ZENITH Bank is granting loans to its directors and key management staff at an average interest rate of 4 percent, but small business owners pay as high as 27 percent to access credit facilities from the financial institution, Economy Post has found.

This is happening at a point when the Nigerian economy is shrinking amid rising poverty and business shutdowns.

In the bank’s third quarter 2023 financial statement, Economy Post found that at the start of the September 30, 2023 financial year, Zenith Bank’s directors and key management staff owed the bank N3.245 billion as against N2.902 billion in the corresponding period of 2022.

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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 directors and key management staff owed the financial institution the sum of N2.888 billion as against N3.283 billion in the corresponding period of 2022.

The directors owed the bank N1.588 billion by the end of September 2023 financial year.

“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,” Zenith Bank said in its third quarter 2023 financial statement.

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Economy Post had earlier reported how financial experts and small business owners criticised Zenith Bank for paying more attention to its management than small business owners in terms of loans, urging the financial institution to turn a new leaf.

Zenith Bank is managed by Mr Ebenezer Onyeagwu.

The bank’s directors include: Mr Jim Ovia (chairman), Mr. Chuks Emma Okoh, Mr Gabriel Ukpeh, Engr. Mustafa Bello, Dr. Al-Mujtaba Abubakar, and Dr. Omobola Ibidapo-Obe Ogunfowora. Others are: Dr. Peter Olatunde Bamkole, Dr. Ebenezer Onyeagwu, Dr. Adaora Umeoji, Dr. Temitope Fasoranti, Mr. Henry Oroh Executive Director. Mrs Adobi Nwapa, and Mr. Akindele Ogunranti.

Loans for SMEs at 27%

While directors and key management staff have enjoyed loans at 4 percent interest rate, micro, small and medium enterprises (MSMEs) have had to pay for credit access at 27 percent. Zenith Bank’s “MSME Loans” costs as high as 27 percent, according to the bank.

That is not all. Small business owners who intend to borrow from the Tier-1 bank are expected to pay “0.5% – 1% flat subject to a minimum of N10,000.”

Minimum amount to be lent to MSMEs is N500,000 while maximum amount is N2 million at a tenor of 12 months.

There is a stringent condition attached to this loan, which is “exclusivity of all transactions done by the customer to Zenith bank.” This can be interpreted to mean that the customer will perform all their transactions at Zenith Bank – and no other bank.

The loan is meant majorly for MSMEs in beauty, style, confectionery and fitness.

The problem

The Central Bank of Nigeria (CBN)’s current monetary policy rate (MPR), which is the benchmark interest rate for the country, stands at 18.75 percent. A benchmark interest rate determines other rates in the economy, meaning that banks cannot lend below the rate.

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Ordinarily, when a customer borrows loans from Zenith Bank or any other deposit money bank in Nigeria, the interest rate changes once the CBN benchmark rate changes. This means that customers who borrowed in January 2023 at 20 percent rate would have had their interest rates changed three times since then. This is because the CBN Monetary Policy Committee (MPC) has changed the MPR or benchmark rate three times since January.

Interestingly, Economy Post found that even when the benchmark rate has changed from 17.5 percent to 18 percent, and to 18.5 percent, and to 18.75 percent since January 2023, Zenith Bank’s interest rate to its management staff and directors has remained the same – at four percent.

Poverty rising, credit access shrinking

Poverty is rising in Africa’s most populous nation. The country was world’s poverty capital in 2018. The World Poverty Clock’s 2023 data said 71 million Nigerians are extremely poor.

This correlates with poor access to funding as the majority of Nigerian businesses are MSMEs, according to financial experts.

Enhancing Financial Innovation & Access (EFInA) 2020 report said 38 million Nigerians, representing 36 percent of adults, were financially excluded.

MSMEs kick

Operators of MSMEs have criticised Zenith Bank for lending depositors’ fund to its management staff and directors at four percent interest rate when they could only get loans at rates above 25 percent.

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.

An Abuja-based operator of food business, Ms Vivian Emodi, said she was not surprised at the situation.

According to the 32-year-old entrepreneur, she went to a bank seeking some funds in 2021 but could not get due to a high interest rate.A struggling small business owner in Rivers State

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“I went to a bank to get some loan in 2021, but I was told I could only get it at N23 percent. I could not even get any of the CBN loans,” she said.

Founder of Livestock247.com and RiceAfrika, Mr Ibrahim Maigari Ahmadu, said several deposit money banks in Nigeria did not understand small businesses properly.

He noted that Nigeria’s commercial banks were “risk-averse” and often put “gridlocks on MSMEs’ access to credit.”

Internal interest rate is negotiable but unfair

Meanwhile a former staff member of a Tier-1 bank, Mr Otienne Maxwell, said this was a normal practice in deposit money banks.

“It is nothing strange in banks. But it’s not all bank workers that can get loans at that rate. 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 nearly 20 percent. It is often meant to compensate staff for their efforts, but the 4 percent rate is so low and unfair,” he added.

Zenith Bank keeps mum

Head of Corporate Affairs at Zenith Bank, Mr Ayoola Kusimo, did not respond to text and WhatsApp messages sent to him for a response on the rationale behind the provision of loans to the bank’s management staff at four percent interest rate.