Wema Bank enjoyed CBN salary bailout for 14 years despite 239% profit increase

WEMA Bank has enjoyed the Central Bank of Nigeria (CBN)’s staff salary bailout in the last 14 years despite growing profits by more than 239 percent over the period, Economy Post has exclusively gathered.

In October 2009, the CBN granted more than N87 billion in convertible loan to Wema Bank to support staff wages and other related activities of the bank.

The loan has a moratorium of 20 years at an interest rate of 9 percent. Based on the arrangement between the CBN and Wema Bank, repayment of the principal would be by bullet (payment of the outstanding lump sum) at the expiration of the moratorium.

Even though the interest rate on the amount was 9 percent, the apex bank reduced that to 5 percent in 2020 due to COVID-19 but restored it to 9 percent in September 2022.

However, findings have shown that the facility was granted to Wema Bank when it was struggling to pay the wages of staff members. In 2009 full financial year, Wema Bank incurred a loss of N7.53 billion due to a financial crisis facing the bank at that time.

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“The Group’s consolidated accounts show a loss after tax of N7.53 billion largely attributable to the absorption of significant write-downs and trading losses from legacy
positions impacted by the financial crisis in our subsidiaries,” Wema Bank Chairman, Mr Samuel Olaniyi Bolarinde, said in 2009.

“In absorbing these losses, your bank has disseminated its corporate governance ethos to its subsidiaries and proven that the new management team did more with less, by delivering substantial profitability with a significantly lower inherited balance sheet,” he noted.

Lamido Sanusi Lamido was the CBN governor when this loan was granted.

Fortunes now better

However, things have looked up since then as the bank has long emerged a profit-making financial institution. In fact, the bank’s fortunes changed the following year when its profit after tax rose by more than 300 percent.

“The Group Gross Earning grew by 14.7% increasing to N21.79 billion in the reporting period from N18.99 billion of the 9-month period to December 2009, Group’s Profit After Tax also grew from loss position of N7.53 billion to N17.46 billion
translating to growth of 331.7% within the same period,” Mr Bolarinde said while unveiling the 2010 full financial year results.

Surprisingly, in the half-year 2023 results, the bank still reported enjoying the facility on page 22 of its financial statements despite making a profit of N10.492 billion over the period as against N11.351 billion gain recorded in the corresponding period of 2022.

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Wema Bank’s spokesperson, Ms Mabel Adeteye, did not respond to Economy Post‘s inquiries that sought a clearer explanation of the situation.

Analysts blame CBN

Analysts have, however, exonerated Wema Bank, casting aspersions rather at the central bank for allowing the situation to last longer than required.

An economist, Mr Babtunde Ayinde, said the CBN could have terminated the loan when the bank was out of waters the following year, noting that it conferred undue advantage on Wema Bank over others in the industry.

“The CBN should have ended the loan when the bank started making profits. I will not so much blame Wema Bank because it is the beneficiary and everybody would do the same,” he said.

President Bola Tinubu recently appointed Mr Jim Obazee as a special investigator to probe the activities of the CBN in line with Section 15(5) of the Nigerian constitution.

A financial analyst, Ms Maryjane Thelma, said the new CBN governor might be forced to terminate some of those intervention programmes due to issues associated with them.

“After the work of the investigator, some of those programmes may be terminated because of the manner in which they were granted -without due diligence. I do not know much about the facility you have spoken about, but I know that there may be an effort to reduce the level of cash circulating within the banking system.”

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