The banking sector has long been the toast of many Nigerian workers, mainly because people who work there are believed to earn quite a lot of money. While this may not be entirely true for every Nigerian banker, the truth remains that the sector is one of the best-paying in the country. In Q1 2020 alone, thirteen Nigerian banks collectively spent more than N178 billion as personnel expenses.
Focus on banks’ personnel costs in Q1 2020
According to checks by Nairametrics Research, thirteen banks listed on the Nigerian Stock Exchange (NSE) collectively spent N178 billion as personnel expenses during the first quarter of the year. This shows a 9.5% increase when compared to N162.6 billion which the thirteen banks recorded during the comparable period in Q1 2019.
It should be noted that personnel expenses encompass all of a company’s expenditures in relation to its staff’s remuneration and welfare, albeit within a specific financial reporting period. In other words, such expenses may include salaries/wages, other benefits including health insurance costs, pension, training, etc.
Comparing how much various banks paid their workers in Q1 2020
Ecobank Transnational Incorporated (ETI) recorded the biggest personnel expense in Q1 2020. As much as N43.3 billion was spent on workers across places like Nigeria, Togo, Ghana, and others where the Pan African bank operates.
FBN Holdings Plc came in second on the list, having spent N23.9 billion on employees’ salaries and other benefits. Now, as we have always specified for the sake of clarity, FBN Holdings Plc is a holding company for First Bank of Nigeria Ltd and other subsidiaries such as FBNQuest and FBN Merchant Bank. What this means, therefore, is that the figure above represents personnel expenses for all the subsidiaries across the FBN Holdings group of companies. Further checks by Narametrics Research revealed that FBN Holdings has a total of 9,016 employees as of December 2019.
Meanwhile, United Bank for Africa (UBA) Plc came in third. The tier-1 bank spent about N21.9 billion for its staff’s remuneration during the first three months of the year. UBA had about 13,237 employees, according to information gleaned from its full-year 2019 financial statement.
Access Bank Plc witnessed a significant increase in its personnel expenses from N12.8 billion in Q1 2019 to N19.6 billion in Q1 2020. This is partly due to the fact that its total number of employees jumped from 4,273 in FY 2018 to 6,898 as of December 2019. As you may well know, this increase followed the merger/acquisition of Diamond Bank which became effective in early 2019.
Also, Nigeria’s most profitable bank (Zenith Bank Plc) spent about N18.1 billion as personnel expenses in Q1 2020. Interestingly, this is slightly less than how much (N18.2 billion) the bank spent for the same purpose in Q1 2019. Note that the reduction is most likely due to the fact that the bank’s staff strength reduced from 6,253 as of December 2018 to 5,982 as of December 2019.
It is important to mention that Guaranty Trust Bank, which is Nigeria’s second most profitable bank, spent N9.2 billion for personnel remuneration in Q1 2020. The tier-1 bank is known for its very minimal operating cost approach. This probably explains why its staff strength as of December 2019 stood at 3,509.
For a full list of the banks and their personnel expenses in Q1 2020, see the table below. We have also provided their personnel expense costs ibn Q1 2019 for easy comparison.
It is uncertain, at this point, whether the COVID-19 pandemic would have any impact on how much bank workers would earn for the rest of the year. Recall that after the pandemic hit, Access Bank Plc was among the first to consider salary cuts and layoffs as a cost-cutting approach to cope with the negative effects of the pandemic. However, the Central Bank of Nigeria (CBN) had warned banks against laying off any staff, as Nairametrics reported.
CBN expands scope of regional banks in Nigeria, gives compliance timeframe
The aim of this directive is to expand the reach of the regional banks across the country, the CBN said.
The Central Bank of Nigeria (CBN) has expanded the scope of regional banks in the country, by requiring them to open branches in at least one additional geopolitical zone outside of the existing geopolitical zones where their operating licenses cover.
A circular that was issued earlier this week by the apex bank said this new directive is in accordance with “section 8 (g) of the CBN Scope, Conditions & Minimum Standards for Commercial Banks Regulations no  2010 as revised on September 4, 2019.”
The new directive took effect on Friday, June 26, 2020. In other words, all the regional banks are expected to have become aware of this development since then. They now have a timeframe of six months to establish their presence in the geopolitical zones outside of where they currently operate.
It should be noted that prior to this time, regional banks in the country typically operated in at least two geopolitical zones of the federation. However, in line with the new expansion, the CBN shall now prescribe an additional geopolitical zone for each of these regional banks, thereby making the coverage area three geopolitical zones per regional bank.
Meanwhile, the CBN said the aim of this directive is to expand the reach of the regional banks across the country, whilst ultimately promoting financial inclusion. Note also that the new directive affects all regional banks, both the ones engaged in commercial banking and non-interest banking. Some part of the circular said:
“Effective the date of this circular, all banks with regional authorisation shall be required to operate from one additional geopolitical zone as may be prescribed for each institution by the CBN, without prejudice to the existing requirement of the minimum of two (2) geopolitical zones of the federation. The essence is to promote spread and balance of the regional banks across the country.
“The compliance timeline to establish operational footprint at the advised zone shall not exceed six (6) months from the issuance of the regulatory advice to each regional bank by the CBN.”
Banks’ stakeholders express 4 main concerns bothering the sector right now
Banks are more concerned about the arbitrary nature and lack of understanding of the CRR debits.
Stakeholders in the Nigerian banking sector have raised concerns over four main issues that are threatening their investments at the moment.
These concerns range from the perceived “unorthodox monetary policy” moves of the apex bank, to FX liquidity issues, and of course the negative impacts of the COVID-19 pandemic.
These concerns were raised by the representative of some of the country’s top banks (Zenith Bank Plc, FBN Holdings Plc, United Bank for Africa Plc, Guaranty Trust Bank Plc, and Stanbic IBTC Holdings Plc) who recently attended Standard Chartered Bank’s 2020 Africa Investor’s Conference.
Focus on the issues raised
According to an executive summary of the conference which was made available to Nairametrics, banks’ stakeholders are especially worried about the following:
- The negative impacts of CBN’s constant CRR debits.
- The issue of naira’s liquidity management.
- They are also worried about FX liquidity (or the lack thereof), as well as the exchange rate unification at CBN’s different windows. When will the CBN resume dollar sales to foreign portfolio investors in the I&E window?
- Lastly, banks’ stakeholders are worried about COVID-19 and its impacts on earnings outlook, loan restructuring, and asset quality.
Part of the document containing the executive summary of the conference said:
“Banks are more concerned about the arbitrary nature and lack of understanding of the CRR debits as it makes it difficult for them to plan. Most are increasing steps to reduce balances with the CBN to limit debits. According to the CBN, CRR balances with the CBN currently stand at N10tn, 22% of sector assets and 50% of sector deposits. This is negative for NIMs, but funding costs have also declined, dampening the impact. Most of the banks have presented loans to the CBN for restructuring but are still engaging with clients. According to the CBN, loans presented by the sector for restructuring account for 32.9% of total loans, implying an overall weakness in sector asset quality, which we will likely not see in asset quality deterioration by FY20e given the regulatory forbearance.
“Sector NPL ratio currently stands at 6.6% vs. 11% in April 2019. Banks continue to maintain their position of following strict credit processes to drive credit growth, and not grow loans aggressively due to pressure from the loan-to-deposit ratio (LDR) minimum lending policy of the regulator.
“The improvement in oil prices has also reduced the concerns of asset quality deterioration in oil and gas exposure. Obligors in the sector have a breakeven cost price at the USD30/bbl level. Some banks expect further devaluation in the currency at the official window, given the depressed FX revenue outlook from
lower oil prices, but acknowledge the backward integration drive of government to improve corporates’ sourcing of raw materials locally to reduce pressure on FX due to imports.”
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Recall that there have been different reports and forecasts about the recent negative pressures on Nigerian banks and how their earnings/profitability might take a hit. And this is probably the first time these banks are acknowledging and speaking up about these changes. It is unclear, at this point, what the CBN might do to remedy some of the concerns raised.
In the meantime, you may download the full report containing the key takeaways from the conference by clicking here.
Adesina Probe: US Treasury Secretary praises AFDB’s decision on independent review
The AFDB said it supported an internal investigation that cleared Adesina.
The US Treasury Secretary, Steven Mnuchin on Thursday praised the African Development Bank’s decision for an independent probe of the bank’s president, Akinwunmi Adesina.
Mnuchin, while stating that institutions must be held to standards of transparency, commended the AfDB’s decision to pursue an independent review.
“International intuitions must adhere to the highest standards of governance and transparency, and the decision to pursue an independent review demonstrates the strength of the African Development Bank,”
“Undertaking an independent review is fully consistent with a presumption of innocence,” Mnuchin said.
Mr. Adesina was accused by a whistleblower of abusing his office with allegations of nepotism through handing contracts and appointments, accusations he has denied.
The AFDB said it supported an internal investigation that cleared Adesina. However, the US government demanded an independent review.
The panel will be chaired by former Irish president, Mary Robinson, and includes Gambian Chief Justice, Hassan Jallow, and Leonard McCarthy, former World Bank Vice president for Integrity and also an ex-South African government official.
They will review an ethics committee report that found zero evidence of wrongdoings on Adesina and the review is expected to be completed in 2–4 weeks.
The United State is the bank’s second-largest shareholder and called for an independent probe, rejecting the bank’s internal review.
President Buhari has assured Adesina of Nigeria and Africa’s backing from the American “onslaught”.
The shareholders of the bank also include all 54 African Nations and 27 others from the rest of the world and also serve as Africa’s largest multilateral bank.