The long-awaited audited accounts for the year that ended in December 2022 have been published by the Central Bank of Nigeria (CBN).
These records reveal that the bank made a profit of N103.8 billion after tax, which is an increase over the N75.1 billion profit that was declared the previous year.
The audited results for 2016, 2017, 2018, 2019, 2020, and 2021 were included in the results that were published on the website of the central bank’s highest authority.
Despite suffering currency depreciations, doling out intervention money, and loans to the government, amongst other development finance activities, the results of the apex bank reveal that it has recorded a profit after tax every year for the last eight years in a row. This is the case despite the fact that it has been reporting profits every year for the past eight years.
Under Godwin Emefiele’s leadership, the results have been kept secret from the public up until this point. The release of the financial statements may have been precipitated by President Tinubu’s recent decision to investigate the activities of the apex bank while the CBN Governor was suspended. This decision was made recently.
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Specifics regarding the outcomes
According to the most recent results, which were signed by Godwin Emefiele and certified by both EY and KPMG, the top bank has maintained its profitability through a combination of increased interest income, fee income, and commission income.
A quick examination of the data reveals that the central bank brought in a net interest revenue of N1.8 trillion, which represents an increase of 80% when compared to the net interest income of N1 trillion that it brought in the previous year.
In comparison to the same period in 2021, the net operating income was N1.2 trillion, up from N1.1 trillion. In addition, total operational expenses increased from N1.1 trillion in 2021 to N1.2 trillion in 2022, reflecting a 12% increase.
How CBN makes profits
The federal government received loans and advances in the form of overdrafts, which resulted in a significant amount of interest income for the government.
The interest on the loans, which totaled N23 trillion and are also referred to as “Ways and Means,” brought in N1.9 trillion for the apex bank, which is an increase from the N1.2 trillion that was brought in the year before.
The contentious loan has been criticised for both its size and the fact that it flouts the central bank act, which states that the apex bank may only lend the government a maximum of five percent of the previous year’s income from the FG.
The apex bank’s audited financial statements reveal that the MPR plus 3 percentage points is added to the cost of the Ways and Means provision.
CBN remarked: “Included in interest income on Loans and receivables is interest income on Overdraft facility granted to the Federal Government amounting to N1.9 trillion (2021: N1.2 trillion). The interest rate applied on this facility is MPR+3%.”
The figures also show that the apex bank got an additional N247 billion and N156 billion, respectively, from AMCON and via FGN Securities.
Additionally, the central bank declared an additional income of N422.7 billion that was generated through “debt instruments measured at fair value through profit and loss (FVTL)”. FVTL is a method that businesses use to account for certain investments that they own. The value of the investment is routinely updated by the company to reflect the current price of the investment on the market. The company does not record the investment’s initial cost.
By using this approach, one may be certain that the financial statements will accurately reflect the most recent value of the investment.
CBN benefitted from Forex
Commissions earned from the sale of foreign currency and other activities related to it contributed N104.5 billion to the company’s total revenue, making it one of its primary sources of income.
Another N15.9 billion was made through the processing of currency, the application and registration for a Bureau de Change, the commission on fund transfers, and the application and licencing fees collected from other banks and financial organizations.
Losses incurred
But at the same time as the central bank’s income soared as a result of the extension of loans to the federal government and from transactions in foreign currency,
It also faced enormous expenses as a result of impairments in foreign currency and loans.
The apex bank incurred N888.3 billion in “other operating expenses” during the course of the year (this number was N884.2 billion in 2021). This was a significant component of the total expenses.
A breakdown of the sum reveals that close to half of the expenses (N346.2 billion) were losses resulting from changes in the value of the currency that was being traded.
Another N155.5 billion was spent as “rebate expenses,” which the central bank claimed was tied to RT 200 and Naira4Dollar, policies implemented by the CBN led by Godwin Emefiele to stimulate foreign exchange inflows.
These expenses are also included in the total.
For instance, the RT 200 made it possible for the apex bank to offer exporters a financial incentive to bring their dollars back home.
CBN reports explained that: “Rebate expenses represent expenses incurred by the CBN in connection with the RT200 and Naira 4 Dollar schemes which the Bank introduced to enhance foreign currency inflow, diversify the sources of FX inflow, increase the level of non-oil exports, ensure stability and sustainability of FX inflows, and support export-oriented companies to expand their export operations and capabilities.”
Another significant expense item that was reported by the central bank that was included in the “other operating expense” was N125 billion ($45 billion in 2021), which was spent on matters pertaining to national security, the federal government, and security agencies. This expense was incurred by the central bank.
Although the costs are technically an extension of loans to the federal government, they are recorded as expenses because the federal government is responsible for repaying the loans.
“Intervention activities expenses represents expenses carried out by CBN in connection with national security, federal government, state securities, armed forces, financial sector capacity building where there is important need for the fund. All payments made in relation to intervention activities embarked on by the Group are expensed as incurred. However, payments made by the Group in relation to intervention activities on behalf of the Federal Government are recognized as receivables and are fully impaired after 12 months if the amount is not received from the Federal Government.”
A staggering N875.2 billion in credit losses were reported by the top bank, which is almost exactly twice as much as the previous year’s figure of N498.2 billion.
This shows that the impairment on its loans contributed the majority of the reduction in interest earned. The leading bank did not provide a breakdown of which of its debtors have defaulted or are in the process of doing so. On the other hand, the company’s balance statement reveals that it has a total loan of around N31.4 trillion.
The balance sheet of the apex bank grew by around N22 trillion between 2018 and 2022, going from approximately N35.5 trillion to almost N57.9 trillion.
