Banks’ deposits rise by N3.122trn in 9 months despite recession


…Experts link trend to hike in commodity prices, MMM

Uba Group

Commercial banks are currently enjoying an unusual increase in their deposit base despite the economic recession in the country, investigation by The Pointhas revealed.
According to findings, customer deposits in 11 commercial banks increased from N17.760 trillion in January to N20.882 trillion at the end of September, representing an increase of 17.58 per cent.
The financial institutions include United Bank for Africa, Guaranty Trust Bank, Zenith Bank, Access Bank, Union Bank of Nigeria, Fidelity Bank, Diamond Bank, Ecobank Transnational Incorporated, Wema Bank, Unity Bank and FBN Holdings.
The banks’ third quarter results revealed that, while the deposits of the pan-African bank, Ecobank, moved from N3.274 trillion to N4.355 trillion, FBN Holdings, the parent company of First Bank of Nigeria, Zenith Bank, UBA, GTBank and Access Bank increased theirs from N2.971 trillion, N2.528 trillion, N2.083 trillion, N1.610 trillion, and N1.683 trillion to N3.296 trillion, N2.692 trillion, N2.497 trillion, N2.048 trillion and N2.099 trillion respectively.
Also, the deposits of Diamond Bank, Fidelity Bank, Union Bank, Unity Bank and Wema Bank moved up from N1.234 trillion, N765.785 billion, N579.100 billion, N231.440 billion and N221.698 billion to N1.401 trillion, N795.592 billion, N618.300 billion, N263.905 billion and N227.016 billion respectively.
However, Sterling Bank is among the few institutions that recorded a decline in customer deposits, as it shed about N5 billion, when its deposits dropped from N590.889 billion to N595.085 billion within the same period.

Huge Deposit Doesn’t reflect growing economy – experts
Experts have, however, said that there are indications that the increasing deposit base of major commercial banks may hamper a rebound of the economy in the near future.
Data from the National Bureau of Statistics indicate that the biggest economy in Africa is in full blown recession, as Gross Domestic Product report for the second quarter of 2016 showed that the nation’s GDP declined by 2.06 per cent (year-onyear) in real terms.
According to a source at the NBS, the development in the banking sector contradicts the major indicators of the economy.
The source, who asked not to be named because of the sensitivity of the issue, argued that the GDP was lower by 1.70 per cent from –0.36 per cent recorded in the preceding quarter, and also lower than the growth rate of 2.35 per cent recorded in the corresponding quarter of 2015.
“Quarter on quarter, real GDP increased by 0.82 per cent during the quarter; nominal GDP was N23.483 million (in nominal terms) at basic prices. This was 2.73 per cent higher than the second quarter 2015 value of N22.859 million. This growth was lower than the rate recorded in Q2 2015 by 2.44 per cent,” the source told The Point.
Aside from the major economic indicators stated above, other economic experts argued that the development in the financial sector was a mirage, which would not translate into the desired economic transformation.
A California, United States-based Nigerian financial advisor, Ms. Olubunmi Adekoya, disagreed with the figures disclosed by the banks in their Q3 results, insisting that such data would not translate into any good for the economy.
She reasoned that the deposits in question did not mean that the productivity level of the citizens had increased, as the Federal Government had not implemented any policy to justify such feat.
She said that the deposits were driven by what she described as ‘illegal transactions’ in the informal sector.
She noted, “Most of the funds are from Nigerians who are engaged in the Movrodi Mondial Moneybox Ponzi scheme. About four million Nigerians have subscribed to the scheme and they circulate the funds among themselves, using their bank accounts. The Russian founder of the scheme, Mr. Sergey Mavrodi, had studied the Nigerian market and observed that Nigerians were gullible, especially about investment schemes that offered juicy returns on investment.
“That is the reason the Russian mathematician created the acclaimed ‘help community’. If that fund is not invested in the real sector, it adds no value to the economy. The food price index rose from 16.6 per cent in September to 17.1 per cent by October.”
She added, “The increases were recorded across almost all major divisions, which contribute to the headline Index. Communication and restaurants and hotels recorded the slowest pace of growth in October, growing at 5.7 per cent and 9.4 per cent year-on-year respectively. Price movements recorded by all the items, less farm produce or core sub-index, rose by 18.1 per cent (year-on-year) in October, up by 0.4 per cent from rates recorded in September (17.7 per cent).

The deposiTs in quesTion do noT mean ThaT The producTiviTy level of The ciTizens has increased, as The federal GovernmenT has noT implemenTed any policy To jusTify such feaT. They were driven by ‘illeGal TransacTions’ in The informal secTor

“If high price increases were seen in food, housing, water, electricity and gas, where are the funds coming from, because it is expected that deposits should slide.”

Deposits up on consumer exploitation – analysts
Meanwhile, economic analysts across the country have also blamed the development on manufacturers and producers of goods and services, who are taking advantage of the economic downturn to exploit Nigerians.
Contrary to the views of Ms. Adekoya that the funds in the banks were from MMM subscribers, an economist, Mr. Tunde Oyediran, argued that the economic recession was not affecting bank customers’ savings because there was an increase in the number of depositors.
According to him, depositors have increased as a result of excess funds with producers of commodities, as most of them had increased the prices of their goods to between 50 per cent and 75 per cent in the last quarter, even when cost of production had not increased by the same rate.
He explained, “Most of them argued that the lull in the foreign exchange had affected their costs of production, but the naira had only increased by 30 per cent within the same period they increased their prices. It does not make economic sense to increase price of commodities by 50 per cent or more, when import rate has only increased by 30 per cent.
“A lot of them may think they are making more profit, but they will be shocked when the effect bounces on them. No producer has autonomy over all commodities, if you increase your price and others do the same, you will pay back somewhere. Even prices of products that have nothing to do with foreign exchange increased and that gives the sellers more opportunities to increase the earning, which ends up in banks.”
An accountant, Mr. Boniface Okonji, noted that the economic recession provided great opportunity for artisans to work harder, adding that the prices of goods were on the high side, which made Nigerians to create multiple streams of income.
“I called a plumber to fix my water closet that has a little fault. To my surprise, he billed me N10,000; this is something that was supposed to cost between N3,000 and N4,000. He said things were very expensive in the market. This is how they make extraordinary profit. The inflation in the country is not as bad as Nigerians portray it. Many sellers double the price of goods, just as a result of recession scare and this gives them almost double profit,” he said.