Audit, law, consulting, other firms earn N87 billion from banks in 9m 2023

An analysis by ThePressNG Research has revealed that twelve publicly listed commercial banks paid over N87.1 billion to audit, consulting and other professional services firms between January and September 2023.

This compared to the N60.1 billion spent as of the same time last year, represents a 44.9% increase.

A breakdown of the data showed that audit cost stood at N5.87 billion, while professional and contract expenses was N81.2 billion.

For the purpose of context, banks seek the services of accounting firms as auditors to check the accuracy of their financial records.

This is a statutory requirement as it ensures that the accounts of the firm represent a fair and accurate picture of the company’s current financial position as of the date on the balance sheet.

There are several accounting firms operating in Nigeria, however, the Big 4s typically receive the bigger parts of the pie. The Big 4s in no order are PWC, KPMG, Deloitte, and EY. Further findings by ThePressNG Research showed that all the listed commercial banks on the NGX are serviced by either of these Big 4s.

In terms of professional fees, which include legal, consulting, tax, financial and risk advisory, as well as other technologically driven professional services gulped a total of N81.24 billion in the review period, a sharp contrast from the N55.64 billion recorded in the corresponding period of 2022.

Some other areas where banks spend on professional fees include consulting for HR and strategy, Mergers and Acquisition, capital raise, risk advisory, and tech products amongst others. Professional services are integral to the smooth running of banks as well as expansion plans.

Examples of some consulting firms in Nigeria are McKinsey and Company, Andersen, Phillips Consulting amongst others. Outsourcing to professional service firms enables the banks to face their core banking function, while other firms take up their responsibility on their behalf.

Due to the lucrative nature of these industries (Audit and Professional services), the space has also recorded increased competition in recent years. As professional service firms in their typical fashion try to pouch big-ticket clients.

United Bank for Africa (UBA) according to its nine-month 2023 financial statement spent a sum of N943 million as audit fees and N35.86 billion for contract services. This makes UBA the highest spender on aggregate and the highest based on professional service expenses.

FBN Holdings, the group company of First Bank incurred N11.61 billion as professional services cost in the review period, although did not report on its current audit spend, since the report is an unaudited financial statement.

Meanwhile, based on available data, the biggest audit spenders so far are Access Holdings, and GTCo with N1.52 billion and N1.09 billion respectively. This is not surprising considering that the two banks adopt a Holding company structure, with a lot more range of assets across different subsidiaries and sub-sectors.