KEY members of Zenith Bank management got N4.095 billion as compensation in nine months to September 2024, representing a 40 percent rise from N2.928 billion compensation they received in the corresponding period of 2023.

The bank’s managers also secured loans from the financial institution at an average interest rate of 4 percent, which is far below the market rate, in the same period under review.

READ ALSO: In 6 months, Zenith Bank lends only 7% of N311bn intervention fund

According to Zenith Bank’s third quarter 2024 financial statement seen by Economy Post, salaries and other short-term benefits made available to key members of the management stood at N3.230 billion in the period under review.

Similarly, the managers got N320 million from Zenith Bank as retirement benefits and N545 million as allowances. In total, the key management members of Zenith Bank got N4.095 billion as compensation over the period.

Same interest rate

Similarly, key management personnel’s loans stood at N2.176 billion at the end of the nine months to September 2024. However, as usual, the management personnel got these loans at an average interest rate of 4 percent – far below the market rate.

READ ALSO: Zenith Bank directors pocket N6.8bn in 15 months

The N2.176 billion loan is a 25 percent reduction from N2.888 billion seen in the corresponding period of 2023. As at the beginning of 2024, loans owed by the key management personnel stood at N2.850 billion. The managers got N32 million within the period and repaid N706 million in the nine-month period under review. This kept their total debt at N2.176 billion by the end of September 2024.

This is not the first time Economy Post has reported the 4 percent interest rate at which Zenith Bank key managementpersonnel get loans.

Economy Post had reported that Zenith Bank Plc lent N3.517 billion to its management staff at four percent interest rate by the second quarter of 2023.

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. The loans had also been obtained at 4 percent interest rate.

The major issue

One might wonder this story matters. “How does that concern the media how a bank elects to compensate its managers?” asked a Lagos-based bank worker, who concluded that “Economy Post is poke-nosing.”

READ ALSO: Zenith Bank raises managers’ compensation by 40%, grants loans below market rate

However, there are two issues with a 4 percent interest rate. First, the rate is far below the market rate.

Banks’ interest rates are determined by the Central Bank of Nigeria (CBN)’s monetary policy rate (MPR). The MPR is known as the benchmark interest rate as it is the rate at which the CBN lends to banks. Ordinarily, no bank lends at any rate below the MPR as it would often lead to losses.

Last week, the CBN’s Monetary Policy Committee (MPC) raised the MPR by 25 basis points to 27.50 percent due to high food and petrol prices. In fact, the MPC has raised the interest rate six times this year to tame inflation.

Curiously, however, as the CBN raises its rate, Zenith Bank’s rate to key management personnel remains the same. Even if Zenith Bank chooses to lend to its key management personnel at 27.50 percent, it would still mean that the bank is at a break-even point – the point at which cost and earnings are equal with no profits.

“At 4 percent interest rate, the bank would be losing at least 23.5 percent, if we assume that the break-even point is 27.5 percent. I understand why banks compensate their key amnagement personnel, but they must not keep the rates this low,” said a former Lagos-based banker, Mr Fidelis Maduwelu.

Secondly, banks’ deposits are liabilities, meaning that they are not assets. Hence they belong to customers, and not banks’ directors or managers.

READ ALSO: Outrage as Zenith Bank lends 7% of N311bn intervention fund in six months

“When bank customers deposit money into a checking account, savings account, or a certificate of deposit, the bank views these deposits as liabilities. After all, the bank owes these deposits to its customers, and are obligated to return the funds when the customers wish to withdraw their money,” said Lumen Macroeconomics, a textbook on Economics.

SMEs borrow at far higher rates

Micro, small and medium enterprises (MSMEs) borrow at higher rates at Zenith Bank. Zenith Bank has not updated its interest rates for loans on its website since at least the second quarter (Q2) of 2023.

Economy Post found that one of Zenith Bank’s SME loans is priced at 28 percent interest rate. With the latest increases in MPR, this rate is no more sustainable and could have been raised by the bank.

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.

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. This is the third time Zenith Bank has failed to respond to Economy Post‘s request on this.