Nigeria’s tier-1 banks spent a combined total of about N44 billion on advertising and sales promotions in full-year 2019. This is according to checks by Nairametrics. The banks are First Bank of Nigeria Ltd, United Bank for Africa Plc, Guaranty Trust Bank Plc, Access Bank Plc, and Zenith Bank Plc (FUGAZ).
Some details to note
Out of all the banks, First Bank incurred the most advertising cost last year, followed by Zenith Bank and United Bank for Africa.
Note that First Bank’s huge advertising expenditure is most probably due to the fact that the company celebrated its 125th year anniversary, an event that must have required enough of money for publicity and event planning.
On the other hand, Guaranty Trust Bank spent the least on advertising in 2019, compared to all of its competitors. GTBank’s low advert cost is part of the company’s overall cost control strategy, which its Chief Executive Officer, Segun Agbaje, had recently spoken about.
Breakdown of how much each bank spent
Guaranty Trust Bank: According to information obtained from GTbank’s audited financial statement for full-year 2019, about N4 billion was spent on advertising and sales promotion in 2019. As we mentioned earlier, this is the lowest amount that was spent by a tier-1 bank in 2019. The amount is also less than the N6.4 billion cost, which the bank incurred for the same purpose in 2018. Again, cost control.
Access Bank: This tier-1 bank’s advert costs stood at N6.3 billion in 2019. This is more than the N4.9 billion, which the company spent on advertising and marketing during the comparable period in 2018. It should be recalled that Access Bank acquired Diamond Bank in early 2019, and this might have contributed to the rise in its advertising costs. This means more money had to be spent to advertise products and services that were hitherto offered by Diamond Bank.
United Bank for Africa: This bank spent a total of about N7.4 billion on advertising and marketing communications in 2019. This makes UBA the third highest spender on advertising and marketing, compared to the other tier-1 banks.
Note that in 2018, UBA incurred a total cost of N7.3 billion for the same purpose.
Needless to overstress the fact that UBA is quite masterful with its advertising and marketing strategies. The bank is also known to make use of A-list celebrities to help endear its numerous services to target audiences. And as you may well know, this costs a lot of money.
For instance, out of the N7.4 billion which the bank spent on advertising and marketing in 2019, popular Nigerian singer WizKid got at least a cool N1 billion. That is how much the tier-1 bank paid the singer in what has been described as the biggest celebrity endorsement in Nigeria.
Zenith Bank Plc: Last year, about N7.9 billion was spent by this highly-profitable bank on advertising and marketing communications. Interestingly, even though this amount is lower than the N9.6 billion the bank spent in 2018, its revenue and profits grew, as you shall see shortly.
First Bank: As we mentioned above, First Bank spent the highest amount on advertising and marketing communications last year. In specific terms, a total of about N18.4 billion was recorded. This is significantly higher than the N7.8 billion that was recorded in 2018.
Note that the recorded advert and communications expenses represent how much was spent across FBN Holdings Plc and its subsidiaries. FBN is the parent company of First Bank of Nigeria Ltd. It has other companies under its fold, including FBNQuest Capital Ltd, FBNQuest Securities Ltd, FBNQuest Capital Asset Management Ltd, etc.
Now, let’s juxtapose advert spending with revenue and profit
In 2019, Zenith Bank Plc made a total revenue of N662.3 and a profit after tax of N208.9. It was the most profitable Nigerian bank last year, a position it has held for, at least, two consecutive years. This shows that the money spent on marketing communications and advertising is yielding the needed results.
Guaranty Trust Bank is the second most profitable Nigerian bank in 2019. The bank had recorded total revenue of N296.2 and a profit after tax of N196.8. What this shows is that even though advertising is essential, sometimes all you need is to offer products and services that people love.
Access Bank came in third as the most profitable tier-1 bank, with a profit after tax of N94.9 billion. The company had also recorded the second largest revenue of N536.8 billion, right behind Zenith Bank.
United Bank for Africa Plc made a profit after tax of N89 billion, followed by First Bank which generated a profit after tax of N61.9 billion, according to its unaudited financial statement.
Why advertising is important to Nigerian banks
Nigerian banks typically operate in a saturated market where competition is rife. Therefore, in order to stand out, it is not enough for them to offer high-quality products and services; they must also be able to adequately communicate the benefits of their products and services to customers. This is the whole essence of marketing communication and advertising.
Nigeria’s border reopening will not impact profitability in 2021 – Flour Mills GMD
Flour Mills Nigeria Plc has stated that the recent reopening of the nation’s land borders will not affect the profitability of the company.
Mr. Omoboyede Olusanya, the Group Managing Director of Flour Mills Nigeria Plc has disclosed that the recent reopening of the nation’s land borders will not adversely impact the performance and profitability of the company in 2021 and beyond.
He added that FMN will continue to leverage brand loyalty, product standardization and innovation, as well as improved cost efficiency to increase profitability in 2021.
This statement was made by the Olusanya during the company’s 9M’20/21 Investor Webinar which held virtually on January 26, 2020.
According to the statement made by Mr. Olusanya at the virtual meeting, the reopening of the nation’s land border will not affect the company’s sales and revenue, as Flour Mills Nigeria is focused on increasing operational efficiency with accelerated plans for cost optimizations across the group to ensure competitive product offerings and profitability in the new operating environment, occasioned by the border reopening.
He revealed that the company will continue to invest in local content development, production capacity and aggregation to strengthen product innovation and product standardization in a bid to foster brand loyalty.
In line with this, Flour Mills Nigeria has invested heavily to upscale its Regional Distribution Centers (RDCs), in order to gain direct access to consumer market segments across the country, and expand consumer reach with the road to market initiatives and product offerings across the group, especially in the B2C segment.
Olusanya revealed that the group has successfully opened new regional distribution centers (RDCs) in Kano, Magboro and Abuja targeting the new fast-growing B2C product categories (fats, sugar and garri).
He added that the FMN Group among other strategic investments made, has invested in trucks to support the RDCs, animal feeds and starch value chains; as well as sales force automation platforms to ensure high-quality processes and services.
He concluded that the activities of the company will be complemented by the efforts of the nation’s border security, as these agents would ensure that the borders do not become porous, and would help to curtail markets from being proliferated by imported items.
What you should know
- Recall that Nairametrics reported that Flour Mills Nigeria Plc declared a profit of N5.65 billion in the third quarter ended, 31st December 2020.
- The report revealed that the profit which Flour Mills made in the third quarter of its accounting year 2020/2021 rose by a whopping 150.36% when compared to the profit it made in the corresponding period of 2019.
- It is important to note that the impressive performance of the company was driven by the agro-allied segment. The Agro-Allied segment benefited immensely from the August 2019 border closure, as the profit from this segment improved by 15,268%.
Flour Mills moves to diversify funding sources with N29.8 billion bond listing
Flour Mills Nigeria Plc lists N29.8 billion bonds to diversify funding sources from the Nigerian capital market.
Flour Mills Nigeria Plc’s fresh N29.8 bond listing will help the nation’s leading food business company to explore diversified funding sources from the Nigerian capital market, with the hope of enhancing growth and the development of the company.
This statement was made by the Group Managing Director of FMN, Mr. Omoboyede Olusanya, at the listing of the Tranche A and Tranche B bonds valued at N29.8 billion on the Nigerian Stock Exchange (NSE).
The food and the agro-allied company which has remained Nigeria’s largest and oldest integrated agro-allied business with a broad profile and robust Pan-Africa distribution issued these bonds under its N70 billion Bond Issuance Programme.
Olusanya said that the company would continue to explore funding opportunities inherent in the capital market to ensure business growth and continuity.
While speaking about the Credit Rating of the Programme, he disclosed that FMN’s credit rating, as well as the operational financing of the Group, have improved considerably.
According to him, the bonds floated by Flour Mill will help to strengthen the company’s capital base and provide the needed working capital required by the Company. He added that Flour Mills Group will continue to deleverage and replace short term financing with longer-tenured and lower price funding to optimize capital structure and reduce financing cost.
He noted that Flour Mills will continue to explore opportunities to raise fundings via the capital market as this enables the company to diversify its funding sources and continue to play a role in the capital market as a significant player in it.
What they are saying
The Group Managing Director of FMN, Mr. Omoboyede Olusanya, at the virtual event, said;
- “We are delighted with the response from the market, we are happy to be listed.
- “We are introducing an N29.9 billion listing under an N70 billion bond issuance cover; we will continue to raise funding to diversify our funding sources.
- “The company remains passionate about feeding the nation to improve the quality of living for Nigerians through increased production and investments in backward integration.”
What you should know
- With the successful issuance of the new N29.8bn Tranche A and Bonds, FMN has utilized its bond issuance program registered in 2018.
- It is important to note that the Senior Unsecured bond listing includes an N4.89bn under Series 4 Tranche A of the bond issuance programme, at a 5.5% rate for 5 years, due by 2025, and a 25bn under Series 4 Tranche B of the same program at a 6.25% rate for a tenure of 7 years, due by 2027.
- The bond proceeds will be used to refinance existing debt obligations. It will also help the company take collaborative actions to diversify the company’s financing options beyond expensive short term debt.
Lafarge moves to divest 35% shareholding in CBI Ghana
Lafarge Africa Plc has resolved to sell off its 35% shareholding in Continental Blue Investment Ghana Limited.
The Board of Lafarge Africa Plc has resolved to sell off its 35% shareholding in Continental Blue Investment Ghana Limited, in order to cut down on costs impacting the Group’s profit.
This disclosure was made in a notification tagged- “Notice of Divestment in Continental Blue Investment Ghana Limited”, which was issued by the Company Secretary, Mrs. Adewunmi Alode.
According to the statement, the Board of Directors of the Group made the decision to divest its 35% shareholding in Continental Blue Investment Ghana Limited (“CBI Ghana”), in line with the resolutions made at the emergency board meeting which held yesterday 20th, January 2020.
This move was made to set off the cement manufacturer on the path of sustainable growth and profitability, as Lafarge’s investment in CBI Ghana has depleted significantly over the years.
What you should know
- This is not the first time the company has had to sell off an unproductive investment in an effort to cut down on deadweight cost, as key players in the Cement industry like BUA and Dangote Cement continue to show strength and resilience through their effective cost minimization strategy which worked well in 2020.
- Recall that in August 2019, Lafarge Africa sold off all its stakes in Lafarge South Africa Holdings (LSAH). This move helped the company to cut down costs coming from its South African subsidiary, which had been making billions of naira worth of losses for years.