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BANKS HIKE EMPLOYEE PAY AS STAFF COSTS ACCOUNT FOR 27.44% OF OPERATING EXPENSE
Employee costs account for 27.44 percent of the total operating costs of Nigerian banks in the first quarter of 2025, posing challenges to banks in improving their net interest margins as lenders hiked pay for workers to cushion the impact of cost of living.
The most capitalised and liquid banks incurred N424.31 billion wages costs in March 2025, which is 24.64 percent higher than 2024’s N340.44 billion, according to data gathered by MoneyCentral.
According to MoneyCentral, among the top 10 banks ranked by total assets, United Bank for Africa (UBA) Plc and WEMA Bank Plc have the highest staff costs to total operating costs ratio of 38.69 percent and 34.30 percent, respectively, followed by First City Monument Bank (FCMB) Plc with 31.74 percent.
Access Holdings has a staff costs to total operating cost ratio of 30.24 percent; FirstHoldCo, (27.33 percent); Stanbic IBTC Holdings, (27.32 percent); Zenith Bank, (22.48 percent); Guaranty Trust Holdings, 22.40 percent, and Fidelity Bank, 17 percent.
There are indications that inflation will increase in Nigeria, putting pressure on banks’ expenses, especially on staff costs.
Nigeria’s inflation rate edged up to 24.23 per cent in March, according to the National Bureau of Statistics (NBS).
The bold reforms of the new administration such as the removal of subsidy on fuel and the unification of the exchange rate to spur investment mid-year 2023 stoked a monstrous inflation that brought excruciating pains on Nigerians who had not envisaged such painful policy.
Consequently, a red-hot inflation stole workers’ wages, impoverished the people, and disrupted asset prices.
Banks were compassionate as they increased salaries to mitigate the effects of the once in a generation hardship.
WEMA Bank increased workers’ salaries by 112 percent, one of the highest in the banking industry.
GTBank, Nigeria’s most cost-efficient commercial bank, quietly raised staff salaries by 40% in September 2024, responding to the ongoing cost of living crisis, four GTBank employees told TechCabal.
“There was no prior communication before the increase. Even though there were speculations, I was not expecting the increase,” an assistant banking officer (ABO) who now earns ₦720,000 ($442) told TechCabal. An ABO is just one level above entry-level staff in GTBank’s employee structure, which has fewer staff levels than other Tier-1 banks.
A breakdown of wage bills reveals Access Bank incurred N105.6 billion in staff salaries; UBA, (N84.31 billion); FirstHoldCo, (N67.03 billion); Zenith Bank, (N63.01 billion); GTCO, (N27.43 billion); Stanbic IBTC Holdings, (N24.59 billion); FCMB, (N22.75 billion); Fidelity Bank, (N19.60 billion), and WEMA Bank, (N9.94 billion).
Banks’ total operating expenses (salaries plus other operating expenses, increased by 26.22 percent to N1.54 trillion, which exceeds the inflation rate, and higher than 2024 N1.22 trillion.
Other major drivers of total operating expenses are increased regulatory charges such as the mandatory Assets Management Corporation (AMCON) charge which has been magnifying as a result of increases in total assets, driven by impact of exchange rate and increase in price occasioned by rise in diesel, fuel, and general maintenance costs as well ground and water rates, and growth in technological and service related expenses.
There are concerns that rising costs which have undermined net margins could fuel investors’ apathy towards banks stocks even as sector players are trading at an attractive valuation.
