Nigeria’s leading commercial banks recorded significant FX revaluation gains, estimated at a combined total of N3.37 trillion in 2023 and Q1 2024, primarily due to the devaluation of the Naira last year.
These FX gains include both realized and unrealized amounts, as reported by the banks.
According to data collated from the 2023 FY and Q1 2024 financial statements released by the banks, these lenders are Access Holdings, FCMB, Fidelity, GTCO, Stanbic IBTC, UBA, and Zenith Bank.
Below is a review of the banks’ foreign exchange gains for 2023 and Q1 2024.
GTCO – N844.450 billion FX Gains
GTCO recorded the highest FX gain among Nigerian banks, totalling N844.450 billion for the 2023 FY and Q1 2024.
This significant gain greatly contributed to the bank’s profitability during these periods. In 2023, GTCO reported an FX gain of N345.070 billion, which played a crucial role in the 184% year-over-year growth in pre-tax profit, reaching N609.308 billion.
This positive trend continued in Q1 2024, with an additional FX gain of N499.380 billion, representing about 144.72% of the full-year 2023 FX gains, and leading to a substantial pre-tax profit of N509.349 billion. According to the bank’s financial notes, the FX gain for 2023 is unrealized.
Zenith Bank Plc – N828.675 billion
Zenith Bank Plc, one of Nigeria’s largest financial institutions, has effectively capitalized on FX market dynamics.
The bank reported FX gains of N638.98 billion in its 2023 financial statements and an additional N189.693 billion in Q1 2024.
While the bank attributed its earnings and profitability growth to significant increases in interest and non-interest income, the results also reflect substantial contributions from FX gains, though the bank did not classify if the FX gains were realized or unrealized.
In 2023, Zenith Bank recorded a pre-tax profit of N795.962 billion, the highest among Nigerian banks. This strong performance continued into Q1 2024, with a 270% year-over-year growth in pre-tax profit, reaching N320.194 billion.
Access Holdings – N748.159 billion FX gains
Access Holdings recorded substantial FX gains in its 2023 financial report. The group recorded the third-highest FX gains of N748.159 billion in 2023 FY and Q1 2024.
The bank’s extensive international operations and effective currency management strategies have positioned it to benefit from FX market fluctuations.
The FX gains in 2023 were impressive, but they appear to have slowed in 2024, having achieved 18% of the 2023 FY figure. The Group remains strong with a tipple-digit growth in profitability both in 2023 and Q1 2024.
United Bank for Africa – N682.952 billion FX gains
Though UBA did not specify whether the FX gains were realized or unrealized, the sharp decline in Q1 2024, reporting only N23.695 billion, highlights the volatility and unpredictability of FX markets and their significant impact on the bank’s financial performance.
The Q1 2024 figure is a stark contrast to the substantial N659.257 billion reported in 2023, which represents an impressive 814% year-over-year growth compared to the N72.150 billion recorded in 2022.
The sharp decline in UBA’s FX gains in Q1 2024 could be more concerning if the prior gains were largely unrealized, as it suggests that the previous paper gains did not convert to actual cash flows and could be subject to reversal.
However, profitability growth remains healthy. In Q1 2024, pre-tax profit grew by 155% YoY to N156.344 billion, though just 21% of 2023 pre-tax profit of N757.680 billion; up 277% YoY.
First City Monument Bank (FCMB) – N116.443 billion FX Gains
FCMB reported a cumulative FX gain of N116.443 billion for 2023 and Q1 2024.
In 2023, the bank reported an FX gain of N86.307 billion, representing an impressive year-over-year growth of over 1,000%. By the end of Q1 2024, it had achieved approximately 30% of the 2023 figure, with an FX gain of N30.137 billion. According to the bank, these FX gains have been realized.
FCMB’s reported realized FX gains of N116.443 billion for 2023 and Q1 2024 indicate strong financial performance with immediate positive impacts on cash flow, earnings stability, and investor confidence.
Its profitability growth has continued to impress, showing 185% YoY growth in 2023 and 193% YoY growth in Q1 2024.
Other banks under review, including Fidelity Bank and Stanbic IBTC, reported FX gains of N71.143 billion and N24.569 billion, respectively.
While these FX gains have significantly boosted the banks’ bottom lines, some of the banks attribute their growth to robust earnings from both interest and non-interest income.
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 foreign exchange gains realized by banks in their 2023 financial statements. This tax aims to fund capital infrastructure development, education, healthcare, and welfare initiatives.
While the one-time windfall tax could promote economic stability and social welfare, it will also reduce banks’ net profits, impacting their bottom lines and shareholders’ wealth.
Banks will need to adapt their strategies, manage costs, and ensure compliance to mitigate the financial impact and maintain investor confidence.
