Twelve Nigerian banks listed on the Nigerian Exchange Limited (NGX) reported a combined operating expense of N5.18 trillion in the first nine months of 2024, marking a 101.9% increase compared to N2.56 trillion during the same period in 2023. This surge was attributed to inflation, rising personnel costs, depreciation, and other operational expenses such as the deposit insurance premium and AMCON charges. Inflation in Nigeria, which rose to 34.60% as of November 2024, has further strained banks, driving up costs and eroding profitability. Leading the expenses were Ecobank Transnational Incorporated, United Bank for Africa, and Access Holdings, which reported significant year-on-year increases in operating costs.
Experts attribute the rising costs to Nigeria’s volatile foreign exchange market, escalating transportation expenses, and fiscal pressures. High inflation has impacted production costs, profit margins, and consumer purchasing power, creating challenges for businesses and citizens alike. Analysts believe these issues, compounded by global economic instability, are hindering banks’ profit generation and affecting dividend payouts to shareholders. Amid these conditions, financial institutions are facing difficulty maintaining efficiency and growth, as highlighted by rising cost-to-income ratios and increased expenses in critical areas like staffing and infrastructure.
The World Bank has also noted that global inflationary pressures, worsened by geopolitical conflicts such as the Russia-Ukraine war, have constrained Africa’s economic growth. These challenges have forced governments to make difficult fiscal choices, with high interest rates and debt burdens undermining progress on poverty alleviation. Industry experts warn that unless inflationary pressures subside, Nigerian banks and businesses may face sustained profitability challenges, impacting the broader economy and investor confidence.
