Banks Realise N2.08trn Income From Government Bonds, Treasury bills

The five largest banks in Africa’s most populous nation have enjoyed easy money as they made money from investment in securities such as government bonds and treasury bills, which helped add impetus to earnings.

Of course, these lenders had enough liquidity to invest in these classes of assets when the yields were low, and now it’s bumper harvest as yields have skyrocketed on the back of an aggressive monetary policy of the central bank.

Zenith Bank Plc, FBN Holdings Plc, Access Bank Corp Plc, United Bank for Africa (UBA) Plc, and Guaranty Trust Holdings (GTCO) Plc, collectively realised N2.08 trillion from income on investment securities, which is 144.50 percent higher than 2022’s N851.16 billion, according to data gathered by MoneyCentral.

It is important to note that yields in the debt market have been rising in congruence with spiraling interest rates as the Russia and Ukraine war that ballooned the price of grains and crude oil aggravated inflation.

The Nigeria 10 year government bond has a 19.707 percent yield, according to data from World Government Bonds.

Nigeria’s central bank raised its monetary policy rate by 200 basis points to 24.75 percent from 22.75 percent as the bank continued a tightening to head off soaring inflation.

This followed its largest rate hike in around 17 years in February, when the bank raised the rate by 4 percentage points to try to get price pressures under control.

Nigeria’s annual inflation rate soared to a fresh 1996-high of 31.7 percent in February 2024, up from 29.9 percent in January and above market forecasts of 31 percent, mainly due to the effects of oil subsidy removal and devaluation of the naira.

Big banks are ingenious to take advantage of monetary policies to magnify their earnings, but the small lenders earn meagre income from investment securities because they don’t have a strong liquidity base.

A breakdown of the figures per banks shows Zenith Bank earned N390.93 billion from income from government bonds and treasury bills; Access Corp, N731.50 billion; GTCO, N182.28 billion; First Bank Holdings, N271.20 billion, and UBA,  N505.23 billion.

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