.59 billion in interest expenses in Q1 2023 from N48.85 billion in Q1 2022.
UBA’s Group Managing Director/ Chief Executive Officer, Mr. Oliver Alawuba explained that despite the high inflationary and challenging global environment, the Pan-African bank was able to leverage the uptick in interest rates and improved digital offerings, in growing funded and non-funded income.
In addition, Access Holdings reported N158.94 billion in interest expenses in Q1 2023, a growth of 84 percent from N86.33 billion reported in Q1 2022.
In the period under review, the 10 banks generated N1.23 trillion in interest income from loans & advances to customers, an increase of 44.5 percent from N850.23 billion reported in Q1 2022.
Access Holdings, followed by ETI led other banks in interest income generated from loans & advances to customers, treasury bills, Government and other bonds, among others amid a hike in MPR by CBN.
Access Holdings generated N254.22billion interest income in Q1 2023, an increase of 46.4 percent from N173.7billion in Q1 2022, while ETI reported N207.22billion interest income in Q1 2023, a growth of 33 percent from N156.113billion in Q1 2022.
Finance analysts have maintained that the hike in MPR is expected to impact on businesses and banks do not operate in isolation.
The Director/Chief Executive Officer · Centre for the Promotion of Private Enterprise (CPPE), Mr Muda Yusuf explained that the victims of the continuous hike in the monetary policy rate are the investors in the real economy and other entrepreneurs in the economy.
According to him, “Increase of the MPR to 18 percent means an additional burden on business as it will result in a spike in the cost of credit. Interest rates on loans will increase, production costs would increase, sales will drop, profit margins will shrink and investors’ confidence will be negatively impacted. The reality is those ways and means financing, high energy cost, and foreign exchange challenges are much bigger factors in the inflation equation.”
He urged the CBN to pay greater attention to financial system stability at this time.
“Recent developments in the global financial system underscore the imperative of cautious interest rate hikes,” he explained.
