By Milcah Tanimu
Top officials and key management personnel of Deposit Money Banks (DMBs) in Nigeria collectively obtained approximately N549 billion in loans from their respective institutions over a span of five years. The PUNCH conducted an analysis of annual reports filed by banks with the Nigerian Exchange Limited between 2019 and 2023, revealing this significant figure.
However, there was a notable decrease in loans and advances to directors and key management personnel, as well as related party transactions, in 2023. This decrease, amounting to N52.40 billion across eight financial institutions, compared to N111.31 billion in 2022, signifies a 52.92% decline within one year.
The financial institutions reviewed in the 2023 analysis include 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 decline coincided with the introduction of new corporate governance guidelines by the Central Bank of Nigeria (CBN), effective from August 1, 2023.
Under these guidelines, banks are mandated to establish policies regarding insider trading and related party transactions, ensuring compliance through internal review mechanisms. Additionally, directors whose facilities remain nonperforming for over a year are to be removed from the board and blacklisted from serving on boards of other financial institutions without prior CBN approval.
Fidelity Bank Plc experienced the most significant decline in loans to related parties and entities controlled by key management personnel, dropping from N92.31 billion in December 2022 to N2.09 billion by the end of 2023. The bank attributed this decline to the exit of certain related parties, such as A-Z Petroleum Limited, Dangote Group, and Genesis Group, in line with CBN requirements.
In 2022, total insider loans across ten banks amounted to N131.04 billion, with Fidelity Bank leading at N92.31 billion, followed by Unity Bank at N17.32 billion, and UBA at N13.74 billion. By 2023, this figure decreased to N52.40 billion across eight institutions.
Financial analysts have weighed in on this trend, emphasizing the importance of transparency, diligence, and adherence to corporate governance standards. While insider loans are not inherently problematic, proper disclosure and performance monitoring are crucial to mitigate risks and maintain investor confidence in the banking sector.
