The recently released Central Bank of Nigeria (CBN) report has indicated the level of losses incurred by the apex bank. These losses come in the form of expense loaded intervention, foreign exchange and credit related loses
A key feature of the expenses was N888.3 billion incurred by the apex bank as “other operating expenses” during the year (N884.2 billion in 2021).
When this amount is further analysed it was discovered that almost half of the expenses N346.2 billion were losses arising from foreign exchange revaluation losses. Also included is another N155.5 billion incurred as “rebate expenses” which the apex bank explained was connected to RT 200 and Naira4Dollar, a policy under CBN led Godwin Emefiele to attract forex inflows.
For example, the RT 200 allowed the apex bank to pay exporters an incentive for repatriating their dollars.
The Rebate expenses represent expenses incurred by the CBN in connection with the RT200 and Naira 4 Dollar schemes which the Bank introduced to enhance foreign currency inflow, diversify the sources of FX inflow, increase the level of non-oil exports, ensure stability and sustainability of FX inflows, and support export-oriented companies to expand their export operations and capabilities.
The Bank stated it incurred N137 billion in 2022 on the RT200 scheme and In 2021 Naira 4 Dollar expense was N4 billion. This policy has since been dropped since the unification of the naira was announced.
FG Expenses: Another major expense item reported by the central bank and included in the “other operating expense” was N125 billion (N45 billion in 2021) which it incurred in connection to national security, the federal government, and security agencies. While the expenses are actually an extension of loans to the federal government, it is expensed on the FG repays the loans
intervention activities expenses represents expenses carried out by CBN in connection with national security, federal government, state securities, armed forces, financial sector capacity building where there is important need for the fund. All payments made in relation to intervention activities embarked on by the Group are expensed as incurred. However, payments made by the Group in relation to intervention activities on behalf of the Federal Government are recognized as receivables and are fully impaired after 12 months if the amount is not received from the Federal Government.
Credit Losses: The apex bank also reported a whopping N875.2 billion in credit losses almost double the N498.2 billion reported a year earlier.
This suggests most of the interest earned was dented by impairment on its loans.
The apex bank did not break down which of its borrowers have or are defaulting. However, its balance sheet shows a total loan of about N31.4 trillion.
The apex bank’s balance sheet expanded by about N22 trillion from N35.5 trillion in 2018 to about N57.9 trillion in 2022.
However, the Central Bank of Nigeria released its long-awaited audited accounts for the year ended December 2022 showing it made a profit after tax of N103.8 billion up from N75.1 billion reported a year earlier.
The results which are published on the website of the apex bank included audited results for 2016, 2017, 2018, 2019, 2020, and 2021.
The results also show it reported a profit after tax every year for the last 8 years consecutively despite facing currency depreciations and doling out intervention funds, and loans to the government amongst other development finance activities.
Until now, the results have been withheld from the public under Godwin Emefiele. However, the recent decision of President Tinubu to investigate the apex bank’s operations under the suspended CBN Governor may have triggered the release of the financial statements.
The latest result which was signed by Godwin Emefiele and audited by EY and KPMG shows the apex bank has relied on a combination of higher interest income, fees, and commissions to remain profitable.
A cursory analysis of the results shows the apex bank earned a net interest income of N1.8 trillion compared to N1 trillion a year earlier representing an 80% surge in net interest income.
Net operating income was N1.2 trillion compared to N1.1 trillion same period in 2021. Total operating expenses also rose from N1.1 trillion in 2021 compared to N1.2 trillion in 2022.
Ways and Means Income Surge: A major source of interest income was from loans and advances in the form of overdrafts given to the federal government.
The loans totaling N23 trillion and also known as “Ways and Means” generated interest of N1.9 trillion for the apex bank compared to N1.2 trillion in the prior year.
The controversial loan has been criticized for its size and flouting of the central bank act that only allows the apex bank to lend a maximum of 5% of prior year FG revenues to the government.
According to the audited accounts of the apex bank, the Ways and Means provision is priced at a whopping MPR+3%.
“Included in interest income on Loans and receivables is interest income on Overdraft facility granted to the Federal Government amounting to N1.9 trillion (2021: N1.2 trillion). The interest rate applied on this facility is MPR+3%.” CBN
The apex bank’s results also show it earned an additional N247 billion and N156 billion from AMCON and via FGN Securities respectively.
The apex bank also reported another N422.7 billion in income derived from “debt instruments measured at fair value through profit and loss (FVTL). FVTL is a way companies account for certain investments they own. Instead of noting the investment’s original cost, the company regularly updates the investment’s value to reflect its current market price.
This method ensures that the financial statements reflect the most up-to-date value of the investment.
Forex Income: Rounding up its major income sources was N104.5 billion incomes earned from commissions from the sale of foreign currency and other related transactions.
The apex bank earned N15.9 billion from processing currency, Bureau de Change application and registration, commission on fund transfers, and other banks and financial institutions’ application and licensing fees.
