According to information contained in the annual reports of both Guaranty Trust Bank and UBA, a total of about N24 billion was spent by both banks on private jets in the lat two years. Executives of Commercial banks like their counterparts in more advanced countries, typically acquire private jets to help facilitate their travel requirements.
According to United Bank for Africa (UBA) 2015 annual report, a total sum of N12.5 billion was recorded as cost of “other transportation equipment” which we believe is for their aircrafts. The report did not list the number of aircrafts owned by the bank. A further look into UBA’s 2014 annual reports reveals a sum of N8.5 billion was added to the bank’s classification of “other transportation equipment” suggesting that the private jet may have been acquired in 2014. Anecdotal opinions suggest that the balance N3.9 billion may also have been aircrafts acquired in prior years.
GTB on the other hand reported a total purchase cost in N8.34 billion as additional purchase of “Aircraft” in their 2015 annual report indicating that new purchases may have been made that year. The bank also reported a carrying amount of N4.2 billion being aircraft purchase cost as at 2014. This brings GTB’s total aircraft cost to about N12.5 billion, similar to what UBA is carrying on its balance sheet.
Private Jets are thought to cost about $25 million suggesting that GTB may have acquired two last year and perhaps have about 3 in their fleet. UBA may also have about 3 in their fleet. These are purely based on cost of private jets which can be found online and using the current official exchange rate.
Implication for shareholders
GTB paid out about a total dividend of N51.5 billion in 2015 and N50 billion in 2013. As such the aircraft purchased this year is about 24% of the dividends paid out. Also, the bank adopted a 10 year useful life for the aircraft meaning that it will amortise the value of the aircraft from its income over a 10 year period. The bank took a depreciation charge for the aircraft of about N705 million in 2015 compared to about N507.6 million last year. In accounting, cost of assets purchased and to be used over a period are amortised over the period rather than in the year of purchase only.
For UBA, they spread the cost of the aircrafts over a period of 20 years (assuming what they mean by “other transportation equipment” are aircrafts). This cost the bank’s profits about N600 million in 2015 compared to N238 million in 2014. UBA paid out dividends of about N15.4 billion in 2014 and N9.7 billion in 2015.
Private jets for bank executives are mostly the norm for most banks worldwide. However, politicians and shareholders often view this with disdain referring to it when they chastise banks as being and excessive waste of depositors/shareholders funds. At a bailout hearing in the thick of the 2008 financial crisis, Wall street banks were admonished for flying to Washington with private jests even when their banks were at the verge of collapse.
GTB boss, Segun Agbaje in 2013 told the audience of the Nigerian Business Aviation Conference that private jets in Nigeria are worth $3.75 billion and that there are over 150 private jets owned by high networth individuals in the country. He also revealed that each category of jet costs $25m, which carries both local and international registrations. Using an exchange rate of 200, a private jet cost about N5 billion, in line with our assumptions.
Agbaje also said that the most popular jets among Nigerian billionaires are Gulfstream, Bombardier, Global Express, Hawker Legacy and Dassault Falcon.