These transactions dropped to N52.40bn for eight financial institutions compared to N111.31bn in 2022, indicating a 52.92 per cent decline in one year.
Commercial banks' annual reports filed with the Nigerian Exchange Limited between 2019 and 2023 revealed that directors, senior executives, and other key management personnel borrowed approximately N549 billion from their financial institutions over five years.
An in-depth analysis of these reports by The PUNCH revealed this, revealing that the banks’ loans and advances to some directors and key management personnel as well as related party transactions dropped significantly in 2023.
These transactions dropped to N52.40bn for eight financial institutions compared to N111.31bn in 2022, indicating a 52.92 per cent decline in one year.
The 2023 review includes Access Holdings, Guaranty Trust Holding Company Plc, Zenith Bank Plc, United Bank for Africa, Fidelity Bank, Wema Bank, Stanbic IBTC Holding Plc, and the FCMB Group.
This fall coincided with the introduction of new corporate governance norms by the Central Bank of Nigeria, which entered into effect on August 1, 2023.
According to the apex bank, the guidelines imposed on the bank board and executive compliance officers by the circular dated July 13, 2023, and signed by the Director, Financial Policy and Regulation Department, Chibuzo Efobi, supersede all previous codes, circulars, and related directives.
The CBN guidelines on related party transactions said, “Banks shall establish a policy concerning insider trading and related party transactions by directors, senior executives, and employees, as well as publish the policy or a summary of that policy on their website.
“The policy shall contain appropriate standards and procedures to ensure it is effectively implemented. In addition to the requirements in Section 22.2, there shall be an internal review mechanism carried out by the internal audit function of the bank, to assess the compliance and effectiveness of the policy.
“22.4 Any director whose facility or that of his/her related interests remains nonperforming in any financial institution for more than one year shall cease to be on the board of the bank and shall be blacklisted from sitting on the board of such bank and that of any other financial institution under the purview of the CBN.
“22.5 No director-related loans and/or interest thereon shall be written off without the CBN’s prior approval.”
Fidelity Bank Plc led the field in terms of significant declines in loans to related parties and companies controlled by senior management staff, dropping from N92.31 billion at the end of December 2022 to N2.09 billion at the end of last year.
In footnotes, the bank however said that some of the related parties like A-Z Petroleum Limited, Dangote Group and Genesis Group as of 31 December 2022, had “exited the related party relationship post 2022 financial year in line with CBN requirement.”
In 2022, the total value of insider loans for 10 banks including Access Holdings, Guaranty Trust Holding Company Plc, Zenith Bank Plc, United Bank for Africa, Fidelity Bank, Wema Bank, Stanbic IBTC Holding Plc, FCMB Group, Unity Bank and Sterling Bank amounted to N131.04bn.
Fidelity Bank led the highest for the year, followed by Unity Bank at N17.32bn and UBA at N13.74bn.
In 2021, the loans to related parties of these financial institutions rose to N139.16bn with Fidelity Bank and UBA leading at N97.73bn and N15.28bn, respectively. GTCO trailed in third position with N6.859bn.
Between 2019 and 2020, a total of N226.6bn was disbursed as loans. In 2019, eleven banks borrowed its key management personnel a total sum of N29.65bn. The figure also includes loans to companies related to the directors.
An analysis showed that GTCO lent N155m, Zenith Bank (N1.76bn), UBA borrowed its directors N297m, Wema Bank (N5.2bn), Stanbic IBTC (N95m), FCMB (N4.8bn), Unity Bank(N7.14bn), Sterling Bank (N10.12bn) to related parties.
In 2020, the figure increased by 564 per cent or N167.32bn to N196.97bn.
Checks showed that Access Bank lent the highest with a total of N174bn to its directors and companies related to them. This was followed by Unity Bank with N7.55bn. Third on the list was Sterling Bank with N6.01bn.
Other banks including Fidelity borrowed its directors N986.2m, GTBank (N67.9m), Zenith Bank (N1.797bn), UBA (N206m), Wema Bank (N2.82bn), Stanbic IBTC (N332m), FCMB (N3.2bn), Unity Bank (N7.55bn), Sterling Bank (N6.01bn).