Operating expenses for 10 Nigerian banks surged by 42.51% in 2023, reaching N3.23tn compared to N2.26tn the previous year, as reported by The PUNCH. This increase was primarily driven by rising personnel costs and other operating expenses, including IT and e-business expenses.
AccessCorp, Nigeria’s largest bank, saw its operating expenses climb by 38.85% to N697.53bn, with personnel costs accounting for a significant portion of the increase. Similarly, FBN Holdings reported a 46.83% jump in operating expenses to N534.34bn, while FCMB Group experienced a 35.64% increase to N154.44bn.
Fidelity Bank recorded a substantial 60.77% rise in operating expenses to N194.18bn, while Wema Bank’s operating expenses grew by 32.16% to N78.76bn, alongside Stanbic IBTC’s 29.41% increase to N166.81bn. GTCO and Zenith Bank also witnessed notable increases in their operating expenses.
Experts attribute the surge in operating expenses to factors such as inflationary pressure, naira devaluation, and upward salary reviews. Ayokunle Olubunmi, from Agusto & Co., emphasized the importance of managing operating expenses effectively to ensure profitability and competitiveness in the market.
Looking ahead, non-performing loans in Nigerian banks are expected to rise in 2024 due to economic challenges. To address this, measures such as improving credit risk management practices and enhancing regulatory oversight are recommended.
In response to the removal of fuel subsidy by the Federal Government, banks implemented pay raises for employees. Wema Bank PLC, GTCO, and Zenith Bank PLC were among those that increased salaries to mitigate the impact. Additionally, initiatives such as providing staff buses were introduced to support commuting employees.
Overall, the banking sector in Nigeria faces challenges in managing operating expenses amidst economic uncertainties, highlighting the need for strategic decision-making and investment in technology and employee training to meet customer demands and regulatory standards.
