Nigeria’s leading commercial banks have reported substantial foreign exchange (FX) revaluation gains, amassing a combined total of N3.37 trillion in 2023 and the first quarter of 2024. This windfall is primarily attributed to the devaluation of the Naira last year.**
These FX gains encompass both realized and unrealized amounts, as detailed in the banks’ financial statements for the 2023 fiscal year and Q1 2024. The banks involved include Access Holdings, FCMB, Fidelity, GTCO, Stanbic IBTC, UBA, and Zenith Bank.
Breakdown of FX Gains by Bank
GTCO: N844.450 Billion
GTCO topped the list with FX gains amounting to N844.450 billion for the 2023 fiscal year and Q1 2024. The bank’s 2023 FX gain of N345.070 billion significantly boosted its pre-tax profit, which surged by 184% year-over-year to N609.308 billion. This upward trend continued in Q1 2024, with an additional FX gain of N499.380 billion, leading to a substantial pre-tax profit of N509.349 billion. Notably, the 2023 FX gains for GTCO are reported as unrealized.
Zenith Bank: N828.675 Billion
Zenith Bank, a major player in Nigeria’s financial sector, reported FX gains of N638.98 billion in 2023 and N189.693 billion in Q1 2024. The bank’s profitability was further enhanced by significant increases in both interest and non-interest income, resulting in a pre-tax profit of N795.962 billion in 2023. This strong performance extended into Q1 2024, with a 270% year-over-year growth in pre-tax profit, reaching N320.194 billion.
Access Holdings: N748.159 Billion
Access Holdings reported substantial FX gains totaling N748.159 billion in 2023 and Q1 2024. The bank’s extensive international operations and effective currency management strategies have positioned it well to capitalize on FX market fluctuations. However, FX gains in 2024 appear to have slowed, achieving only 18% of the 2023 figure. Despite this, Access Holdings maintained robust profitability growth in both 2023 and Q1 2024.
UBA: N682.952 Billion
UBA recorded FX gains of N682.952 billion in 2023, representing an impressive 814% year-over-year growth compared to the N72.150 billion recorded in 2022. However, the bank experienced a sharp decline in Q1 2024, with FX gains dropping to N23.695 billion. This volatility underscores the unpredictable nature of FX markets. Despite the decline in FX gains, UBA’s pre-tax profit in Q1 2024 grew by 155% year-over-year to N156.344 billion.
FCMB: N116.443 Billion
FCMB reported a cumulative FX gain of N116.443 billion for 2023 and Q1 2024. In 2023, the bank achieved an FX gain of N86.307 billion, reflecting a year-over-year growth of over 1,000%. By the end of Q1 2024, FCMB reported an additional FX gain of N30.137 billion. The bank has confirmed that these FX gains are realized, contributing positively to cash flow and earnings stability.
Other Banks
Fidelity Bank and Stanbic IBTC also reported FX gains of N71.143 billion and N24.569 billion, respectively. These gains have significantly bolstered the banks’ financial performance, with robust earnings from both interest and non-interest income contributing to their growth.
Government’s Proposed Windfall Tax
As part of the Renewed Hope Agenda, the Federal Government has proposed amendments to the Finance Acts 2023 to introduce a one-time windfall tax on the FX gains realized by banks in their 2023 financial statements. This tax aims to fund capital infrastructure development, education, healthcare, and welfare initiatives. While this tax could promote economic stability and social welfare, it may also reduce banks’ net profits, impacting shareholders’ wealth.
Bottom Line
Nigerian banks have effectively navigated the challenges posed by the Naira devaluation, reaping substantial FX gains that have bolstered their financial positions. However, with the proposed windfall tax, these banks will need to adapt their strategies, manage costs, and ensure compliance to mitigate the financial impact and maintain investor confidence.
