With the growing lending to private and individual customers, a total of 13 banks have generated N5.96trillion interest income from loans to customers between 2020 and 2018.
This has demonstrated banks’ drive to support the Central Bank of Nigeria (CBN) aggressively lending to support the real sector and boosting banks’ earnings.
Nigerian Banks with branches in Africa and Europe have developed a variety of products in recent years to make it easier for customers to obtain loans with double-digit interest rate.
The 13 banks comprise of six Domestic Systemically Important Banks (D-SIBs) or Tier-1 banks and seven Tier-2 banks operating in Nigeria, Africa, and some European countries.
The six D-SIBs are Access Bank Plc, Ecobank Transnational Incorporated (ETI), Zenith Bank Plc, Guaranty Trust Holdings Plc (GTCO), United Bank for Africa Plc (UBA), and FBN Holdings Plc.
Others are Fidelity Bank Plc, Union Bank of Nigeria Plc, FCMB Group Plc, Wema Bank Plc, Sterling Bank Plc, Unity Bank Plc and Stanbic IBTC Holdings.
According to our correspondence investigation, Access Bank, followed by ETI and Zenith Bank led others in interest generated from loans to customers in the three years under review.
In the last three years, Access Bank has generated N898.01billion interest lending to private and individual customers, while ETI’s interest from loans to customers hits N838.33billion in the period under review.
Both Access Bank and ETI are pan-African banks with branches in over 15 African countries with lending to customers above the N3trillion mark.
However, Zenith Bank in the three years under review generated N756.5billion interest lending to customers, followed by FBN Holdings with N750.19billion generated as interest from loans to customers.
Other Tier-1 banks that generated interest income from loans to customers are, UBA- N627.95billion and GTCO- N550.5billion.
As observed by our correspondence, Unity Bank generated the lowest interest from loans to customers, while Fidelity bank has aggressively grown its interest income from lending to customers.
Specifically, Fidelity bank in three years generated N370.7billion in interest from loans to customers, while Unity Bank’s income from loans to customers stood at N2.23billion.
Others are: FCMB gGoup with N300.66billion interest income from loans to customers, while UBN generated N227.93billion as interest income from loans to customers.
Sterling bank-N275.99billion; Stanbic IBTC Holdings – N191.71billion and Wema Bank-N166.55billion generated as interest income from loans to customers between 2020 and 2018.
Meanwhile, Nigerian banks’ lending rates as published by the CBN shows two different classes of loan pricing, which are prime lending rates, charged creditworthy customers, and maximum lending rates, charged perceived risky customers.
Consequently, banks charge customers lower interest rates of between four per cent and 27 per cent in the prime lending rate category.
The banks have an average interest rate of between four per cent and 36 per cent on loans given to customers in various sectors of the economy, especially agriculture and forestry, manufacturing and education.
The CBN throughout 2021 maintained its Monetary Policy Rate (MPR) at about 11.5 per cent and average prime lending and max lending rates at 11.48 per cent and 28.06 per cent respectively.
THISDAY can report that CBN pegged its MPR at 14 per cent in 2018 with banks max lending closing the year at 30.52 per cent from 31.39 per cent in January 2018.
The following year, MPR dropped from 14 per cent to 13.5 per cent max lending rate grew from 30.48 per cent to 30.72 per cent.
However, in 2020, MPR was at 13.50 per cent but max lending rate dropped from 30.77 per cent to 28.31 per cent in December 2020, while prime lending also dropped from 14.97 per cent in January 2021 to 11.35 per cent in December 2020.
The banking sector is faced with Fintech companies and other Payment Service Bank (PSB) operators lowering interest rate on loans and advances to customers.
Analysts have expressed that banks might review lending rate, which some have adopted lending to a single interest rate to individual customers to meet the CBN’s Loans-to-Deposit (LDR) policy.
Analyst at PAC Holdings, Mr. Wole Adeyeye said: “banks are going to face challenges in interest income generated from loans to customers.
The licensing of PSP to MTN Nigeria and Airtel Africa going to pose a threat but banks with effective management understand the The banks have been coping with the Fintech companies and trying to improve lending to customers through App USSD, among other devices.”
The Vice President, Highcap Securities Limited, Mr. David Adnori expressed that bank customers’ have to decided where to borrow from with alternatives provided by Fintech and PSP operators.
He maintained that banks are always prudent in managing interest income generated from loans and customers and are expected to thrive amid challenges posed by Fintech companies, among others.
Analyst at Vetiva Research believed that a tough times still lie ahead for the banks, with interest rates poised to recover slowly, while inflationary pressures remain and the added competition from the new Payment Service Bank (PSB) licences issued to MTN Nigeria and Airtel pose a threat to some lines of the banks’ businesses.
The Banking Analyst at Vetiva, Joshua Odebisi said, “Next year, we expect interest rates to remain in a steady upward trajectory, as government borrowing continues to rise to fund an ever-expanding deficit. However, we do expect inflation to continue to outpace this rise, meaning negative real returns for investors in the market.”