Categories: Banking Sector

Zenith Bank, UBA, 5 Others Lead Profit Charge in H1 2023

Nigeria’s top seven most profitable publicly-listed companies have reported a total profit before tax of ₦1.89 trillion ($2.43 billion) in the first half of 2023.

The list includes United Bank for Africa Plc (UBA), Zenith Bank Plc, Guaranty Trust Holding Company (GTCO), FBN Holdings Plc, Access Holdings Plc, Dangote Cement, and MTN Nigeria.

What sets this trend apart from the global norm is the driving force behind these profits. Unlike the international landscape, where technology and oil companies typically lead in profitability, Nigeria’s financial institutions are dominating the scene.

Analysts attribute this unexpected surge in bank profitability primarily to revaluation gains from foreign exchange (FX) swaps and forwards with the Central Bank of Nigeria (CBN).

The catalyst for this extraordinary economic phenomenon can be traced back to President Bola Tinubu’s declaration on May 29, where he unveiled plans to unify exchange rates.

This announcement led to the Central Bank of Nigeria’s subsequent decision to implement a free-floating exchange rate system, causing the naira to depreciate by 40% against the dollar in June.

Consequently, the official exchange rate soared from ₦463.38/$ to ₦776.8/$, a significant transformation in the foreign exchange landscape.

However, while the banking sector thrives on these FX transactions, Nigeria’s manufacturing industry faces considerable challenges, with a surge in job losses.

Economist Kelvin Emmanuel points out the alarming imbalance in the nation’s economic landscape, emphasizing the need for measures to foster inclusive growth and address economic disparities.

Emmanuel calls for the government to decouple inflation as a tool for adjusting the Monetary Policy Rate (MPR), making credit more affordable for the real sector, particularly manufacturing.

He also stresses the importance of stabilizing the FX markets to provide businesses with easier access to essential raw materials, thus boosting production and bridging the gap between the flourishing banking sector and struggling manufacturing companies.

Moses Adeolubodun, an investor, echoes these sentiments, urging banks to focus on long-term strategies and diversification for sustainable growth, as overreliance on short-term FX gains can pose risks to the nation’s economic stability.

This unconventional profit trend underscores the pressing need for a comprehensive economic strategy that ensures balanced growth across various sectors, ultimately promoting the prosperity of all segments of the Nigerian economy.

Temitayo Olukoya

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Temitayo Olukoya

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