Zenith Bank shareholders have expressed frustration over the high penalties imposed on commercial banks by regulatory authorities, particularly the Central Bank of Nigeria (CBN).
They argue that these fines, which are levied for various infractions, indirectly affect shareholders’ returns, creating a ripple effect on their investment.
Zenith Bank made a dividend payment of N4.00 per share, bringing the total dividend for the 2024 financial year to N5.00 per share, with a total value of N195.67 billion.
Rising Penalties and Financial Impact on Banks
Many banks have faced significant penalties for failing to comply with the Banks and Other Financial Institutions Act 2020 and various CBN circulars.
- For instance, Zenith Bank incurred N15.422 billion in penalties in 2024 for infractions related to anti-money laundering reviews, foreign exchange violations, and regulatory breaches, among others.
- This represents a significant increase when compared to the N21 million it paid to the CBN as penalties in 2023.
- Access Bank Group paid N1.21 billion in penalties in 2024 for contraventions of the Banks and Other Financial Institutions Act and CBN regulations, up from N38 million penalty paid for related offences in 2023.
- GT Bank, also one of the biggest hit, paid N1.6 billion in penalties in 2024, a massive increase from N73 million paid the year before.
- UBA was fined N400 million for infractions in 2024, up from N110 million in 2023, while Sterling Bank’s penalty rose from N21 million in 2023 to N61 million at the end of the 2024 financial year.
These penalties are compounded by the tax burden on banks, with the government collecting N1.2 trillion in taxes from just nine Nigerian banks in 2024, a 111.4% increase compared to the previous year.
In contrast, shareholders received N951.4 billion in dividends, reflecting an 87% increase from 2023.
Windfall Tax Liabilities Add to the Burden
The Finance (Amendment) Act 2023 introduced a windfall tax levy targeting profits from foreign exchange transactions, further straining banks.
Zenith Bank, GTCO, and UBA collectively incurred N172.3 billion in windfall tax liabilities in 2024, with charges of N63.3 billion, N51.2 billion, and N57.9 billion, respectively.
These levies, combined with regulatory penalties, have sparked concerns among shareholders, who argue that the financial burden is ultimately passed on to them and reduces their dividend payout.
Why the CBN fines banks
The Central Bank of Nigeria (CBN) imposes financial penalties on banks to enforce discipline, strengthen regulatory compliance, and safeguard the financial system. These penalties are not arbitrary; they usually follow breaches of established regulatory standards.
- While the banks did not specifically disclose the infractions that led to these fines, Nairametrics’ findings indicate that most penalties revolve around four key areas.
- First are violations of anti-money laundering (AML) and counter-terrorism financing (CTF) regulations. Banks are required to flag and report suspicious transactions, and failure to do so can result in heavy sanctions due to the risks posed to national security.
- Second is non-compliance with the cash reserve requirement (CRR), which mandates banks to hold a portion of customer deposits with the CBN. Falling short signals weak financial discipline and attracts direct debits from their accounts.
Third are breaches related to the handling of foreign exchange transactions. These include unauthorized sales, pricing irregularities, or documentation lapses — all of which threaten transparency in the FX market and can trigger regulatory action.
Lastly, general regulatory lapses such as failures in customer protection, cybersecurity, or reporting standards also attract fines. These frameworks are essential to ensure consumer trust and system stability.
Through these enforcement actions, the CBN aims to ensure that banks operate within the bounds of prudence and accountability, helping to build a safer and more resilient financial sector.
Shareholders’ Reactions
Shareholders have criticized the CBN’s stringent penalty regime, describing it as excessive and counterproductive.
Otunba Muktar, a shareholder, stated in an interview with Nairametrics, “The penalties are too high. The CBN should issue warnings before imposing fines. Penalizing banks for every minor infraction is harsh and unfair.”
Similarly, Dr. Farouk Umar lamented the growing tax burden, saying, “The taxes and penalties are becoming unbearable. We pay corporate tax, withholding tax, education tax, and now windfall taxes. It’s too much for businesses and shareholders to bear.”
Okezie Boniface, another shareholder, expressed frustration over the N15 billion penalty paid by Zenith Bank, adding, “These fines are dragging institutions down. The regulatory environment is stifling growth. If not for this N15 billion penalty, our dividend would have increased above the N5 we were paid per share”.
Banks Respond to Regulatory Challenges
Reacting to the concerns, Group Managing Director/CEO of Zenith Bank, Adaora Umeoji, acknowledged the challenges posed by regulatory fines.
Speaking at the bank’s 2025 Annual General Meeting, she stated, “The fines are regulatory, and the CBN has increased its monitoring and supervision of banks. We are implementing measures to ensure compliance and avoid future penalties.”
Umeoji assured shareholders that Zenith Bank is committed to prudent and professional practices to minimize infractions and safeguard shareholder value.
Calls for Proactive Measures
Experts have advised management of the banks to adopt proactive measures to prevent avoidable infractions and reduce exposure to penalties.
Investment expert, Abiodun Adedotun, said investors are bound to raise eyebrows if a company incurs such a huge penalty, as it signifies that there is something the directors are not doing right.
“I think the CBN is just trying to sanitize the banking system, and it is up to the banks to sit up and abide by laid-down regulations to prevent incurring these penalties,” he told Nairametrics.
“As a shareholder, news like this doesn’t sound good because you’re an investor. And if your bank continues incurring such a huge penalty year after year, you just have to exit because these penalties are likely affecting your dividend.”
Muktar noted, “If banks are careful and articulate in their dealings, they can avoid sanctions. However, the CBN’s penalties remain excessively high, creating undue pressure on financial institutions.”
As the debate continues, stakeholders are urging the government and regulatory authorities to strike a balance between enforcement and fairness, ensuring that penalties do not stifle the growth of Nigeria’s banking sector.
