The policies of the government in 2005/2006 focused on the attainment of macroeconomic stability and sustainable economic growth devoid of exchange rate volatility and high inflation rate. Thus, all through the period under review, the fiscal stance and monetary measures of the government mainly conduced to furthering the gains of the on-going wide-ranging economic reforms - the key planks of the National Economic Empowerment and Development Strategy (NEEDS).

By the year-end, not only was exchange rate stability achieved within the target band of plus or minus 3% set by the Central Bank of Nigeria (CBN), the national currency made more appreciation.

The Naira appreciated from N132.82/US$1 at the beginning of 2005 to N129.3191/US$1 at the end of the year. The introduction of the Wholesale Dutch Auction System (WDAS) early in 2006 further stabilized the exchange rate and eliminated the gap between the official window and the inter-bank rates. The stability boosted investors' confidence in the economy, resulting in an unprecedented inflow of portfolio investment and FDI into the non-oil sectors. The exchange rate stability as well as the consistent rise in the price of crude oil in the international market ensured accretion to reserves of US$28.3 billion at end-December 2005, and which rose further to $36.6 billion by the end of June 2006. The downward review of the Minimum Re-discount Rate (MRR) in 2005 from 15% to 13% and the pegging of the maximum lending rate at MRR + 4.00%, translated into reasonably reduced lending interest rate in the economy during the period.

One of the major developments during the period under review was the (BB-) risk rating of Nigeria by two reputable global rating agencies - Fitch and Standard and Poor's. Obviously, those ratings were the outcome of the determination and commitment of the Federal Government of Nigeria to the ongoing economic reforms in the country. Also of significance in fiscal 2005 was the repayment of external debt owed the Paris Club of creditors, a development that has drastically reduced Nigeria's stock of external debt to about US$5billion. The exit from the debt trap is expected to free up funds for investment in other sectors of the economy.

True to the goals of the NEEDS, in 2005, growth remained strong at 7% for the economy as a whole and 8% for the non-oil sector. Year-on-year inflation fell to 12% by December 2005, from 15% in 2004. This growth rate is faster than the projected global rate of 5% and 4.8% for the sub-Saharan Africa. During the period under review, the import tariff regime was also liberalized, reducing the number of tariff band from 20% to 5% and lowering the un-weighted average tariff from about 30% to 18% in line with the ECOWAS Common External Tariff (CET).

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In 2005, the consolidation of banks, a major component of the banking reform announced by the Central Bank of Nigeria (CBN) in July 2004, was concluded. By the end of December 2005, the exercised produced 25 banks out of the 89 in operation when the reforms were announced, mostly through mergers and acquisitions involving 76 banks that altogether accounted for 93.5 per cent of the deposit liabilities of the banking system.

In addition to producing relatively stronger banks, the consolidation also boosted activities on the capital market, which received a total of N406 billion through fresh investments, including foreign capital inflow of US $654 million and £161,993. Fourteen out of the 89 banks, accounting for 6.5 per cent of the deposit liabilities of the industry, however, failed to make the December 2005 deadline and have had their operating licenses withdrawn by the CBN.

A similar reform to that of the banking industry was announced for the insurance sector in September 2005. The new capital requirements for insurance companies Nigeria announced by the Minister of Finance, requires those willing to do Life business to have a minimum of N2 billion; Non-Life N3 billion; Reinsurance N10 billion and composite company N5 billion. Insurance companies are expected to meet this new capital requirement by February 2007. The recapitalization process will lead to consolidation of the Insurance Industry in a similar manner to what we have witnessed in the banking industry.

In 2005, the capital market was one of the beneficiaries of the banking consolidation as it was beehive of activities, especially on bank stocks. At the close of trading for the year on the Nigerian Stock Exchange (NSE), 26.69 billion shares worth N262.93 billion were traded, representing about N37.13 billion or 16.44 per cent improvement over the N225.8 billion shares traded at the market in 2004. The 2005 figure translated to an average of N5.05 billion (as against N4.34 billion in 2004) spent on equities trading weekly. Buoyed by the turnover volume in some banks' shares, the sub-sector remained the most active with 19.93 billion units valued at N146.94 billion traded in 453,894 deals in 2005. Largely helped by bank stocks, the NSE All Share-Index at 24,085.76 points gained 241.3 basic points or 1.01 per cent over the 2004 figure of 23,844.45 points. Market capitalization also rose from 1.9 trillion in 2004 to 2.5 trillion by end - December 2005; this has further risen to close to 3 trillion as at June 30, 2006 - all attesting to the booming capital market.

In furtherance of its reforms, the Federal Government last year stepped up its campaign for good governance with the appointment of a team of auditors to conduct a transparency audit of the energy industry. The appointment by the National Stakeholders Working Group (NSWG), of a consortium led by U.K based Hart Group to conduct a financial audit, process audit and physical audit pursuant to the Nigerian Extractive Industries Transparency Initiative (NEITI) followed an intensive international competition among reputable global auditing agencies. The financial audit is expected to provide an independent audit, in accordance with international auditing standards, of all payments made to the Federal Government and all revenues earned, from the oil and gas sector in the past five years as well as assess whether those payments were recorded in the Central Bank.

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Your bank's financial results for the 2005/2006 financial year show substantial appreciations in all evaluation parameters. These results amply demonstrate the strong financial health of your bank as well as its resilience as a leading franchise. Profit before tax was N15.154 billion, representing a 65 percent increase over the figures reported for the previous year. Gross earnings increased by 67 percent over the figures reported for the previous year to hit N58.22 billion. Total assets plus contingent liabilities rose to N714.51 billion, a significant leap from the figures for last year. Total deposit grew from 68 percent to N392.86 billion, showing a 148 percent growth over the last financial year's figure. All these amply demonstrate the leading position of your bank in the consolidated banking industry of today. Our bank has once again exceeded its own projections and outperformed market expectations.

Specialized financial and advisory services are similarly offered through the following subsidiaries of the bank :
Zenith Securities Limited – a securities trading and asset management company.
Zenith Registrars Limited – share registration services.
Zenith General Insurance Company Limited – insurance and risk underwriting company.
Zenith Pensions Limited – a pensions custodian management company.
Zenith Trust Company Limited – a trusteeship services company.
Zenith Medicare Limited – a medical insurance company.
Zenith Bank (Ghana) Limited – a banking subsidiary.

In tune with our strategic intent to remain a superior national franchise and a reputable global financial institution, we have stepped up our drive to open more branches in strategic locations within the country and offshore. At present our branch network covers not only the states capitals, the FCT Abuja and major towns and cities across the country, we have since spread our franchise much farther than these. We will sustain this tempo, leveraging emerging market opportunities in order to continue to deliver superior earnings which will serve as a catalyst in driving our share price appreciation in the future.

May I use this opportunity to thank our teeming customers for their continued patronage and unwavering loyalty. Their immeasurable contributions have no doubt really propped our excellent performance. Therefore, in this spirit of mutual determination to grow our business, we undertake to continue to serve you better than ever before. In this regard, we will strengthen the platforms and carve new channels for meaningful interaction and dialogue between the bank and its various stakeholders. We will further device methods and strategies to achieve a common understanding with the needs and aspirations of our customers to enable us affect their expectations and sustain their enthusiasm.

Distinguished shareholders, I am happy to inform you that as a responsible corporate citizen, your bank continued to impact positively on the communities in which we operate. We have stepped up our corporate social responsibility (CSR) efforts dedicated solely to identifying and contributing to worthy and deserving causes in the society. During the period under review, the bank committed a total of N811.4 million to charitable causes with beneficiaries that cut across broad segments of the society. We will not relent in our effort in demonstrating our commitment to giving back to our host communities and the society at large for providing an enabling environment for our operation.

Our bank continues to be the toast of discerning investors who appreciate that the Zenith brand bears real value. The last public offer, in which your bank raked in N53.63 billion, is further confirmation of the strength of our brand. Added to the N38.7 billion we had as at June 30, 2005, Zenith Bank now has one of the highest shareholders' fund in the banking industry.

Dear shareholders, I am happy to report to you that our bank has retained its reputation for quality staff welfare. We continue to attract and retain some of the best talents in the banking industry. As a result of our good welfare package and motivating work environment, we maintain one of the lowest staff turnover rates in the industry. On behalf of the Board of Directors and Shareholders, therefore, I wish to express our profound gratitude to management and staff of the bank for their commitment and loyalty. Going forward, we will continue to develop management and staff talents and skills to meet emerging challenges in the industry.

Dear shareholders, the future of our bank is not only assured but also very bright. This optimism is predicated on our excellent track record as well as the overall improvement of the Nigerian economy - a reality that has translated into improved country risk ratings for the nation. As a bank, we will continue to remain focused and pro-actively reinvent ourselves and our systems to face emerging challenges of the post-consolidation banking in Nigeria. More than ever before, we are embracing global best practices in all our operations, with a high accent on good corporate governance.

Our rich pool of human capital and ICT edge continue to place our bank in a very strong position to compete with the best in the world. We will continue to put our stamp of proven quality in terms of product differentiation and speedy service delivery as well as capacity for wider market penetration and reach. Our respected and powerful franchise in several businesses, going forward will be expanded and we are confident that we will continue to deliver superior earnings.