In 2023, Nigeria’s leading tier-one banks—Zenith Bank, United Bank for Africa (UBA), and Guaranty Trust Bank (GTB)—witnessed a substantial increase in profits from their foreign operations, fueled by the performance of their African subsidiaries. Collectively, these banks recorded ₦477.45 billion in profit after tax from international operations, marking a remarkable 307% growth compared to ₦117.19 billion in 2022.
This foreign income accounted for 23.8% of their total profits in 2023, a notable rise from the 18.8% contribution in the prior year. The total profit after tax for the three banks combined reached ₦2.01 trillion, a significant leap from ₦624.93 billion in 2022. The growth was supported by a high-interest rate environment aimed at curbing inflation and the naira’s devaluation due to its floatation.
Breakdown of the Banks’ Foreign Profit Contributions
- Guaranty Trust Bank (GTB):
- GTB posted a total profit after tax of ₦539.64 billion in 2023.
- ₦423.83 billion came from domestic operations, while subsidiaries in other African countries contributed ₦105.64 billion.
- Subsidiaries outside Africa generated ₦10.16 billion.
- This represents a significant turnaround from 2022, where the bank’s foreign operations in Africa and beyond collectively yielded a loss of ₦1.58 billion.
GTB operates subsidiaries in countries such as Ghana, Kenya, Sierra Leone, Rwanda, The Gambia, and the United Kingdom.
- United Bank for Africa (UBA):
- UBA achieved ₦777.08 billion in overall profits in 2023, with ₦503.6 billion coming from Nigerian operations.
- Its African subsidiaries contributed ₦185.30 billion, a 159% improvement from ₦71.67 billion in 2022.
- Subsidiaries outside Africa brought in ₦88.18 billion, up from ₦20.95 billion the previous year.
- Zenith Bank:
- Zenith Bank’s total profit for 2023 stood at ₦691.03 billion, with ₦602.86 billion generated domestically.
- The bank’s African subsidiaries earned ₦51.18 billion, a stark reversal from the ₦16.55 billion loss recorded in 2022.
- Its subsidiaries outside Africa added ₦36.99 billion, a 127% increase from the ₦16.26 billion achieved in the previous year.
Regulatory Mandates and Capital Requirements
The Central Bank of Nigeria (CBN) recently issued a directive requiring banks with international banking licenses to raise their minimum paid-up share capital to ₦500 billion. This policy aims to strengthen the capital base of these banks, ensuring their stability and competitiveness in the global financial market.
To meet this requirement:
- GTB needs to raise an additional ₦361.81 billion.
- UBA must secure ₦384.19 billion.
- Zenith Bank requires ₦229.75 billion to comply.
This directive underscores the apex bank’s focus on enhancing the resilience of Nigeria’s financial institutions amidst evolving global economic challenges.
Implications of Growth in Foreign Earnings
The substantial increase in foreign earnings reflects the strategic importance of African subsidiaries in driving the profitability of Nigerian banks. By expanding their presence across the continent, these financial institutions have been able to diversify income streams and mitigate domestic economic challenges.
However, the requirement to meet higher capital thresholds presents both an opportunity and a challenge. While it pushes banks toward greater financial soundness, it also demands significant resource mobilization to meet regulatory expectations.
As the deadline for compliance looms, these banks are expected to leverage their robust profit growth to strengthen their capital base, ensuring they remain competitive players on the international stage.
