The Nigerian banking industry is facing an unprecedented challenge from the emerging fintech market that is rapidly fixing every friction in the payment business, especially cross-border payment frictions. The situation does not only scuttle the current growth of banks, it also threatens their future.
Nevertheless, while fintech remains a threat that the Nigerian banking industry needs a formula to neutralize, there is another situation that the banks have made a drastic decision to arrest.
In the first half of the year (H1’21), the Central Bank of Nigeria (CBN) raised the interest rate on one-year Treasury Bills (TBs) to 10.1%. The TB rate was 5.74% at the end of last year. This decision of the apex bank ignited a renewed preference by depositors to put their money in Treasury Bills as it becomes more profitable than leaving it in banks’ fixed deposits.
Tekedia Mini-MBA edition 14 (June 3 – Sept 2, 2024) begins registrations; get massive discounts with early registration here.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
With this development, the amount of available funds in bank deposits has greatly declined, prompting the banks to raise their rates for deposited funds.
Vanguard reports that Nigerian banks have raised deposit rates by 140% in a bid to attract more funds from customers and address the sluggish growth in deposit recorded in (H1’21).
According to the report, the financial statements of the 13 banks listed on the Nigerian Stock Exchange (NSE), show that customers’ deposits grew marginally by 6.6% to N34.13 trillion at the end of June this year from N32.02 trillion at the end of December last year, indicating a very sluggish growth as a result customers’ unwillingness to leave their money in bank deposit.
To entice depositors in order to increase banks’ deposit growth in the second half of the year (H2’21), banks needed to make them an attractive offer, which means raising the deposit rates.
Vanguard noted the latest report on Deposit and Lending Rates in the Banking Industry published by the CBN, where the average deposit rates of the top 13 banks rose by 140% to 5.3% on Friday September 17th from 2.2% at the end of December last year.
The 13 banks are Access Bank, Ecobank, FirstBank, FCMB, Fidelity Bank, GTBank, Stanbic IBTC, Sterling Bank, UBA, Union Bank, Unity Bank, Wema Bank and Zenith Bank.
The banks’ deposit rates according to the report
Zenith Bank leads the pack, lifting its average deposit rate by 2,450% to 4.75% in September from 0.22% in December. But in terms of growth in customers’ deposits, Zenith Bank came third, with 8.1% growth in deposit to N5.77 trillion at the end of June from N5.34 trillion at the end of December.
GTBank came second, raising its deposit rates by 4.57% to 5.57% in September from 1.0% in December. In terms of growth in customers’ deposit, GTBank came ninth with 4.0% growth in deposit to N3.63 trillion at the end of June from N3.51 trillion at the end of December.
In the third position is Fidelity Bank which raised the deposit rate by 4.50% to 5.5% from 1.0% during the nine months period. In terms of growth in customers’ deposits, Fidelity bank came 2nd with 16.5% growth in deposit to N1.98 trillion at the end of June from N1.7 trillion at the end of December.
Following the trend above, Access Bank, which raised its average deposit rate to 9.52% in September from 1.93% in December, indicating a 3.93% increase, took fourth position. Wema Bank on its part raised its average deposit rate to 4.94% from 1.47%, indicating a 2.36% increase during the nine months period. In terms of growth in customers’ deposits, Wema Bank occupied the 11th position with 0.05% growth in deposit to N808.9 billion at the end of June from N804.9 billion at the end of December.
Stanbic IBTC came 6th as it raised its deposit rate to 5.52% in September from 1.86% in December, indicating a 1.97% increase. Stanbic IBTC recorded the highest growth in customers’ deposits with 16.9% growth in deposit to N958.4 billion at the end of June from N819.9 billion at the end of December.
Ecobank occupied the 7th position. The bank raised its deposit rate to 9.67% from 3.5%, indicating 1.76% during the nine months period.
Union Bank also intensified its quest for customers’ deposits by raising its average deposit rate to 8.28% from 4.28%, indicating a 93% increase during the nine months period. In terms of growth in customers’ deposits, Union Bank occupied the 10th position with 3.6% growth in deposit to N1.17 trillion at the end of June from N1.13 trillion at the end of December.
Sterling Bank, on its part, raised its deposit rates to 9.77% in January from 7.15% in December, indicating a 37% increase. In terms of growth in customers’ deposits, Sterling Bank occupied the eight position with 6.7% growth in deposit to N1.02 trillion at the end of June from N951 billion at the end of December.
Despite slashing average deposit rate by 33% to 1.0 per cent in September from 1.5% in December, UBA recorded the fourth highest growth in customers’ deposit, with 7.4% growth in deposit to N6.09 trillion at the end of June from N5.68 trillion at the end of December.
Though FBN Holdco retained its average deposit rates at 0.15% during the nine months period, the bank group was able to record 4.1% growth in customers’ deposits to N5.1 trillion in June from N4.89 trillion at the end of December.
With the decision to review their deposit rates upward, the banks have set a bait to win depositors back, but also have set up a competition against the Treasury Bills.