A Dataphyte review of the 2022 full-year financial statements of Zenith Bank has shown that the financial institution prioritised loans to corporates over small businesses.
Zenith Bank, in the 2022 financial year, lent a total gross loans of N4.12 trillion. The loan composition shows that corporates got 62.3 percent of the total loans disbursed for the 2022 financial year.
This would mean the bank gave corporates N2.5 trillion in loans in 2022. Micro, small and medium enterprises (MSMEs) and commercials accounted for 19.8 percent of the bank’s total loan portfolio, meaning that N815 billion was disbursed as loans to MSMEs and commercials over the period. The retail sector got 5 percent of the bank’s loans.
The manufacturing sector accounted for 17.8 percent of the loans disbursed, while agriculture got 4.8 percent. The upstream oil and gas sector received 17.8 percent of the loans, while the downstream oil and gas industry got 4.8 percent. Government received 12.9 percent.
Zenith Bank’s financials also show that loans granted to the oil and gas sector were subject to restructuring for amounts running into billions of naira.
Restructuring occurs mainly in exceptional circumstances, where borrowers are deemed financially unstable and are unable to meet debt obligations.
The oil and gas sector was responsible for 80.7 percent of the bank’s restructured loans, representing N578.075 billion. The manufacturing sector’s share was N5.401 billion, while the power sector’s was N17.421 billion. The public sector got N82.795 billion.
Also, the oil and gas sector topped the non-performing loans (NPLs) chart in Zenith Bank’s financial report, taking 44.3 percent of the total. With a total non-performing loan figure of N177.3 billion, the oil and gas sector’s total NPL stood at N78.5 billion.
MSMEs deserve more
Experts told Dataphyte that MSMEs’ capacity to fulfill loan obligations often informed banks’ decision to grant them loans.
A SMEDAN official, Tana Abdul, told Dataphyte that the organisation had been making substantial efforts to support MSMEs’ access to finance.
“The major problem MSMEs face is that of banks’ interest rates, which are unfavorable to them. Also, sometimes banks prefer to grant loans to corporate organisations that can pay larger interest rates than to SMEs that cannot afford to pay the rate they set.”
She also identified a problem with the banks’ ranking of MSMEs’ capacity to repay loans.
The SMEDAN staff member, however, noted that there were substantial efforts by the government agency to help MSMEs smoothen the process, although that was minute, given the number of MSMEs in the country.
A policy expert, Samuel Atiku, told Dataphyte that the country must invest in MSMEs.
He said that there was a need for the government to prioritise MSMEs development in the country..
“We should address growing concerns of these MSMEs and startups, making them see reasons to continue to do business. Doing that will enable us to create millions of jobs and boost the economy. It is not rocket science; it is just what will be obtainable. We need to invest in our MSMEs sector as other countries do and even train them,” Atiku added.
Profit falls despite increased revenue
Despite recording increased revenue, the profit before tax of the bank fell. The gross earnings of the firm in 2022 stood at N945.55 billion, up from the N765 billion recorded in 2021.
However, its profit after tax stood at N223 billion, down from the N244 billion posted in 2021.
Zenith Bank’s operation cost also grew from N289 billion in 2021 to N339 billion in 2022.
Chief among the costs that grew were fuel and maintenance, which rose from N20 billion in 2021 to N29 billion in 2022.
A further review of the bank’s financials shows that corporates accounted for only 18.2 percent of the total deposits received by the bank in 2022. A total sum of N8.98 trillion was recorded as deposits for 2022, with corporates accounting for N1.6 trillion.
Retail recorded 44.2 percent of the banks’ deposits for the year, totaling N3.9 trillion, while MSMEs and commercials comprised 27.1 percent, representing N2.4 trillion.