Fidelity Bank classifies loans granted to 2 ex-directors as lost

.As staff obtain credit at 3.5%

FIDELITY Bank classified loans granted to 2 of its ex-directors as ‘lost’ as at the end of the 2024 financial year. The loans were granted to ex-directors, Ms Onome Olaolu and Mr Ik Mbagwu, according to the bank’s 2024 full-year financial statement seen by Economy Post.

The Central Bank of Nigeria (CBN) Prudential Guidelines describes a lost loan as one which is not repaid 360 days after pledging to do so. In other words, the Fidelity Bank loans were granted to the former directors but they did not repay them as promised.

Ms Olaolu’s Cy Incorporated Nig Ltd was granted finance lease/overdraft, which stood at N321.580 million as at the end of 2024. Similarly, Mr Mbagwu’s Equipment Solutions And Logistics Services Ltd got a term loan/overdraft, which stood at N767.029 million by the end of December 2024. Though their collaterals were perfected, the loans were not repaid, according to the bank.

Ms Olaolu’s interest on the lost loan stood at N8.493 million by December 2024, but Mr Mbagwu’s interest was not in the financial statement of the bank. Interest is the charge for borrowing money, according to Investopedia, a finance platform.

READ ALSO: Fidelity Bank grants loans to staff at 3.5% but lends to manufacturers at 36%

Low interest rate

Fidelity Bank did not state the rate at which the ex-directors obtained the loans. However, there was a clue from the bank’s financial statement, where it was clearly stated that the staff themselves obtained loans at a very low single-digit rate.

“The loans are repayable from various repayment monthly cycles over the tenor and have an average interest rate of 3.5%,” Fidelity Bank said, of staff loans.

Fidelity Bank staff’s loans stood at N14.698 billion as at the end of 2024 as against N14.117 billion in the corresponding period of 2023. Loans totalling N14.322 billion were granted during the 2024 financial year, but only N6.253 billion was repaid. The repaid loans also included credit extended to the staff in the previous year that was repaid, Economy Post found.

Divisional Head, Brand & Communications, Mr Meksley Nwagboh, did not respond to questions regarding why the 2 directors did not repay the loans granted them, and why the staff loans were taken at 3.5 percent interest rate, whereas customers get loans at much higher interest rates.

Fidelity Bank loans

With Fidelity Bank staff getting loans at 3.5 percent rate and the 2 directors unable to repay their credit, leading to the classification of their loans as lost, Economy Post dived into the financial institution’s cost of loans.

The bank, which is in between tier-1 and tier-II, lent to manufacturers at 36 percent in between 2024 and early 2025, according to the Central Bank of Nigeria (CBN). Nigerian manufacturers struggle to have access to credit for expansion as banks like Fidelity lend to them at 36 percent or more but grant credit to staff at 3.5 percent or below 10 percent.

READ ALSO: Jaiz Bank classifies loans granted to director as doubtful, substandard

Economy Post found old lending rates for individual and small business loans on Fidelity Bank’s website. Most of the bank’s personal loans are granted at 24 percent interest rate, plus 1 percent management fee and 1.5 percent insurance rate, making it 26 percent. However, this was an old rate before the Central Bank of Nigeria (CBN)’s monetary policy rate (MPR) hikes.

Ordinarily, the CBN’s monetary policy rate (MPR), also known as the benchmark interest rate, determines what banks charge on loans. Commercial or deposit money banks claim they must charge rates above the MPR to make profits. The MPR currently stands at 27.50 percent, meaning, according to them, they won’t make real profits if they charge below the MPR. By that logic, it is impossible for Fidelity Bank or any other bank to charge rates below 27.50 percent.

Insiders told Economy Post that Fidelity Bank’s other loans range from 35 percent to 40 percent, just like many of its peers. Zenith Bank grants credit to key management personnel at 4 percent as Access Bank does the same at 8 percent rate, Economy Post earlier reported.