Data from some of the biggest quoted companies by market capitalization in Nigeria reveals the big 4 audit firms earned a whopping N6.4 billion in audit fees for the year ended December 2016. The big 4 audit firms in Nigeria are PricewaterhouseCoopers (PWC), KPMG, Deloitte and Ernst & Young.
The fees were earned by auditing about 28 of Nigeria’s biggest firms cutting across the banking sector, consumer goods, cement and oil and gas. According to the data obtained by Nairametrics research, the big four increased their earnings by 9% year on year after earnings about N5.78 billion in 2015. The 28 companies under review made a combined N6.2 trillion in revenues for the period thus audit fees as a percentage of revenues was 0.1% of revenues.
According to our research, PWC carted away with the most fees earnings about N2.5 billion in 2016 (2015: N2.2 billion) from auditing 7 companies on our list. KPMG was next as the audit firm earned N2 billion in 2016 a 15% increase from the 1.7 billion received as fees in 2015. The auditors also got to audit about 10 of the companies in our list.
Ernst and Young, another of the big 4, also earned about N1.1 billion in 2016, auditing 6 of the companies on the list and a 4% dip from the N1.2 billion earned in 2015. It is important to note that of the 28 companies in our list, the oil and gas firms went the way of EY.
Deloitte recorded the largest percentage increase in earning after income rose by 30% to N530.2 million compared to N406 million earned a year earlier. Deloitte relied majorly on income from Dangote Cement which rose 38% year on year in the period under review. Deloitte was able to audit the financial statements of 4 of the companies in our list.
The data reveals KPMG’s earnings mostly came from the banking sector with about 83% of its earnings coming from the banking sector alone. KPMG currently audits about 1 out of Nigeria’s biggest banks including two of the big 5 which we like to call FUGAZ (FBNH, UBA, GTB, Access Bank and Zenith Bank) on Nairametrics. The audit firm also relies heavily on Zenith Bank for about 31% of its total earnings from the 10 companies it audits from our list of 28. KPMG audited 10 companies in our list.
PWC earned a total of N2.5 billion in 2016 out of which 4 of the FUGAZ contributed about 92% of its earnings. PWC also only these audits 4 banks from the 11 banks on our list. Apart from the banks, PWC also audited PZ, Transcorp and Guinness making up just 8% of its earnings.
Ernst & Young earned about N1.3 billion from just 7 audit firms by focussing on auditing big oil and gas firms. With the likes of Oando, Seplat and Mobil on its billing oil and gas made up about 46 % of its total earnings from the list of companies under review. The audit firm relied on Oando for about 31% of its revenue per the list of companies under review. It also included two banks on its list, Fidelity and Sterling Bank while Lafarge made up about 14.2% of total audit earnings. Ernst & Young appears to be the most diverse in terms of sector coverage of the companies on our list.
Deloitte surprisingly does not have any of the big 11 banks as clients for the period under review. However, it does audit Nigeria’s largest company by market capitalization, Dangote Cement Plc and 3 other companies on the lit. It’s important to also add that Deloitte shares this bill with Ahmed Zakaria, an audit firm. Nevertheless, Dangote Cement makes up about 75% of its revenue from the data set reviewed by Nairametrics. Dangote Group also accounts for about 85% of its revenue per the data under review.
See table below (All fees in thousands)
wpDataTable with provided ID not found!
Do you need the raw data set used for this article? Send an email to Nairametrics via [email protected]
NB: An original version of this article listed Stanbic IBTC & UAC as companies audited by PWC. This has now ben corrected. Thanks to our readers for pointing this out.
Fidelity Bank Plc must cover the chink in its curtains to keep rising
Fidelity Bank Plc follows the narrative of top tier-2 banks, which have had better or easier years.
The Nigerian banking sector has consistently been one of the most profitable sectors in the Nigeria Stock Exchange market. However, in 2020, Deposit Money Banks (DMBs) have faced a flurry of impediments, which may have affected their solidity.
With reduced income from fee and commission implemented at the start of the year by the Central Bank of Nigeria, the paucity of foreign currency for international transactions, the resulting economic contraction from dire effects of the coronavirus pandemic, and the consequent operational constraints of keeping employees safe, 2020 is obviously fraught with numerous disorders for banking institutions.
For most, it hasn’t exactly been a year for growth at all, more like a walk in the woods, where improvements to bottom-line is almost unexpected. This period, many banks seem content with simply surviving and fundamentally matching their previous feats.
Fidelity Bank Plc follows the narrative of top tier-2 banks, which have had better or easier years. The bank generated a 2020 9M PAT of N20.4billion, rising 7.08% from the corresponding figures last year, but drilling solely into its results in Q3’2020 and its exact comparative period in 2019, the bank suffered reduced interest revenue, reduced fees and commission, reduced profit before tax, and reduced after-tax profit.
Fidelity Bank Plc concluded Q3 with a profit position of N9.1billion, 13.7% decline compared to its position in 2019 y/y. PBT reduced by 12.9% from N10.8billion in 2019 to N9.4billion this year. Gross earning in Q3 was only N49billion as against N57billion in 2019 – plummeting 14%.
The Group Chief Executive Officer of the bank, Mr. Nnamdi Okonkwo, commenting on the result said: “Our 9 months results reflect our resilient business model, particularly in a very challenging operating environment. We worked closely with our customers to gradually recover from the economic impact of the pandemic and the attendant effect of the lockdown. The drop in gross earnings was due to the decline in interest and similar income, caused by lower yields and drop in fee income.”
True cause of the reduction in earnings
DMBs generate gross earnings under three primary subheads: Interests earned, Fees and commission, and Other operating income. Fidelity Bank Plc generated a combined total of N150.8billion for the period ended September 2020 from these three categories, compared to the N158.5billion in the corresponding period last year.
Deeper analysis reveals that this rising tier-2 bank has seen more deficit in revenue from fee and commission compared to the other aforementioned gross-earnings’ generating-sources within this period. Interest earned dropped by a difference of N4.3billion, while revenue from fee and commission saw a decline of N4.8billion from N14.5billion in 2019 to N19.3billion YoY.
Fee and commission as a component of gross earnings
Card maintenance fees, account maintenance fees, commission on remittances, collect fees, telex fees, electronic transfer fees, amongst others, represent the plethora of channels that makes up income from fee and commission.
The real insight this particular component of gross earnings provides is that a spike in revenue generated indicates increasing/increased customer account activity. The more a customer maximizes the usage of an account’s product and facilities, the more the revenue earned from this segment. Thus, earnings from fees and commissions are so overriding due to their apparent controllability.
For example, a bank could make the decision to purely pursue and aggressively drive the usage of its ATM debit card and promptly see the revenue from commission rise. Furthermore, an increased rate of card production and collection necessitates usage and consequently means more money is earned as card maintenance fees.
The fact that gross earnings reduced mostly from fees and commissions should be a telling concern for the Management of Fidelity Bank Plc. Post covid-19 would birth the dawn of a new era for business processes. The management must guarantee the usability of its electronic banking channels, promotion of its cards, and with urgency, implement improved service delivery mechanisms to ensure that it is the first port of call to customers for general payments and remittances.
These measures are of grave significance in the bid to bridge its widened fee and commission income gap.
Holistically, in the 9 months ended September, it is worthy of note that the bank made certain advancements. Customer Deposits, Net Loans and Total Assets all grew in double digits. Customer Deposits grew by 22.3% from N1.2billion to N1.5billion, Total Assets also rose by 21% from N2.1billion in 2019 to N2.5billion, and Net Loans rose by 12.9% to N1.3billion from N1.1billion.
Airtel is paying up its debts
Airtel’s annual report revealed that the company has a repayment of $890 million due in May, as well as, an installment of $505 million due in March 2023.
Airtel’s presence in 14 countries from East Africa to Central and West Africa would have been impossible without relevant financial investments. But, while the funds have been key to its growth in the past few years, many of its financial obligations are starting to mature quickly.
The Covid-19 pandemic has had negative economic effects on different sectors of the economy; however, the resilience of the telecom sector is evident in an increase in Airtel’s income. The overall performance of Airtel increased with a revenue growth in constant currency of 19.6% in Q2 compared to 16.4% recorded in Q1, while revenue on reported basis increased by 10.7% to $1.82 billion, with Q2 revenue growth of 14.3%.
Unilever Nigeria Plc: Change in management has had mixed impact
9 months into the change of management, Unilever Nigeria Plc’s performance in Nigeria has been largely underwhelming.
Change in the management of a company is never a walk in the park. Transitions usually take time to yield the desired results. Organizations can look to past successful managerial transitions for inspiration, but not for instruction because there is no defined playbook. The decision to replace Mr Yaw Nsarkoh, who served as the Managing Director of Unilever Nigeria Plc until the end of 2019 was plausible, but adjustments were never going to be an easy task.
Mr Nsarkoh had served as Managing Director of the company for 5 years and steered the course of its proceedings with remarkable skill up until the financial performance disaster which culminated in his resignation on November 28th, 2019.