ZENITH Bank key managers got loans from the financial institution at 4 percent interest in 2023 amid the rising benchmark monetary policy rate which currently stands at 24.75 percent.
Also, small and micro businesses pay as high as 27 percent or more to have access to credit at the bank, but the the key management staff of Zenith Bank access the same facility at just 4 percent rate.
According to the 2023 financial statement released by the company, key management personnel of the tier-1 bank were given mortgage and other personal loans at an interest rate of 4 percent.
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“Loans to key management personnel include mortgage loans and other personal loans. The loans are repayable from various repayment cycles, ranging from monthly to annually over the tenor and have an average interest rate of 4%. Loans granted to key management personnel are performing,” the bank said.
At the beginning of 2023, the key personnel owed the bank the sum of N3.245 billion, which was increased by N272 million within the year. The management personnel, however, repaid N667 million out of the whole money, leaving N2.850 billion unpaid.
New normal
This has become a new normal for Zenith Bank, which also reported granting loans to its management personnel at 4 percent interest rate in the third quarter of 2023.
In the bank’s third quarter 2023 financial statement, Zenith Bank’s key management staff owed the bank N3.245 billion as against N2.902 billion in the corresponding period of 2022. The loans were also obtained at 4 percent interest rate.
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Within the year, the Tier-1 bank lent N272 million to them as against N573 million in the same period of 2022. At the end of the financial period, Zenith Bank’s key management personnel owed the financial institution the sum of N2.888 billion as against N3.283 billion in the corresponding period of 2022.
Small businesses struggle
As the key management personnel have access to credit at the bank at 4 percent interest, small businesses obtain the same facility at extremely high rate. An MSME loan meant for women in the bank attracts an interest rate of 27 percent. Tenor of the loan is 12 months. There is also a management fee of 0.5 percent to one percent to be paid before a small business owner can access the loan.
The 27 percent, however, has been on the bank’s official website for more than a year. Insiders say the rate has reached 35 percent today.
The benchmark interest rate
Bankers often claim that interest rates are negotiable without telling the public about the intrinsic cost of funds. Basically, banks raise interest rates for their customers, including for loans borrowed earlier, once the Central Bank of Nigeria (CBN) increases the benchmark interest rate, otherwise known as the monetary policy rate (MPR).
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The CBN raised the MPR from 18.75 percent of the pre-Godwin Emefiele era to 22.75 percent on February 27, 2024. It was later increased to 24.75 percent on March 26, 2024, raising the cost of borrowing in Africa’s largest economy.
However, loans borrowed by Zenith Bank chiefs were obtained at 4 percent without recourse to the intrinsic cost of funds in the country. Hence the cost was the same irrespective of what the MPR said.
“This is extremely low. Since it came from people’s deposits, it should not be this low. Other banks do quite higher rates for internal staff and managers, but Zenith Bank’s rate is very low. The CBN Governor, Dr Yemi Cardoso, must begin to look at things like this to entrench fairness in the banking system,” said a Lagos-based finance expert, Mr Cyril Obasa.
A former staff member of a Tier-1 bank, Mr Otienne Maxwell, said: “It is nothing strange in banks. But it’s not all bank workers that can get loans. It is often reserved for those who are full staff (not contract staff), and mortgage loans are for senior staff.
“As for the terms of loans, they are determined by the banks. If a bank decides four percent is good for its staff, it is no problem. However, it is absolutely wrong to give out depositors’ money at four percent rate when the repo or benchmark rate is 24.75 percent. It is often meant to compensate staff for their efforts, but do not bring it so low,” he added.
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An operator of a small business and Chief Executive Officer of Lagos-based Jasen Fashions, Ms Jane Idemudia, said the situation only reflected the state of Nigeria’s financial system.
“It is a laughable situation that a bank pays more attention to its senior staff than those without which it cannot be in business. As an entrepreneur, we hardly have access to cheap loans. Even when government intervention loans are available, you cannot access them unless you know someone in a bank. So, this situation is just a reflection of what the country’s banking system has become,” she said.
