In a significant financial revelation, the combined operating expenses of ten prominent Nigerian banks surged by 42.51 per cent, totaling N3.23 trillion in 2023 compared to N2.26 trillion in the preceding year. This data, unveiled in the annual reports submitted to the Nigerian Exchange Limited, underscores a notable financial trend within the nation’s banking sector.
The financial institutions under scrutiny include Access Holdings, FBN Holdings, Zenith Bank, United Bank for Africa, FCMB Group, Sterling Financial Holding, Fidelity Bank, Wema Bank, Stanbic IBTC, and Guaranty Trust Holding Company.
Operating expenses encompass various crucial expenditures incurred during routine business operations, such as rent, equipment, inventory costs, marketing, staff expenses, insurance, research and development, and depreciation. In the case of the ten banks, personnel costs and other operational expenses emerged as primary drivers behind the surge in operating expenses during 2023.
For instance, Nigeria’s largest bank, AccessCorp, witnessed a substantial 38.85 per cent increase in operating expenses, soaring to N697.53 billion from N502.36 billion in the previous year. This surge was attributed to a notable rise in personnel costs, which escalated by 43.97 per cent to N167.90 billion, primarily due to enhanced wages and salaries.
Similarly, FBN Holdings reported a significant surge of 46.83 per cent in operating expenses, amounting to N534.34 billion in 2023, according to its unaudited results. FCMB Group also experienced a notable rise of 35.64 per cent, reaching N154.44 billion in operating expenses, primarily driven by increased personnel expenses.
The escalation in operating expenses was not limited to these institutions alone. Sterling Financial Holdings Company and subsidiaries witnessed a 25.26 per cent rise, totaling N109.24 billion, while Fidelity Bank reported a substantial 60.77 per cent surge, amounting to N194.18 billion.
Furthermore, Zenith Bank Plc disclosed a 32.31 per cent increase, reaching N449.47 billion in operating expenses, whereas UBA’s expenses surged by a staggering 68.99 per cent, amounting to N591.64 billion from N350.09 billion in the previous year.
Experts attribute this surge in operating expenses to inflationary pressures, naira devaluation, and upward revisions in salaries. Ayokunle Olubunmi, the Head of Financial Institutions Ratings at Agusto & Co., emphasized the criticality of managing operating expenses effectively for banks to sustain profitability and competitiveness in the market.
Addressing these challenges necessitates a strategic blend of measures, including improving credit risk management practices, enhancing regulatory oversight, promoting economic stability, and implementing sound corporate governance standards within banks.
Moreover, a report by KPMG Nigeria in 2023 shed light on significant pay rises among bank employees following the removal of fuel subsidies by the Federal Government. This trend saw banks such as Wema Bank PLC, GTCO, and Zenith Bank PLC implementing salary increments and enhancing staff welfare measures to mitigate the impact on employees.
As Nigeria’s banking sector navigates through evolving economic landscapes, the efficient management of operating expenses remains pivotal for sustaining growth and resilience amidst dynamic market conditions.
