…MSMEs borrow at 29-35% rate at bank

One of Nigeria’s Tier-1 banks, Zenith Bank Plc, has lent N3.517 billion to its management staff at four percent interest rate, Economy Post can authoritatively report.

This was revealed in the bank’s second-quarter 2023 financial statement recently released to the Nigeria Exchange Limited (NGX).

At the start of the financial year in January 2023, Zenith Bank Group’s loans to the management staff stood at N3.245 billion. However, the bank granted an additional N272 million to them within the year, bringing the value of total loans to N3.517 billion.

So far, the bank’s management staff have repaid only N619 million, which is just 17.6 percent of the total obligation. Hence the current balance yet to be repaid by Zenith Bank’s management staff is N2.898 billion.

Zenith Bank granted most of the loans to its management staff to acquire land and build houses, while some were given to them as personal loans.

“Loans to key management personnel include mortgage loans and other personal loans. The loans are repayable from various repayment cycles, ranging from
monthly to annually over the tenor and have an average interest rate of 4%,” Zenith Bank admitted in its second-quarter financial statements.

“Loans granted to key management personnel are performing,” it further said.

Understanding the problem

The Central Bank of Nigeria (CBN)’s current monetary policy rate (MPR), which is the benchmark interest rate, stands at 18.75 percent. A benchmark interest rate determines other rates in the economy, meaning that banks cannot lend below the rate.

As at January 2023 when Zenith Bank’s loans to its management staff were put at N3.245 billion, the CBN’s MPR or benchmark interest rate was 17.5 percent. However, the bank had no problem granting loans to its management staff at four percent interest rate

Ordinarily, when a customer borrows loans from Zenith Bank or any other deposit money bank in Nigeria, the interest rate changes once the CBN benchmark rate changes. This means that customers who borrowed in January 2023 at 20 percent rate would have had their interest rates changed three times since then. This is because the CBN Monetary Policy Committee (MPC) has changed the MPR or benchmark rate three times since January.

Interestingly, Economy Post found that even when the benchmark rate has changed from 17.5 percent to 18 percent, and to 18.5 percent, and to 18.75 percent since January 2023, Zenith Bank’s interest rate to its management staff has remained the same – at four percent.

READ MORE HERE: https://www.economypost.ng/featured/knocks-as-zenith-bank-grants-n3-5bn-loans-to-mgt-staff-at-4-interest-rate/2023/09/25/

Hmmm!