The combined operating expenses of 10 Nigerian banks surged by 42.51 percent to N3.23 trillion in 2023, up from N2.26 trillion the previous year.
This was based on the annual results of the financial institutions filed with the Nigerian Exchange Limited.
Financial institutions analysed include Access Holdings, FBN Holdings, Zenith Bank, United Bank for Africa, FCMB Group, Sterling Financial Holding, Fidelity Bank, Wema Bank, Stanbic IBTC and Guaranty Trust Holding Company.
According to Investopedia, an online investment education platform, an operating expense is an expense that a business incurs through its normal business operations.
It includes rent, equipment, inventory costs, marketing, staff expenses, insurance, step costs, funds allocated for research and development, and depreciation and amortisation.
In 2023, personnel costs and other operating expenses were the major drivers of the increase in the operating expenses of the lenders.
In the period under review, Nigeria’s largest bank, AccessCorp, saw its operating expenses grow by 38.85 per cent to N697.53bn from N502.36bn in 2022.
Explaining the increase, Holdco stated that its personnel cost increased by 43.97 per cent to N167.90bn from N116.62, due to an increase in wages and salaries.
Other operating expenses also went up to N465.67bn from N341.32bn, on the back of IT and e-business expenses, which rose to N78.05bn.
The 30.49 per cent rise to N68.81bn in the Asset Management Corporation of Nigeria surcharge that the group paid last year also contributed to the appreciation of its operating costs.
AccessCorp’s depreciation and amortisation costs stood at N63.96bn.
FBN Holdings’ unaudited results revealed that operating expenses jumped by 46.83 per cent to N534.34bn in 2023.
FCMB Group, according to its unaudited report for 2023, saw operating expenses rise by 35.64 per cent to N154.44bn, underpinned by higher personnel expenses.
The total expenses of Sterling Financial Holdings Company and subsidiaries, according to its condensed unaudited interim financial statements for 2023, rose by 25.26 per cent to N109.24bn.
Fidelity Bank reported a 60.77 per cent increase in its operating expenses to N194.18bn from N120.78bn in the prior year.
Wema Bank, which recorded a profit-before-tax growth of 196 per cent to N43.59bn in 2023 also grew operating expenses by 32.16 per cent to N78.76bn.
For Stanbic IBTC, operating expenses were up by 29.41 per cent to N166.81bn.
Also, the operating expenses of GTCO rose by 26.54 per cent to N250.42bn, on the back of personnel expenses and other operating expenses.
Zenith Bank Plc, in its newly released annual result, revealed that operating expenses increased by 32.31 per cent to N449.47bn, while UBA’s operating expenses rose by 68.99 per cent to N591.64bn from N350.09bn in the previous year.
Experts have linked the rise in lenders’ operating expenses to inflationary pressure, naira devaluation and upward salary reviews.
Speaking at the bi-monthly forum of the Finance Correspondents Association of Nigeria in Lagos recently, the Head of Financial Institutions Ratings at Agusto & Co., Ayokunle Olubunmi, said that managing operating expenses effectively was essential for banks to maintain profitability and competitiveness in the market while ensuring the delivery of high-quality services to customers.
