Fidelity, Unity Bank, 7 Others Report N226.12bn Insider Lending to Directors, Related Entities

Nume Ekeghe

Fidelity Bank Plc and eight other depository banks in Nigeria provided N226.12 billion in loans and advances to entities controlled by key executives and related parties in 2021, account analysis revealed banks’ financial resources in 2021.

This is an 11.5% increase from the N202.73 billion loans and advances granted by the nine banks to key management and related parties in 2020.

The other banks are Unity Bank Plc, Wema Bank Plc, Access Holdings Plc, United Bank for Africa (UBA) Plc, Zenith Bank Plc, Guaranty Trust Hold Plc (GTCO), FCMB Group Plc and Sterling Bank Plc.

Analysts believe Nigerian banks could provide loans to key executives at below-market interest rates.

Banks are required to report internal loans and advances in accordance with the provisions of Central Bank of Nigeria (CBN) Circular BSD/1/2004 dated February 18, 2004 on “Disclosure of Insider Related Credits in Financial Statements of banks”.

During the year under review, Fidelity Bank, according to THISDAY’s analysis, led other banks in loans and advances to entities controlled by key management and related parties.

For example, Fidelity Bank, in its 2021 financial statements, disclosed N194.33 billion in related party loans and advances, representing a 20.7% increase from the N194.33 billion reported in 2021. 2020.

The breakdown revealed that loans granted to an entity controlled by key management personnel increased by 20.7% to 96.6 billion naira in 2021 from 80.02 billion naira reported in 2020, while loans granted to related parties increased by 20.6% to N97.73 billion in 2021 from N81.01 billion reported in FY 2020.

Most of the loans obtained by key management and related parties of Fidelity Bank include term loans and overdrafts.

According to the 2021 audited financial statements, the Managing Director of Fidelity Bank, Ms. Onyeali-Ikpe Nnekachinwe; two executive directors, Hassan Imam Galadanchi and Kenneth Onyewuchi Opara; two non-executive directors, Kings Chukwu Akuma and Chidozie Bethram Agbapu, were related parties consisting of key management personnel who have access to loans and advances.

Others are; Reginald U. Ihejiahi, Ikemefuna A. Mbagwu, Ichie Nnaeto Orazulike, Chief Charles Chidebe Umolu, Okonkwo Nnamdi John, Odinkemelu Aku, Adegbolahan Simisola Joshua, Obaro Alfred Odeghe and Yahaya Umar Imam are all former Fidelity directors listed as staff of key direction.

With respect to the entity controlled by the key management personnel who obtained loans and advances, Mr. Ernest Ebi, President of the bank, outstanding loans and advances in seven entities comprising Agric Int’l Tech and Trade, Dangote Industries Limited, Dangote Fertilizer Limited, Dangote Oil Refining Company Limited, Dangote Cement Plc -Obajana Plant, Dangote Agro Inputs Limited and Dangote Sugar Refinery Plc, borrowings increased by 15.46% to N81.17 billion in 2021 vs. 70.3 billion naira in 2020.

Fidelity Bank thus reported a 31% drop in interest income in the entity controlled by key management personnel to N10.2 billion in 2021 from N14.74 billion reported in 2020, while income interest from loans and advances to related parties also decreased by 30.6% to 10.26 billion naira in 2021 from 14.78 billion naira in 2020.

Similarly, Sterling Bank increased its transactions of secured loans and advances with key management personnel to 600 million naira, an increase of 60.4% from 374 million naira in 2021, while Zenith Bank said loans and advances of N1.69 billion on insider-related transactions, an increase of 3.5%. of 1.63 billion naira in 2020.

As these three banks increased insider lending in FY2021, companies like Unity Bank, Wema Bank, Access bank, FCMB Group, UBA, GTCO, Stanbic IBTC Holdings reduced their exposure, following the adoption of the law on banks and other financial institutions. (BOFIA) 2020, among other banking matters.

The 2020 BOFIA Act prohibits a bank from lending more than 5% of its paid-up share capital to any of its directors or significant shareholders.

In addition, a bank’s overall exposure in terms of loans to its directors and significant shareholders must not exceed 10% of its paid-up share capital.

The law also provides that credit granted by a bank to one of its directors or significant shareholders must be subject to the same conditions as those in force at the time for comparable transactions of the bank with persons who are not directors. or shareholders of the bank.

According to Unity Bank’s 2021 financial statements, it reported a 29% drop in loans and advances to N5.35 billion in 2021 from N7.55 billion in 2020.

Access Bank’s internal transactions fell 88% to a sum of 268.2 million naira in 2021 from 2.23 trillion naira reported in 2020, while Wema Bank reported loans and advances related to insiders of 589 million naira in 2021 compared to 2.02 billion naira reported in 2020.

Stanbic IBTC Holdings and FCMB Group also reported declines of 50.4% and 56% in loans and advances related to directors and staff to N39.86 billion and N1.15 billion in 2021, respectively.

In addition, UBA reported N15.28 billion in loans and advances to key management personnel/related parties and insider credits in 2021, compared to N17.4 billion in 2020, while GTCO reported a 13% drop in its insider-related lending to N6.86 billion in 2021 from N7.86 billion in 2020.

GTCO in its audited financial statements said: “During the year, the Group granted various credit facilities to companies whose directors are also directors of the Company (Director Related) ‘or linked to a Key Management Personal ( Insider Related) at rates and terms comparable to other facilities in the Bank’s portfolio.

“A total of N6,853,722,000 (31 December 2020: N7,864,207,000) was outstanding on these facilities at the end of the year. The bank earned N10,258,000 (December 2020: N10,157,000) on insider related facilities during the year. »

During the public hearing on the BOFIA Amendment Bill, the Nigerian Deposit Insurance Corporation (NDIC) had submitted a memorandum to the Senate Banking, Insurance and Other Financial Institutions Committee, calling for an express ban on lending insiders in the banking sector.

In the memorandum, the NDIC proposed to criminalize insider lending by bank directors, making it an offense punishable by imprisonment and fines. The proposal was obviously rejected, as BOFIA 2020 allows insider lending.

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