Nigerian banks, on the average, spend more on advertising compared to companies in other sectors of the economy. Little wonder Nigeria’s Tier 1 banks or FUGAZ, spent a combined sum of ₦35.7 billion on advertising in the full financial year ended December 31st, 2017.
This amount is slightly above ₦31.1 billion, the combined sum the banks spent for the same purpose in 2016.
It should be noted that some companies outside the banking sector such as Unilever, Okomu Oil, and WAPCO spent ₦3.7 billion, ₦540 million, and ₦477 million respectively.
Break down of the advertising costs
Zenith Bank Plc is the highest spender, having recorded ₦8.8 billion as its total costs on adverts for the financial year ended 2017. This is a little less than ₦9.5 billion which the company spent on adverts in 2016. Meanwhile, the company recorded gross earnings of ₦740 billion in 2017 with an annual profit of ₦177 billion.
United Bank for Africa spent ₦7.4 billion against ₦3.6 billion which it spent in 2016. The company earned a total revenue of ₦461 billion, with a profit after tax of ₦78 billion.
Guaranty Trust Bank (GTB) spent a total of ₦7 billion on adverts against ₦7.4 billion which it spent in 2016. In total, GT Bank recorded an annual revenue of ₦419.2 billion, with a profit after tax of ₦170 billion.
First Bank of Nigeria Plc spent ₦6.4 billion on advertising against the ₦6.2 billion it spent for the same purpose in 2016.
In return, it realised ₦595 billion in revenues, and a profit after tax of ₦47.7 billion.
Access Bank Plc spent ₦6 billion in 2017 for adverts. This represents about ₦1.8 billion more than the ₦4.2 billion which the bank had spent in the preceding year. The company recorded a total revenue of ₦459 billion and a profit after tax of ₦61 billion.
Did the costs of adverts affect the banks’ performance?
Looking at the companies’ financial year reports, it can be seen that asides First Bank and UBA, the companies that spent more on advertising reaped more profits.
Zenith Bank spent the most out of all the other banks and recorded the highest profit of ₦177 billion. This is followed by GTBank which recorded ₦170 billion.
It should, therefore, be stated that in as much as other factors are responsible for each of these companies’ profits, their commitment to advertising also played a part.
Advertising and Public Relations are two of the most powerful tools utilised in the business world to communicate brands’ benefits and create awareness about new or existing products.
These, in turn, helps companies to either reach newer markets or consolidate on existing ones. In light of this, the importance of advertising and public relations can never be underestimated, as no company can really survive without them.
About Tier 1 banks
Simply defined, tier 1 banks are banks with the strongest financial capabilities. These banks are said to have enough capital to withstand heavy losses without ceasing operations.
In other words, they are the biggest banks by way of assets. In Nigeria, these banks include First Bank, United Bank for Africa, Guarantee Trust Bank, Access Bank, and Zenith Bank; or FUGAZ as we like to call them here at Nairametrics.
For the sake of this piece, the advertising costs of all the banks were compiled. All the figures are contained in these companies’ audited financial reports as submitted to the Nigerian Stock Exchange.
In conclusion, Nigeria’s Tier 1 banks should consider spending more than they currently do on advertising. This will enable them to reach more market opportunities and position them for more profits. This is important because, even though these banks are already big [with loyal customers], there are always more opportunities which advertising can help unlock.
The previous version of this article erroneously classified the amount spent on advertising in millions instead of in billions of Naira. This has been corrected.
Thanks to our loyal readers for spotting this.