ZENITH Bank is charging manufacturers 38.5 percent interest rate on loans but allows its key management personnel to collect credit at 4 percent.
Economy Post has consistently reported that Zenith Bank‘s key management personnel, including directors and managers, get loans from the tier-1 bank at 4 percent interest rate but charges much higher to small businesses and manufacturers who are the key drivers of the Nigerian economy. The bank failed to explain why the trend has persisted.
The bank increased its interest rate for manufacturers’ loans from 30 percent in 2021 to 38.5 percent in the first quarter (Q1) of 2025, according to data by the Central Bank of Nigeria.
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Zenith Bank is competing with First Bank whose cost of loans over the period was 36 percent; Sterling Bank which charged 37 percent to manufacturers when they came seeking loans; and Fildelity Bank whose loans cost manufacturers 36 percent over the period. It is also competing with FCMB and Rand Merchant Bank which charged manufacturers 45 percent and 44.5 percent over the period.
As at the end of 2024, Zenith Bank’s key management personnel owed the bank N578 million as against N2.850 billion in the corresponding period of 2023has .
Zenith Bank 4% interest rate
Zenith Bank charged its key management personnel 4 percent on loans, according to its 2024 full-year financial statement. “Loans to key management personnel include mortgage loans and other personal loans. The loans are repayable from various repayment cycles, ranging from monthly to annually over the tenor and have an average interest rate of 4%. Loans granted to key management personnel are performing,” the bank said in its statement.
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As at the third quarter of 2023, the bank lent to its key management personnel at 4 percent rate. The statement from the bank’s financial statement had read, “Loans to key management personnel include mortgage loans and other personal loans. The loans are repayable from various repayment cycles, ranging from monthly to annually over the tenor and have an average interest rate of
4%. Loans granted to key management personnel are performing.”
The bank has continued to charge its senior managers and directors 4 percent interest despite criticisms from the business community who can’t get cheaper loans to fuel their business.
Small businesses struggle
As the key management personnel have access to credit at the bank at 4 percent interest, small businesses obtain the same facility at extremely high rate. A Zenith Bank micro, small and medium enterprises (MSME) loan meant for women attracts an interest rate of 27 percent. Tenor of the loan is 12 months. There is also a management fee of 0.5 percent to one percent to be paid before a small business owner can access the loan.
The 27 percent, however, has been on the bank’s official website for more han two years. Many believe it has been raised.
Benchmark rate
Bankers often claim that interest rates are negotiable without telling the public about the intrinsic cost of funds. Basically, banks raise interest rates for their customers, including for loans borrowed earlier, once the Central Bank of Nigeria (CBN) increases the benchmark interest rate, otherwise known as the monetary policy rate (MPR).
Hence banks’ interest rates are decided by the CBN’s MPR. However, the financial institutions violate this rule while lending to their managers and directors.
The CBN-led Yemi Cardoso raised the MPR from 18.75 percent of the pre-Godwin Emefiele era to 22.75 percent on February 27, 2024. It was later increased to 24.75 percent on March 26, 2024, increasing the cost of borrowing in Africa’s largest most populou nation. The rate was further revved to 27.5 percent last year, with the CBN retaining it till today.
READ ALSO: Zenith Bank lends to insiders at 4% interest rate, but SMEs pay 27%
However, loans borrowed by Zenith Bank chiefs were obtained at 4 percent without recourse to the intrinsic cost of funds in the country. Hence the cost was the same irrespective of what the MPR said.
“We have spoken about this rate for some time now. All I have said is that if you can give loans at 4 percent to your managers and directors, ensure you give MSMEs and manufacturers loans at 10 percent to 15 percent. This is only fair as they are the real owners of the funds in the banks,” said Chief Executive Officer of Lagos-based Jasen Fashions, Ms Jane Idemudia.
A former staff member of a Tier-1 bank, Mr Otienne Maxwell, said: “If a bank decides that four percent is good for its staff, it is no problem. However, it is absolutely wrong to give out depositors’ money at four percent rate when the repo or benchmark rate is 27.5 percent. I know that it is often meant to compensate senior staff or directors for their efforts, but it is now ridiculously low,” he added.
