Zenith Bank shareholders have expressed frustration over the excessive penalties imposed on business banks by regulatory authorities, significantly the Central Bank of Nigeria (CBN).
They argue that these fines, that are levied for varied infractions, not directly have an effect on shareholders’ returns, making a ripple impact on their funding.
Zenith Bank made a dividend fee of N4.00 per share, bringing the whole dividend for the 2024 monetary yr to N5.00 per share, with a complete worth of N195.67 billion.
Rising Penalties and Monetary Impression on Banks
Many banks have confronted important penalties for failing to adjust to the Banks and Different Monetary Establishments Act 2020 and varied CBN circulars.
- For example, Zenith Bank incurred N15.422 billion in penalties in 2024 for infractions associated to anti-money laundering critiques, international alternate violations, and regulatory breaches, amongst others.
- This represents a major enhance when in comparison with the N21 million it paid to the CBN as penalties in 2023.
- Access Bank Group paid N1.21 billion in penalties in 2024 for contraventions of the Banks and Different Monetary Establishments Act and CBN laws, up from N38 million penalty paid for associated offences in 2023.
- GT Bank, additionally one of many largest hit, paid N1.6 billion in penalties in 2024, an enormous enhance from N73 million paid the yr earlier than.
- UBA was fined N400 million for infractions in 2024, up from N110 million in 2023, whereas Sterling Bank’s penalty rose from N21 million in 2023 to N61 million on the finish of the 2024 monetary yr.
These penalties are compounded by the tax burden on banks, with the federal government gathering N1.2 trillion in taxes from simply 9 Nigerian banks in 2024, a 111.4% enhance in comparison with the earlier yr.
In distinction, shareholders acquired N951.4 billion in dividends, reflecting an 87% enhance from 2023.
Windfall Tax Liabilities Add to the Burden
The Finance (Modification) Act 2023 launched a windfall tax levy concentrating on income from international alternate transactions, additional straining banks.
Zenith Bank, GTCO, and UBA collectively incurred N172.3 billion in windfall tax liabilities in 2024, with expenses of N63.3 billion, N51.2 billion, and N57.9 billion, respectively.
These levies, mixed with regulatory penalties, have sparked considerations amongst shareholders, who argue that the monetary burden is in the end handed on to them and reduces their dividend payout.
Why the CBN fines banks
The Central Bank of Nigeria (CBN) imposes monetary penalties on banks to implement self-discipline, strengthen regulatory compliance, and safeguard the monetary system. These penalties aren’t arbitrary; they normally comply with breaches of established regulatory requirements.
- Whereas the banks didn’t particularly disclose the infractions that led to those fines, Nairametrics’ findings point out that almost all penalties revolve round 4 key areas.
- First are violations of anti-money laundering (AML) and counter-terrorism financing (CTF) laws. Banks are required to flag and report suspicious transactions, and failure to take action may end up in heavy sanctions because of the dangers posed to nationwide safety.
- Second is non-compliance with the money reserve requirement (CRR), which mandates banks to carry a portion of customer deposits with the CBN. Falling quick alerts weak monetary self-discipline and attracts direct debits from their accounts.
Third are breaches associated to the dealing with of international alternate transactions. These embody unauthorized gross sales, pricing irregularities, or documentation lapses — all of which threaten transparency within the FX market and might set off regulatory motion.
Lastly, normal regulatory lapses comparable to failures in customer safety, cybersecurity, or reporting requirements additionally appeal to fines. These frameworks are important to make sure client belief and system stability.
Via these enforcement actions, the CBN goals to make sure that banks function throughout the bounds of prudence and accountability, serving to to construct a safer and extra resilient monetary sector.
Shareholders’ Reactions
Shareholders have criticized the CBN’s stringent penalty regime, describing it as extreme and counterproductive.
Otunba Muktar, a shareholder, acknowledged in an interview with Nairametrics, “The penalties are too excessive. The CBN ought to situation warnings earlier than imposing fines. Penalizing banks for each minor infraction is harsh and unfair.”
Equally, Dr. Farouk Umar lamented the rising tax burden, saying, “The taxes and penalties have gotten insufferable. We pay company tax, withholding tax, schooling tax, and now windfall taxes. It’s an excessive amount of for companies and shareholders to bear.”
Okezie Boniface, one other shareholder, expressed frustration over the N15 billion penalty paid by Zenith Bank, including, “These fines are dragging establishments down. The regulatory setting is stifling development. If not for this N15 billion penalty, our dividend would have elevated above the N5 we had been paid per share”.
Banks Reply to Regulatory Challenges
Reacting to the considerations, Group Managing Director/CEO of Zenith Bank, Adaora Umeoji, acknowledged the challenges posed by regulatory fines.
Talking on the bank’s 2025 Annual Common Assembly, she acknowledged, “The fines are regulatory, and the CBN has elevated its monitoring and supervision of banks. We’re implementing measures to make sure compliance and keep away from future penalties.”
Umeoji assured shareholders that Zenith Bank is dedicated to prudent {and professional} practices to attenuate infractions and safeguard shareholder worth.
Requires Proactive Measures
Consultants have suggested administration of the banks to undertake proactive measures to forestall avoidable infractions and scale back publicity to penalties.
Funding knowledgeable, Abiodun Adedotun, stated buyers are certain to lift eyebrows if an organization incurs such an enormous penalty, because it signifies that there’s something the administrators aren’t doing proper.
“I feel the CBN is simply attempting to sanitize the banking system, and it’s as much as the banks to sit down up and abide by laid-down laws to forestall incurring these penalties,” he instructed Nairametrics.
“As a shareholder, information like this doesn’t sound good since you’re an investor. And in case your bank continues incurring such an enormous penalty yr after yr, you simply need to exit as a result of these penalties are doubtless affecting your dividend.”
Muktar famous, “If banks are cautious and articulate of their dealings, they will keep away from sanctions. Nevertheless, the CBN’s penalties stay excessively excessive, creating undue strain on monetary establishments.”
As the talk continues, stakeholders are urging the federal government and regulatory authorities to strike a stability between enforcement and equity, guaranteeing that penalties don’t stifle the expansion of Nigeria’s banking sector.
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