Access Bank grants loans to associates at 8% interest rate, charges customers 28%

ACCESS Bank granted loans to its associates and management personnel at 8 percent interest rate in the first six months of 2023, while providing the same support to customers and businesses at rates between 27.6 percent and above, Economy Post has found.

The bank gave out loans to its associates and directors (and their family members) at a tenor of 4 years, while insisting that most of the facilities to individual and corporate customers must not exceed one-year repayment period.

As at June 2023, the Tier-1 bank had granted N1.789 billion to its directors and other key management personnel, including their close family members, at an average tenor of 4 years.

“The transactions were carried out at arms length and have an average tenor of 4 years,” Access Bank said in its half-year 2023 report.

“The loans are collateralised by a combination of lien on shares of quoted companies, fixed and floating debentures, corporate guarantee, negative pledge, domiciliation of proceeds of company’s receivables, legal mortgages and cash,” the bank noted, while explaining the type of collaterals provided by the management personnel and directors while taking the loans.

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It added that “the loan granted to associate as at 31 December 2022 is N363m at an average interest rate of 8% and an average tenor of 4.46years.”

Big loans, high charges

Access Bank granted personal loans valued at N386.518 billion to its customers over the period, but it also offered auto loans, mortgage loans, finance lease, among many others. However, some of these loans were not cheap.

With the Central Bank of Nigeria (CBN) raising its monetary policy rate (the benchmark interest rate) to 18.75 percent in July 2023, most of Access Bank’s loans are now above 25 percent (annually).

For instance, the bank’s Device Finance (DFPS), which is a personal loan granted to salary account holders and other customers, attracts 2.3 percent monthly interest rate and 27.6 percent annual interest rate, including a Credit Life Insurance charge of 1 percent.

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Other loans such as Lending Against Turnover attracts 6.5 percent rate on a 90-day period (26 percent rate in 12 months), a management fee of 1 percent and the Credit Life Insurance of 0.5 percent. In other words, the charge to businesses in 90 days amounts to 8 percent, or 32 percent if a customer decides to extend it to 12 months.

PayDay Loan attracts a 7.5 percent interest rate in 30 days (against next salary), a management fee of 1 percent and the Credit Life Insurance of 0.3 percent. Other loans have varied levels of interest rates, but the majority are higher than 25 percent when extended to a 12-month term. Many of the loans have tenors of one year and lower.

“Taking many bank loans absolutely makes no sense,” said a financial analyst, Ms Adanna Ikebudu. “You are not sure of how much to pay back because once the CBN raises the monetary policy rate, your interest rate will rise. So, you may take bank loans at 27 percent but end up paying 35 percent.

“The worst part of it is that banks will not inform you about these changes,” she noted.

Banks not supporting development

In one of his interviews on Channels TV, a political economist, Prof Pat Utomi, said banks were not supporting development, regretting that the majority of them had deviated from the purpose for which they were created.

“This was not what we anticipated when we were doing bank consolidation. We wanted a banking system that would support development, boost SMEs and industries but that is not happening,” he noted.

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Founder of Livestock247.com, Mr Ibrahim Maigari Ahmadu, Nigeria’s first livestock online marketing and listing platform, argued that apart from the fact that bank interest rates were high, access to those funds was not easy.

“Many of the Nigerian commercial banks are risk-averse. They have erected so many gridlocks to make it hard for those seeking those funds,” he said.

A Lagos-based small business owner, Ms Bola Anifowose, wondered how she would be able to repay a bank loan at 25to 30 percent interest rate.

“How will I pay it back? I am not interested in those loans because they will not help people like us. Even if traders like us go to the banks, they will not give us. They prefer to give it to big companies and big people,” she said.

Access Bank keeps mum

Access Bank’s Head of Corporate Communications, Mr Abdul Imoyo, refused to comment when asked to provide reasons why his bank granted loans to associates at 8 percent interest rate while offering same to customers at 28 percent rate.

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