| | 21 March 2007 | | | | | | FS Digest | | | | | | 'We are set for real consumer banking', Long
Jonathan Long, chairman, First City Monument Bank (FCMB), in this interview with Alao Salimon bares his mind on new approach to banking and future challenges in the industry.
New approach to banking
We have moved from where we had 89 banks, many of which were scarcely alive, let alone doing any banking, to a position where we now have 25 well capitalised banks. I think I am correct in saying that out of the 50 largest banks in Africa, 20 of those banks are in Nigeria. Whereas, prior to consolidation, I doubt if even Union Bank or First Bank would have made the top 50. So, that is a huge change and obviously it poses challenges, management challenges. It is one thing to manage a bank with two or three billion capital, it is quite another to manage a bank with N30 billion or N35 billion capital. It poses management and business challenges. How do you deploy that capital to obtain satisfactory return for your shareholders without going into silly things?
The banking climate here has changed seriously. Most of the changes had taken place in the last three, four years. But may be I should go back a little bit further than that. Probably the single most important change prior to consolidation is the move towards universal banking and that was in 2001. Since then, the banking system has been in almost perpetual change. And obviously what really gave impetus to this change was the consolidation process.
On the other hand, it provides enormous opportunities. We talked earlier about Nigerian banks expanding into the west coast of Africa. I think that is only the first stage. We may probably end up by finding out very soon that even the west coast is over banked. And there will be intense competition between the Nigerian banks and banks within the west coast. We will then start looking for opportunities in East Africa, for instance.
These are centres of the Nigerian Diaspora. So, I think that very soon, we will have banks moving beyond the west coast to east Africa, South Africa, Britain and America. To answer you question directly, I see huge opportunities for banks. There are dangers, but, but there are huge opportunities as well. And obviously, the banks are going to be successful if they take advantage of the opportunities and avoid the pitfalls.
I think one or two banks, First Bank and Union Bank, have representative offices in South Africa. So, there are opportunities in East Africa and Southern Africa and in other countries where the Nigerian Diaspora is strongly represented. Those two countries must be Britain and the United States. There are a couple of Nigerian banks that have subsidiaries in London, First Bank and Union Bank. UBA also has an office in New York, but which Nigerian bank has a branch in Atlanta, or Houston, for instance? Consumer banking
Very few banks, in my opinion, are really customer-friendly, and very few banks are coming out with genuine new products. Everybody like to talk about new products, but actually, when you look at what is then on offer, not very much is new about it. I entirely agree with the point that you are making that everybody talks about consumer banking. But very few banks are actually practising it in a sense in which it is understood elsewhere. So, we are taking our time and Anurag, the chief operating officer, is really spearheading our drive into consumer-banking with the support and experience of Sabre Capital team behind him.
FCMB in post-consolidation
We had three strategies to consolidation. Firstly, we carried out a private placement to raise additional capital from a small group of selected investors. This we had been planning to do in any case even if the governor of the Central Bank of Nigeria had not announced his dramatic consolidation initiative. We went ahead in any case with private placement. But that was by no means sufficient to get us to the N25 billion. So, as soon as the private placement was completed, we moved to the next phase which was to obtain a listing for our shares on the Nigerian Stock Exchange and to launch an appeal with the slogan, 'The Grand Offer from the Grandmasters.' And that was successfully completed. That actually got us to the N25 billion.
We also saw some opportunities through mergers and acquisitions. And that is the third strategy. We merged with two banks for strategic reasons; Co-operative development Bank (CDB) which is based in Akwa Ibom and Nigerian-American Merchant Bank. Really, it gave us the opportunity to establish a presence in that part of the country because CBD had a branch network that was already in place. And we traditionally, apart from our Port Harcourt operations, had not been strong as we would like to be in those very key states, particularly Akwa Ibom. We all know it is the gas capital of the country, and we all know that gas, rather than oil, is the future. So, a strong presence in Akwa Ibom and the surrounding states is of great importance to us. From that point of view, the merger with CDB made great strategic sense.
Nigeria-American Merchant Bank, our other partner, which we had a good relationship for many years. We also had high regard for their management, their processes and customer base. This was because they had been very well supported by their technical partner, the Bank of Boston before they eventually pulled out. And after the Bank of Boston departed, NAMBL had all the right structures in place, but they did not have the financial muscle to take advantage of the customer base that they had inherited. So, by merging with them, we got the benefit of some very important multi-national relationship, through the Bank of Boston involvement. So, again, there was a very compelling reason.
Also at the end of the consolidation process, there were a number of banks which for one reason or another, had not succeeded in achieving the N25 billion. The governor of the CBN called a meeting of those banks that had achieved the N25 billion requirement and asked us to take a look again at the remaining banks to see if we could help the process and support the system by acquiring any bank that was in a reasonably healthy state. So, we searched through those banks and we found Midas Bank. We then acquired Midas and that effectively meant two mergers and one acquisition. That was how we meet the requirement for the consolidation process. But of course, the story does not end there. What we have achieved through the processes that I have just described was full compliance with the CBN requirement. To satisfy our own requirements and our own objectives, we had moved on to do other things. How people see FCMB
There were days when FCMB was a small merchant bank with Otunba Balogun, Jonathan Long; and we had two branches in Port Harcourt and Kano and a couple of hundred employees. Then we concentrated our business on dealing with major companies, multinationals and oil companies. But those days are long gone. As I said, it may be that we have not been sufficiently aggressive in getting the message across. There is a saying that perception is reality. What matters is what people see. We are a bank with some 100,000 shareholders and we have no single shareholder with more than four per cent. I think it has to do with the fact that we have not put more emphasis in communicating the changes more clearly through the media to the public. Otunba Balogun has resigned his chairmanship and in deed from the board, to get himself more time to attend to his obligations as one of the leading figures in Ijebu Ode. But if you look around, at the rest of us, you won't find any other Balogun.
The bank, as at today, is a large retail and commercial bank with 130 branches and about 40 automated teller machines (ATMs). And we will certainly be rolling down more ATMs even if we slow down on branches. So we stopped regarding ourselves as a family bank a long time ago. But perhaps we haven't managed to communicate that message as widely as it should be. Moves to shore up capital base
At the right time we will come back to the local market. I wouldn't say that we would restrict ourselves to the international market. When we can usefully deploy, we will raise additional naira capital. The advantage of raising dollar capital, particularly if you want to bank the oil and energy industry which is a dollar-based industry, you are taking dollar liabilities which march the dollar assets that you create as a result of financing energy and telecommunications companies. We are being careful. We don't want to take unnecessary currency risks by raising more and more naira and then lend in dollars. And if we find the naira suddenly appreciate against the dollar, we then have a currency loss to write off. So, we want to balance our capital structure. We have about N30 billion capital, we want to balance that by raising dollar capital. So we don't see any point in raising more capital just for the sake of being able to shout that we are the biggest bank in town. That is not our objective. But when the time is right and we can use it, we will certainly come back to the local market to raise more naira.
Relationship with investors abroad
We have good relationship with a company called Sabre Capital after the first phase of consolidation. The significant thing about Sabre Capital which is both a private equity and a management services, are the people behind it. It is a partnership and the chairman of the company is Rana Talwar who used to be the chief executive officer of Standard Chartered Bank. With him is another man who used to be the chief financial officer of Standard Chartered. So we have linked up with two of the most senior people from one of the biggest banks in the world and most importantly, a bank that is particularly strong in the developing countries.
IFC gets position on UBA board
By Stanley Oronsaye
The International Finance Corporation (IFC), the private sector arm of the World Bank, is to get a position on the board of United Bank for Africa (UBA) Plc. This follows the $50 million convertible debenture agreement signed by both organisations in Lagos yesterday.
Mr. Tony Elumelu, group managing director of UBA, who confirmed this at the ground breaking signing ceremony said when the debenture is eventually converted to equity, IFC's holding would translate to about two per cent of UBA.
"IFC will get a board seat. This agreement is not much about the money but for strategic partnership. The technical expertise and advise from IFC will bring to bear on the growth aspirations of UBA." he said, adding that the partnership was an endorsement for the bank and the Nigerian economy as a whole.
"IFC is known for its high due diligence and insistence on good corporate governance. We feel we need a robust corporate structure and this partnership will support our dream of building a pan-African bank. We hope to make this strategic partnership with IFC a success story, which should also translate to increased shareholder value for our investors. This support by IFC is a very good signal to current and future investors in UBA" he added.
The $50 million facility is part of a $75 million financing and advisory services package that IFC's board approved for the bank. The package also includes a $25 million partial credit guarantee for bonds and medium term notes that UBA plans to issue to finance mortgage lending and other strategic businesses. That portion of the deal, according to the IFC is expected to be signed in the near future.
The deal is expected to both deepen confidence in the country's financial sector reforms, as well as support the implementation of UBA's post consolidation strategy aimed at developing UBA into a top pan-African bank and financial institution.
Mr. Solomon Adegbie Quaynor, country manager, IFC Nigeria said though the IFC has been maintaining various relationships with banks in the country, UBA was the first bank it was working with to build a strategic partnership.
Both institutions are developing a strategic alliance under which IFC is investing in and providing advisory services to the bank in numerous areas. This includes supporting the bank's regional expansion, co-financing large infrastructure and industrial projects and helping to develop the bank's mortgage, insurance and structured finance businesses. IFC will also advise the bank on establishing a credit bureau, developing its retail business, financing micro, small and medium scale enterprises, on corporate governance and developing new classes of fixed income capital market products.
According to Quaynor, "IFC has global expertise in power projects, so we will be helpful in assisting UBA to finance power projects in Nigeria. The bank has ability and capability to grow on a large scale. We are already talking with UBA Global Markets on some projects."
He stated that the IFC was looking at ways of entering new market segments in Nigeria where needs and opportunities are great. "Nigeria's financial market has experienced good regulatory reforms which have also catalysed further market consolidation to create well-capitalised and stronger banks in terms of risk management."
He said the IFC was shifting its strategy from providing only long-term credit facilities to forming long-term strategic partnerships with select banks and other financial institutions to deepen existing market segments.
|  | | Powered by MooreAdvice 2006 Copyright (c) Financial Standards Newspaper | | | | | | | | | | | | | | | | | | 21 March 2007 | | | | | | Small Business | | | | | | Giving more impetus to Nigerian SMEs CAMI EZENWA reviews a recent Africa-Asia business forum in Tanzania which opened new investment windows for small and medium enterprises from the two regions. No story on the Nigerian economy, especially in the last eight years of a democratic government, is ever complete if it does not give due mention to the small and medium enterprises sector. Ironically, much of the stories on the SME sector tend more to lament problems than they celebrate accomplishments, and this is despite the fact that the sector is considered crucial in any nation's overall development efforts.
But given the effort of the government and other stakeholders to ensure that things improve in the sector for some time now, the sector appears to be wearing a new enthusiasm. This enthusiasm is not entirely because of the things that have been accomplished, but the fact, that sufficient awareness appears to have been created, not only about the challenges in sector, but also about the best ways to go about the obstacles. There are at least, regular forums for both on the side of government and the operators themselves to interface from time to time. And through such meetings, a lot of misinformation and prejudices have been corrected. For example, unlike previously, when the tendency is for the average potential businessman to moan about not getting financial support from the commercial banks, and to perish any investment ideas once he does not get favourable responses from the banks, a lot more of such people have begun to look inwards. As consistently advised by other entrepreneurs who also walked the tight financial rope before eventually getting their liberation, many now attempt to do thorough home works, including, as is essentially advised, having a business proposal professionally drafted, and also, starting with what they have as individuals rather than waiting on one financier or another.
The same advice turned out a refrain at a recent workshop organised by the Fate Foundation in Lagos.
Beyond these, the efforts of the Lagos state chapter of the National Association of Small and Medium Enterprises (Nassi), led by Chief Duro Kuteyi opened a fresh window of opportunity for SMEs in the country recently. The association, with the financial and moral support of the Bank of Industry (BOI), took some of its members to a forum in Tanzania, during which they exchanged ideas and entered into business and investment agreements with their counterparts from the Asian region.. The trade and investment summit was not staged for the sake of matching African SMEs and their counterparts from Asia for the purpose of competition; rather, it was to discover areas of common understanding, to boost trade and investment opportunities on both sides.
An international conference on Africa's development - styled The Tokyo International Conference on Africa's Development (Ticad) which held about 13 years ago, had recognised the importance of the private sector in the effort to transform the social, economic and political landscape in Africa, using the Asian private sector which had achieved significant result in this area, as a model. On the other hand, the Asian side was seeking the opportunity to get Africa as a realistic business ally, in the spirit of South-south cooperation.
Before the Dar-es-Salaam summit, there had been three previous African-Asian business Forums (AABFs) AABF 1 held in 1999 in Malaysia; AABF 2 in 2001 in South Africa, and AABF 3 in 2004 in Senegal.
Among others, the meets had underscored the reduction of poverty through economic growth and emphasised that enhanced Afro-Asian business linkages contine to represent a prime opportunity for African growth and development.
According to the working paper, "The business forum series' primary goal is facilitating business linkages that promote Asian investment in, and trade with Africa. Despite centuries of old cultural linkages and developmental similarities between the two continents, investment and trade have not dev eloped to their full potential in modern times. While Asia has been able to expand her share of global trade and attract substantial new investment in new industries and technologies, Africa has not been as successful in developing value added production and export oriented activities"
It observed further that Africa was however developing the basis for expanded participation in world trade and investment, and some African countries stock of investment in manufacturing and services had started to grow, albeit from a low base.
"As a result, Asia has therefore emerged as an important partner in Africa's trade and development. Asia's developing economies import more form Africa than they did decades. In Asia, imports from Africa outpaced imports from other regions," it observed..
Another important revelation from the briefing was that a trade study initiated as part of the efforts to link Asia with Africa trade-wise, identified about 100 products with existing export potential to the Asian region. These include coal, precious stone, metals, unwrought aluminum, unrefined and refined copper, wood products and natural rubber.
Others include pneumatic tyres, frozen fish, coconut, cashew nuts, fruits, wine, chemical wood pulp cotton lint and furniture.
On the other hand, African countries would be receiving pharmaceuticals, health products, tea, coffee, interior designs, textiles, accessories, hand made crafts, music instruments machineries, and jewelry.
According to them, the total trade potential amounted to $35 million.
Meanwhile, each of the last three foras was implemented with a budget slightly above $2 million, and the main reason for this difference in the memorandums of understanding signed at previous convention and the most recent, according to the organisers, was because lessons learnt in the previous editions informed changes and adjustments that resulted in improved dealings.
At a briefing where the AABF business meeting in Tanzania was reviewed in Lagos recently, the delegation said they would ensure that the gains of the conference was passed along to the benefit of all stakeholders. BOI, had reiterated its readiness to collaborate with the Nassi to ensure that henceforth, the basic problems of finance was adequately tackled, and especially that the lessons leant from the summit in Tanzania was not lost. Perhaps, Nigerians may yet witness a dramatically improved SME sector. With reiterations from both BOI, Smedan and Nassi, not less is expected, after all the expositions at the AABF Smedan to partner ADB, takes entrepreneurship to prison
Stories by Cami Ezenwa
Efforts of the Small and Medium Entreprises Development Agency of Nigeria (Smedan) to enhance the SME sector, gained addition leap recently when the Resident Representative of African Development Bank (ADB) Dr Sipho S. Moyo expressed the bank's determination to partner with the agency towards financing of Small and Medium businesses in the country.
This is coming at a time when the agency has concluded arrangements to build the capacity of prison inmates across the country to start and run their own businesses and become self reliant.
In the first instance, Dr. Moyo told Mrs Modupe Adelaja, the director-general of Smedan during a courtesy visit that she came to be briefed on both the role of Smedan and how the ADB could be of assistance to the agency.
The resident representative pointed out that the ADB had been providing soft loans to commercial banks in the country lending to SMEs but the bank was not impressed with the result.
Dr. Moyo added that even though the bank has been regular on repayment some SME have not been benefiting as they should, hence her visit to seek for private intervention by passing the banks to achieve direct impact.
Responding, the director-general said Smedan promotes, facilitates and coordinates the development of the MSME sector and its critical areas of intervention are repository of information, entrepreneurial education and training as well as linkages
She told the ADB country representative that the agency had also adopted the strategy of partnering with key stakeholders, as well as establishment of Business Support Centers (BSC) and Business Information Centres (BIC), encouragement of clusters and strengthening business development service providers BDSP for sustainability to achieve its objectives.
Mrs. Adelaja also said that the facility offered by the ADB could be useful for intervention in cluster development which is need driven as against industrial parks which is supply driven infrastructural finance. She further stressed that there would be a need for a policy support for the clusters. In his remark, Mr. S.O.Adebiyi, the group head, enterprises promotion said the agency required ADB's assistance by providing credit to SMEs and capacity building, while access to fund by SMEs should be tied to training and this training should be a condition for drawing from the fund.
Adebiyi noted the contribution of ADB in areas of social services and suggested that the facility should be tied to existing projects e.g. the rural access mobility project Ramp.
In the second instance, Smedan in collaboration with Believers Life in Christ Ministries Inc, has concluded arrangements to build the capacity of prison inmates across the country to start and run their own businesses and become self reliant.
Under the faith-based initiative for Enterprise Development, Smedan and the religious body have selected Medium Security Prison Kirikiri, Lagos, Kaduna Central Prison, Kaduna and Agodi Prison, Ibadan as venues for entrepreneurship training. The programme would be extended to other prisons in Nigeria.
The Medium Security Prison Authority has estimated a class of 40 comprising inmates, officials and ex-inmates who had been trained in prison vocational workshops.
Smedan and Believers Life in Christ Ministries Inc are networking with the Prison Ministry of House on the Rock Church , another religious body and already have a structured rehabilitation programme for ex-inmates.
The first programme would run in Lagos at the Medium Security Prison Kirikiri, Apapa, on Friday March 23, 2007 , while the dates for Ibadan and Kaduna programmes would be announced later. | | | Powered by MooreAdvice 2006 Copyright (c) Financial Standards Newspaper | | | | | | | | |
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