The great financial fightback · 2014-10-14 · the bank’s share capital was a mere $6 million. Current share capital is N250 billion ($1.5 billion). The cumulative value of fresh

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Nigeria has been under no illusions about the need to get its economy and financial system back on track, follow-ing the domestic crises of 2004-5, and the more recent worldwide downturn. Much progress has already been made since President Goodluck Jonathan embarked on a series of reforms aimed at the modernisation of the bank-ing sector, the diversification of the economy and the re-distribution of the country’s oil revenues. If implemented successfully, these changes could help the country join the ranks of the world’s largest economies.

Enthused by President Jonathan’s commitment to re-form, last year Ngozi Okonjo-Iweala left her position as Managing Director of the World Bank to become Niger-ia’s Coordinating Minister for the Economy and Minister of Finance. Bringing valuable experience from one of the world’s most important development institutions, she recently said that in transforming Nigeria, “We have to show policy consistency in all kinds of ways. It builds trust in the economy, it builds a resilience, and that helps enormously.”

She then added: “Nigeria has to make some fundamental changes, it has to really diversify its economy. The time is now because investors are interested in the country.”

While GDP growth has been buoyant for the last dec-ade – averaging 5.4% between 2000 and 2010 and rising to more than 7% in 2011 – higher rates are needed to fur-ther reduce poverty levels. Moreover, two financial cri-ses in the past decade as well as corruption, poor trans-port infrastructure and unreliable supply of electricity had tarnished Nigeria’s reputation abroad. Despite this, Nigeria remains Africa’s third-most popular destination for foreign direct investment, as its arsenal of natural resources, including abundant oil reserves, invariably serves as a magnet for investors.

A FRESH STARTDespite the recessions and stock market crash, Nigeria’s financial sector has been one of the largest benefactors to the economy. As such, the state has aimed to strengthen it, and more importantly, make it more transparent.

Since the first crisis of 2004, the sector’s landscape has undergone massive changes: from 89 banks in 2004, the number plummeted to just 24 by 2005, after the Central Bank (CBN) raised the minimum capital requirements twelvefold. This led to the banks zealously raising capital on the Nigerian Stock Exchange (NSE), which in turn led to oversubscribed sales and a spiralling trend in margin lending.

This situation came to a head in 2008, when the index plunged nearly 46%, driving Nigeria into its second cri-sis, which was then compounded by the global financial downturn. The Central Bank responded by appointing a new Governor – the noted economist and Islamic schol-ar Lamido Sanusi – who immediately cracked down on fraud, share price manipulation and other crimes against corporate governance. He also put a cap at 10% on margin

lending, created a new regime for bank licenses and estab-lished an asset management corporation, AMCON, to buy non-performing loans from banks.

“Of the lessons we learned during the recession, a core issue was corporate governance and the failure of risk management practices,” says Godwin Emefiele, Manag-ing Director of Zenith Bank, one of the largest banks on the NSE.

STRONGER THAN EVERThe two-year long reform programme came to a close on September 30, 2011, which was the deadline for all previously rescued banks to recapitalise (often in the form of mergers) or face nationalisation. The result is a reconsolidated, transparent and stronger-than-ever bank-ing sector that will ultimately benefit Nigeria’s overall socio-economic health. As Nigerian Ambassador to Ger-many Abdu Usman Abubakar says, “If you look at the fi-nancial sector reform, it requires us to translate the num-bers into sustainable wealth and job creation. We are not just talking about figures. We are talking about how it all translates into the real economy, and how it improves people’s lives by offering them more opportunities for revenue and employment.”

Jibril Aku, Managing Director of Ecobank Nigeria (the second-largest bank by branch network, since its acquisi-tion of Oceanic Bank last year) praises the CBN and the creation of AMCOM, highlighting that the latter immedi-ately helps “resolve the portfolio challenges of the banks so they can resume their business and lend to the sector.” He adds that the banking system itself is footing the bill of the rescue efforts – rather than the state – and that “this is one of the first industry resolutions; we crafted our own resolutions. This helped restore confidence and even in the challenged banks, there was no erosion of customer base.”

The Jonathan administration reforms go beyond banking and into countrywide project financing through the newly created Sovereign Wealth Fund. Initially created with $1 billion from the country’s Excess Crude Account, the fund is a three-pronged state-owned investment tool that will be stocked with the oil revenues accrued at prices higher than a pre-established benchmark oil price. The largest portion of the fund will be put towards the development of much-needed infrastructure, while the other two parts are savings for future generations, and an economic stabilisa-tion fund to defend the economy against commodity price shocks and economic recessions.

Yet another infusion of money to fix ailing infrastruc-ture will come from subsidies that heretofore went towards fuel. The removal of petroleum subsidies frees up billions of nairas that can now be spent on rail and road projects, hydro stations, water, IT and refineries. Nevertheless, Fi-nance Minister Okonjo-Iweala, a strong proponent of tight fiscal policy, is pushing for prudent use of these and other monies to avoid the corruption and economic imbalances that have marred previous infrastructure projects.

The great financial fightbackNIGERIA

This supplement was produced by GLOBUS VISION

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monDAY, 30 JulY 2012 1

Facts & figuresl Population 170.1 million (July 2012 estimate)

l Area923,768 square kilometres (32nd biggest in world)

l Nominal GDP $244.2 billion (2011 estimate)

l Real GDP at factor cost growth7.4% (2011 estimate)

l GDP per capita (PPP)$2,600 (2011 estimate)

l GDP composition by sectorAgriculture: 35.4%Industry: 33.6%Services: 31% (2011 estimate)

l Trade balance$38.27 billion (2011 estimate)

l Current account balance$15.61 billion (2011 estimate)

l Total international reserves35.21 billion (2011 actual)

l Gini index (distribution of family income) 48.8 (2010)

l Public debt17.6% of GDP (2011 estimate)l Central Bank discount rate4.25% (2010 estimate)

l Commercial bank prime lending rate16% (2011 estimate)

l Market value of publicly traded shares$50.88 billion (year end 2010)

Sources: CIA World Fact Book and Economist Intelligence Unit

Reforms to the country’s banking system have already increased accountability and transparency, and promise to fuel further growth in one of Africa’s largest economies

Finance Minister Ngozi Okonjo-Iweala

Governor of the Central Bank of Nigeria, Lamido Sanusi


monDAY, 30 JulY 20122 NIGERIA

More than 90% of Nigeria’s poor are women. In a far-seeing, government-led initiative, development institutions are being encouraged to examine co-operative lending with commercial banks by which they guarantee each other. This policy is already strengthen-ing weaker segments of society. And, at its last meeting, The Bankers’ Com-mittee established a forum on Women’s Economic Empowerment with the ob-jective of developing a framework that would enhance women’s leadership opportunities, and promote a gender-inclusive workplace and society. Ex-plains Mr Lamido Sanusi, Governor of the Central Bank of Nigeria (CBN): “More banks will now pursue policies that are equal on a gender basis. Eco-nomic equality is one thing, but in an underdeveloped economy, we have gender and economic inequality. We have to address how the financial and banking system views this.’’

The CBN – whose successful poli-cies with regard to eliminating bank toxicity without burdening taxpayers are being examined, forensically, by a very envious Europe – is also in the process of establishing a fund that will allow businesses owned and control-led by women to borrow at single-digit interest rates.

One of Nigeria’s most inspirational women, Ms Evelyn Oputu, is playing a key role in pursuing gender equal-ity through her pivotal roles as MD and CEO of the the Bank of Industry (BOI), Nigeria’s oldest Development Finance Bank. At inception in 1964, the bank’s share capital was a mere $6 million. Current share capital is N250 billion ($1.5 billion). The cumulative

value of fresh loans and investments rose by 53,4% from N0.31 billion to N165.74 billion between 2001 and 2011. More tellingly, cumulative jobs created have exceeded 1,250,000. She proudly stated that the bank had, in the last 10 years of its operations, approved 1,435 loans amounting to investment totaling N165.74 billion: This, she says, has had “considerable developmental impact on the Nige-rian economy.”

A further inspiration to Nigerian women, Faith Tuedor-Matthews, is at the helm of another of the country’s well-known financial institutions – Mainstreet Bank – which operates 217 branches nationwide and has share-holders funds in excess of N55 bil-lion. “It is important not to just target women, but to support and empower their development as well. Nigerian

women are hard-working, industri-ous and committed, and I believe they need more support… I would like to see more women in leadership posi-tions in the banking industry, but not just at the top. Presently there are four female CEOs, but I would like to see more at the Board and senior levels’’.

Ms Tuedor-Matthews concurs that the Government itself has set the tone for this. “If you look at the number of women in key positions, it has risen sig-nificantly in this administration. These are women who were accomplished in their previous callings, before they were appointed to serve in government. Our President has set the tone in this re-gard. The private sector should follow suit. Half of the talent in any country are the women, so how then can the country move forward if half of this tal-ent is not carried along?”

Women set to become the heart and soul of nigeriaThe banking system has plans to eradicate gender inequality and female poverty

Soon, women will play a greater role in determining the country’s future

Nigeria is an industrial diamond in the rough. It has a wealth of natural resourc-es and no dearth of willpower, yet what it lacks to date is the infrastructure and means to transform the industrial sector

The Central Bank along with micro-finance and development institutions such as the Bank of Industry (BOI), are increasing the number of relevant finan-cial instruments and facilitating their access to a wider public in an effort to further industrialise Nigeria.

Evelyn Oputu, Managing Director of BOI, says, “Nigeria has all it takes to become an industrial hub. In terms of our natural resource base – whether it is land, water, population or level of education – everything that is neces-sary to revolutionise the country exists here. The next thing we need to do is get policymakers in position to actually translate all of these resources into the final products that we need. Thankfully, we have the right people in place, and I believe we have already passed the threshold because the policy changes have already started. We can see it hap-pening at the moment.”

She goes on to say that what is still missing is greater technology and knowledge, which have the power to move Nigeria ahead by leaps and bounds. “We are looking to tap into it, to be able to fast-track and bypass the traditional processes of development. The knowledge industry changes the whole process,” she says.

ICT is already in use in certain ar-eas, such as in agriculture. Thanks to mobile technology, farmers can access input products by phone, for example, yet this is only the tip of the potential iceberg. “I cannot even begin to imag-ine how Nigeria would be transformed with the kind of knowledge industry the Germans have,” claims Mrs Oputu.

One of the most important things in-stitutions like BOI are doing is creating an enabling environment and making funding available for small and me-

dium enterprises (SMEs) – heretofore a largely unbanked segment – through commercial banks so that they and the SMEs can form a working relationship without the unnecessarily exposed risk assets. “That way [the banks] could learn about the business volumes that could come from SMEs,” explains Mrs Oputu.

“Now the commercial banks have a better understanding. They also know that for the entire market structure to fit together, we also have to support the SMEs.”

Soon, the efforts of development financing institutions will be comple-

mented by the government’s micro-fi-nance development fund, which will be established this year. According to CBN Governor Sanusi, “the fund is designed to provide funding and refinancing op-portunities. Many of [the people in rural areas] have the funding, but they do not have the ability to lend or access finan-cial institutions.”

This fund will greatly help the agri-cultural sector to take off and become a more value added industry. “The time for exporting the raw commodity is over,” says Mrs Oputu. She highlights both agriculture and infrastructure as huge opportunities for investors.

“We keep looking for foreign inves-tors who will put big companies in the centre of the entire process, with SMEs feeding them raw materials and small cooperatives feeding the SMEs. This is the model we want,” she explains. “We are looking for these foreign investors who will add value in terms of quality assurance and transfer of technology.”

The latter is of utmost importance, she stresses, adding: “We really do not need nor do we want handouts. We want to be given the tools and the technology and learn how to do it for ourselves.”

Having skilled workers is also a pri-ority for the CBN, who has set up three entrepreneurship centres, which in turn are linked to microfinance institutions. Applicants who successfully pass a highly selective process, are trained in entrepreneurship skills and given access to financing. “We set all of this up in ad-vance, so he has the skills, the finance and a network,” explains Mr Sanusi.

FDI and micro-finance to transform nigeriaGreater access to finance is set to help SmEs get off the ground

Evelyn Oputu, Managing Director of Bank of Industry

PRoJECT TEAm: Juan Carlos Jover, Irama Vega

Fabricio Domínguez, niall o‘maonaigh

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monDAY, 30 JulY 2012 3NIGERIA

Removing obstacles to help banks move onAmCon has played a key role in stabilising the financial sector. now it is helping to revive the industry and getting the banks to start lending again

Nigeria’s banking crisis is over and a substantial recovery in the sector’s earnings can be antici-pated. That is according to Mus-tafa Chike-Obi, Managing Direc-tor and Chief Executive Officer of the Asset Management Corpo-ration of Nigeria (AMCON).

In a recent speech in Lagos, he declared: “Nigerian banks are now the healthiest banks in the world in terms of asset quality and capital.”

Mr Chike-Obi added: “We should wait until after the second quarter of this year before pass-ing judgment – I will not tell you that nothing surprising can come up – but the banking crisis of 2007-2009 is over.”

Established in 2010, AMCON has been a key player in the sta-bilizing and revitalizing of Ni-geria’s financial system. Tasked with cleaning up the banks’ bal-ance sheets following a multibil-lion-dollar rescue of eight failing institutions, it has absorbed their non-performing loans, exchang-ing them for government-backed bonds.

AMCON is the largest domes-tic issuer of bonds, with assets of about N5 trillion ($30.6 billion), making it the largest institutional holder of Nigerian bank stocks. By buying up the bad loans that were crippling the banks, the cor-poration has enabled them to con-tinue doing business and making new loans to facilitate the run-ning of the economy.

Kingsley Moghalu, Deputy Governor, Financial System Sta-bility, at the Central Bank of Ni-geria (CBN), said recently that by relying on AMCON and contribu-tions made by the banks them-selves through a banking stabili-zation fund, Nigeria is the only country where the resolution of the banking crisis has been car-ried out without using taxpayers’ money.

AMCON plans to refinance its N1.7 trillion three-year bond with maturities of between seven and 10 years when the debt expires next year. The bonds to be refi-nanced include those issued for the purchase of non-performing loans, as well as those issued for cash. Analysts say the move will

boost banks’ liquidity and test the depth of the domestic bond mar-ket.

The CBN is targeting a non-per-forming loans ratio of 5 per cent across the industry, after AMCON bought up the banks’ existing bad loans, compared to previous lev-els of 50 per cent.

AMCON took on approximately 9,000 non-performing loans and is actively engaged in recovering them through debt restructuring and chasing those unwilling to pay. It aims to resolve all out-standing debts within two years.

The corporation is also respon-sible for the sale of Nigeria’s three new nationalised banks, which were established when Afribank, Bank PHB and Spring Bank were bought by AMCON. The failing banks, which had been losing be-tween N2 billion-N3 billion per month, had their assets and some liabilities transferred to newly incorporated “bridge banks” – temporary banks organised by the regulators (CBN & NDIC) to administer the deposits and li-abilities of failed banks – namely, Mainstreet Bank, Keystone Bank and Enterprise Bank respectively.

The three bridge banks ac-quired their nationalised status after AMCON’s purchase last year. AMCON injected N679 billion into the bridge banks to meet the central bank’s mini-mum capital base requirement of N25 billion and the minimum capital adequacy ratio of 15 per cent. All three banks are now profitable institutions.

AMCON’s boss has pledged that the sale process will be highly transparent, so that Nige-rians consider it has been han-dled fairly.

Mr Chike-Obi says it is es-sential for AMCON to secure the most advantageous deals. “We are not a charity organisation; we want the best returns on investment.”

As a first step to finding buy-ers, AMCON has been selecting financial advisers to assess the banks’ worth. “We want experts to look at these banks, value them and tell us what they think we should do with them in order to create maximum value for AM-CON,” says Mr Chike-Obi.

At the same time, the best in-terests of the financial sector have to be considered. “We must make sure that whoever takes over these banks, ultimately, is fit and proper to run a bank. We must know where their money is coming from and we must know that the management is going to be sound. So, those are the three things that we want to consider. So, until we get there, we are not in the position to seriously look at any investor interest.” Mr Chike-Obi says all op-tions are open: “Nothing is off the table.”

One option would be to list shares of the three banks on the Nigerian Stock Exchange, giving the Nigerian public the op-portunity to invest in them. There have already been more than 20 expressions of inter-est in the banks, although Mr Chike-Obi says it is too early to

consider them. “We will get a bet-ter feel of who is interested when the process starts.”

He believes there are plenty of opportunities in Nigeria’s bank-ing sector for those with “the know-how, the capital and the fortitude” to invest.

“The best measure that people use for latent banking potential in a country is the ratio of bank assets to GDP. In Nigeria the ex-tension of credit to the economy is below 50 per cent; whereas in

Egypt it is 100 per cent; in South Africa it is about 135 per cent and in India it is approximately 90 per cent,” he says.

“We believe that Nigeria’s credit extension to GDP should be around 120 per cent in the next decade. If you follow that logic, even if GDP only grows by 7 per cent yearly in Nigeria, banking assets should grow by 25 per cent per year in order for us to get there. Therefore we believe there are growth opportunities for banking in Nigeria.”

There is very little retail bank-ing or consumer banking in the country; most banking is corpo-rate. “When you add consumer banking, retail banking and mort-gage banking together, you find that credit in the banks will grow and bank assets will grow 25 to 30 per cent yearly for the next decade,” says Mr Chike-Obi.

He says AMCON, the Central Bank and the fiscal authorities are working hard to ensure that the en-vironment is healthy for banking as-sets to grow at such a rate.

“All over the world banks over-stretch themselves. They get into trouble or something happens and they have to retrench. Then they are reluctant to start lending again.

“Banks have to challenge them-selves to get out there and look for good loans so they can start lending again,” he says. “They should not be too traumatised by the events of the past five years.”

Looking ahead, he says that in five years time there will be fewer, but much larger and more profitable banks.

AMCON itself is expected to reach its maximum size this year and to decline as it achieves what it is designed to do and becomes a smaller part of the Nigerian econ-omy. Its target is to bring the per-centage of non-performing loans down to 5 per cent.

“My view is that the sooner AMCON reduces in size, the bet-ter it will be for the country, the financial system and the economy in general,” says Mr Chike-Obi. “I would like AMCON to consist of 25 employees just managing individual assets and the bond re-payments.”

on the trail of bad debtsDebtors who have failed to meet their obligations to the banks are now finding themselves being pursued by Asset Management Corporation of Nigeria, AMCON. Lamido Sanusi, Governor of the Central Bank of Nigeria (CBN) has praised AMCON for what it has achieved so far in its cam-paign to reduce non-performing loans.

“Since 2011, the non-perform-ing loans situation has improved significantly,” he says. “The tar-get is for it to be at an average of 5 per cent and that is where we are close to. Liquidity and capital adequacy ratio has also increased across the sector. The achieve-ments recorded by AMCON are so far laudable.”

The corporation has recovered N600 billion ($3.67 billion) from the bad debts it bought from the banks last year. By the end of this year it hopes to recover N1 trillion.

“We are very satisfied with the progress so far, but we have set a

very ambitious target for this year in terms of debt recovery,” says Mustafa Chike-Obi, AMCON’s Managing Director and CEO. “We hope to meet the targets we have laid out.”

AMCON takes a sympathetic approach to debtors it consid-ers honest but who have found themselves in difficulties through circumstances beyond their con-trol. They have their obligations restructured.

However, businesses that no longer make sense are liquidated and merged with viable business-es, while those who simply refuse to pay are pursued “aggressively”.

“Luckily most of our borrowers are constructive; they continue to approach us in order to restruc-ture or repay,” says Mr Chike-Obi. “Many such restructured loans are now performing.”

He admits he expects recover-ing loans to get more difficult as the corporation seeks to tackle hardcore non-payers.

“The easier loans get restruc-tured first. We are recovering at a rate of over 100 per cent of our purchase price, but as time goes by we will have to deal with the more difficult loans, the ones people choose to go to court for. AMCON has extensive recovery powers and we hope they will be sufficient for the difficult recov-ery issues we have to deal with.”

Lawyers and recovery agents are being employed to pursue its debtors across the country.

As an example, AMCON re-cently obtained a court order to take over the Delta Steel Com-pany, in Delta State, from In-dia-based Global Infrastructural Holdings, for failing to settle a N30 billion syndicated loan that it obtained from five banks.

The corporation also has exten-sive legal backing to go after as-sets abroad and will declare some borrowers insolvent in the event that they are unable to pay off the loans.

AmCon is making good progress in reducing the level of non-performing loans

The Asset Management Corporation of Nigeria, AMCON, has already recovered N600 billion ($3.67 billion) from the bad debts it bought from banks last year and it is aiming to raise this to N1 trillion by the end of 2012

“Nigerian banks are now the healthiest banks in the world in terms of asset quality and capital” mustafa Chike-obiManaging Director and CEO of the Asset Management Corporation of Nigeria, AMCON

“Most of our borrowers are constructive; they continue to approach us in order to restructure or repay. Many such restructured loans are now performing.”

“We are recovering at a rate of over 100 per cent of our purchase price.”



Reforms make banking industry strongerAfter changes to its financial systems, nigeria has the potential to become a major financial services hub for all of Sub-Saharan AfricaAs a result of initiatives led by the Central Bank of Nigeria, the country’s banks are more fully engaged with the domestic economy. The Nigerian banking industry has been significant-ly improved by better governance of financial corporations and improved regulatory oversight, and while Nigeria has fewer banks than it did five years ago, those remaining banks are larger and more consolidated. Lessons have been learned: as Jibril Aku, Managing Director of Ecobank Nigeria puts it: “I think we have learned our lesson, one of the lessons being to pay more atten-tion to governance standards. When a sector is booming, there is a tendency to expose yourself to greater risks, so when there is a contraction, you devel-op a portfolio challenge.”

The reforms introduced by the Cen-tral Bank are aimed at sustaining the country’s economy over a long term period and acting as an engine for growth and development throughout the nation. Managing Director for Skye Bank, Kehinde Durosinmi–Etti sees no reason why the re-cent changes should not lead to many countries throughout the continent of Africa view-ing Nigeria as a banking capi-tal, stating: “Nigeria has the potential to become the major financial services hub in Sub-Saharan Africa. There are natural factors that support our ability to develop into a vibrant financial sec-tor hub. We have the largest market in the sub-region and the deepest outside of South Africa. In addition, we have a range of products and services tai-lored to meet the dynamic needs of the populace as well as the necessary in-frastructure that will support and drive this position.”

Ratings are improving too. Zenith Bank is one of three financial organi-

sations in Nigeria that S t a n d a r d & Poor’s

recently rated as ‘positive,’ revising its previous rating

outlook from ‘stable.’ Zenith Bank is one of the largest and most capitalised companies on the Nigerian Stock Ex-change. Its shareholder base of over 700,000 is an indication of the strength and wide acceptance that the Zenith brand enjoys. Group Managing Direc-tor of Zenith Bank, Godwin Emefiele, when recently asked why Nigeria could become a major financial serv-ices hub for Sub-Saharan Africa, said:

“First by sheer size of the market, I think Nigeria stands out as a country that should be a hub. Besides, the fi-nancial system in Nigeria has grown so much as a result of the recapitali-sation of banks that started in 2004, when Nigerian banks were expected to keep a minimum of 25 billion Naira as core capital. Today we see Nigerian banks, like Zenith Bank, with a core capital of almost 390 billion Naira, which is almost $2.8 billion dollars.”

Established in 1894 when incorpo-rated in Liverpool as the Bank for Brit-ish West Africa, First Bank pre-dates all other banks in Nigeria by several decades. First Bank still stands as the

country’s flagship financial services company as well as its main lender. Over the past century it and other banks have seen positive and negative events in Nigeria, from huge economic growth and improved banking regula-tions, to occasional political instability and the recent international downturn, yet has always emerged stronger than before. Similarly, Guaranty Trust Bank has benefited from a strong Nigerian economy and the decisions which have enabled many organisations to survive the recession intact. Managing Director Olusegun Agbaje claims that “The strongest Nigerian banks have come out from the crisis unscathed. It

was because we had one thing that a lot of banks outside did not have and that was that we had just raised capital in 2007-2008. Also profitability was well equipped whereby we would not even eat into the capital.”

Following the recent financial crisis a number of bailouts and mergers took place throughout the Nigerian econ-omy, resulting in fewer, but stronger banks. First Bank, Zenith Bank and Guaranty Trust were all positively re-viewed by Standard & Poor’s, and the ratings agency claimed the new outlook reflected each bank’s standalone credit profiles and outlook on the sovereign.

Managing Director for Skye

Bank, Kehinde Durosinmi–Etti is confident that the efforts of the Central Bank will lead to Nigeria becoming a financial centre, say-ing: “Following the initiative of the CBN, banks are encouraged, to lend to three critical sectors of the economy: agriculture, in-frastructure and power. We will support the growth of Ggse strate-gic sectors. Our contribution as a bank is to support the government in repositioning these sectors for optimal effectiveness. With the level of capital in the bank, we are adequately positioned to support these initiatives.”

“First by sheer size of the market, I think Nigeria stands out as a country that should be a hub. Besides, the financial system in Nigeria has grown so much as a result of the recapitalisation of banks that started in 2004.“Godwin Emefiele, Group Managing Director of Zenith Bank

Since the consolidation of Nigeria’s banking system some of Africa’s largest and most dynamic banks are now based in the country, with a few banks expanding across the region and beyond. While in the past many African financial institutions were vague about their assets and debts, new transparency laws laid out by the Central Bank of Nigeria ensure that details of the country’s economic system as a whole are disclosed and free for all to see. “Nigeria remains one of the best banking systems in sub-Saharan Africa in terms of trans-parency and corporate governance. Many things that are being spoken about today never used to be out in the open. Banks and companies are now disclosing and opening up their books for people to see what is hap-pening in these institutions. I think that if you compare Nigeria to some other countries in Sub-Saharan Af-rica, we have come out very strong,” says Godwin Emefiele, Group Man-aging Director of Zenith Bank.

Over the past few years Ze-nith Bank has become one of the country’s top financial institutions through a mixture of dynamism, in-novation, firm leadership and clear business insight. With its strong brand recognition and strategically distributed branch network, Zenith Bank has maintained a healthy share of the Nigerian market after the re-cent financial difficulties experi-enced worldwide. “As you know the world economic recession began in late 2007 through 2008 and 2009. No doubt this had a trickledown ef-fect on the Nigerian economy. Of the lessons we learned during the recession, a core issue was cor-porate governance and the failure

of risk management practices. We learnt from this experience and as a result a stress test was introduced around mid-2009 by the Governor of the Central Bank, Lamido Sa-nusi. Most of our 24 banks passed this stress test; Zenith was actually one of the ones that came out very strong, thanks to our strong liquidity and capital adequacy ratio as well as a low non-performing loans ratio,” says Mr Emefiele, discussing the ef-fect of the financial crisis on Zenith

Bank. “The main lesson is that we saw a failure of corporate govern-ance and risk management practices and, I am sure that Zenith, just like every other bank, has learnt from this experience and put structures in place to ensure that this does not happen again.”

The strength and growth of Niger-ia’s financial system is a result of the recapitalisation of the country. To-day, banks such as Zenith have capi-tal of almost $3 billion – one of the

largest in West Africa and the fifth or sixth largest in the whole continent. Despite a sharp decline in market values all over the world last year, Nigeria experienced just a 16.3 per cent decrease compared to China’s 22.8 per cent, India’s 22.6 per cent and Egypt’s 48.9 per cent. Analysts and market operators are already pre-dicting a growth for 2012 of as much as 14 per cent. This growth will help the likes of Guaranty Trust Bank to continue its work as one of the lead-

ing lenders in Nigeria. “We have to continue to work hard. We need to change, re-tool and adapt to continue excelling in our performance,” says Olusegun Agbaje, Managing Direc-tor of Guaranty Trust Bank.

Mr Agbaje also predicts further expansion for Nigerian banks in the future. “You must look outside Nigeria as well because, while Ni-geria is important and we must con-tinue to fight and maintain market share in the country, we must not

allow ourselves to forget that there are countries outside and they will also present opportunities. So, we will look at those – but in whatever dreams and vision we have, we will stay Africa-focused.”

The improvement and growth of all major financial institutions in Nigeria is something that each bank sees as a priority. “A lot has been done in the financial sector and I can say that the Central Bank of Nigeria has put a great deal of effort over the

past two years to deal with the prob-lems and challenges of the industry. With these reforms, the banking industry is back on track and mov-ing forward in a very positive direc-tion,” says Kehinde Durosinmi-Etti, Group Managing Director of Skye Bank, who envisions huge growth for Nigeria’s banks over the coming years. “The reforms in the financial sector are geared towards providing financing and enabling opportuni-ties in key sectors of the economy. We believe that the banking sector has the opportunity to grow at about 20%-30% annually.”

From strength to strengthnigerian banks are growing stronger and looking to expand further

“We believe that the banking sector has the opportunity to grow at about 20%-30% annually.”Kehinde Durosinmi-Etti, Group Managing Director of Skye Bank

The newfound strength and growth of Nigeria’s financial system can be attributed to the recent recapitalisation process





Hi-tech playing its partAcross nigeria major banks are improving existing facilities and embracing new technologies in order to maintain a modern, online banking system for the digital age

The use of online banking websites, ATMs and digital transfers is set to increase dramatically across Nigeria over the coming decade as the Central Bank introduces cashless banking ini-tiatives to bring Nigerian financial in-stitutions up to date with international standards. These innovations will en-able the Nigerian workforce, many of which remain unbanked, to embrace a simpler, more straightforward ap-proach to personal finances which has the potential of eradicating a substan-tial amount of unnecessary poverty still experienced due to lack of avail-able financial advice or lending.

At present Zenith Bank boasts the largest number of credit and account cards among its customers as well as the highest number of point of sale terminals across the country. This technology allows Zenith custom-ers to pay digitally at retail check-outs and tills, reducing their reliance on cash, and increasing their control over personal spending. This focus on technology is something that Zenith Bank innovated and is now a standard model across Nigeria.

“Since the inception of Zenith Bank we have taken our people and our

technology very seriously. Because of this, we have developed a lot of inno-vative products. Zenith was the first bank in Nigeria to adopt technology. In terms of online real time services, Zenith Bank stands tall. Internet bank-ing started in Nigeria through Zenith Bank back in the early 1990s,” says Godwin Emefiele, Group Managing Director of Zenith Bank.

“We want to let people do business the way it is done in other parts of the

world, so you do not have to carry large amounts of cash. I think people in Nigeria should begin to do busi-ness with the aid of electronic cards and channels. People do not necessar-ily have to visit a bank after opening an account and getting a credit card.”

The aim of a cashless country was set out by the Central Bank of Nigeria and has been embraced by every ma-jor bank. Guaranty Trust Bank has also been an innovator when it comes to new products and digital solu-tions. The institution now boasts an E-branch, a system for drive-through banking, and the new Guaranty Trust Bank On Wheels, a fully mobile bank-ing branch. Guaranty Trust was also the first company to issue a specifi-cally Naira denominated MasterCard, reducing the costs of international banking for many of its customers.

A large amount of young Nigeri-ans, especially university students, are becoming accustomed to shop-ping online and digital payments, and Nigerian banks are keeping up with these demands by offering wire-less banking through laptops and mobile phones.

“The last time I heard the Minis-ter of Communications Technology speak she was talking about the im-portance of ‘creating clouds’ in uni-versities so people have more Wi-Fi access through their phones and thus are able to reach a much larger popu-lation. Through targeting young peo-ple and university students, one thing that is clear to me is the greater Wi-Fi access they have, the better it will be for all concerned within the bank-ing and telecommunications sector,” said Olusegun Agbaje, the Manag-ing Director of Guaranty Trust Bank. “These ‘clouds’ of Wi-Fi above all the universities is great news for us be-cause when I think of internet banking I do not think of PCs anymore, I think of Wi-Fi and so forth. I have started to think more in terms of mobile phones rather than laptops.”

It is not just the existing custom-ers and the younger generations that will benefit from these new technolo-gies, as they are also aimed at attract-ing the large population of Nigerians who remain without bank accounts. It is estimated that only 43% of work-ing Nigerians currently use a bank account, which leaves a huge propor-tion unbanked and exclusively using cash. The cashless initiative set up by the Central Bank of Nigeria aims to help these people embrace digital transactions by making the transition as simple as possible. Each major bank in Nigeria is keen to attract the un-banked. Mobile payment and on-line banking are two areas that are expected to attract working Nigeri-ans without bank accounts, especially those in rural areas with no access to bank branches.

Mr Emefiele is confident that these initiatives are the way forward for the Nigerian economy, stating: “Zenith Bank recently received final approval for mobile payment, which is some-thing that the Central Bank and the fi-nancial industry hope will help bring in the un-banked. So Zenith Bank has just put all the necessary facilities in place. We believe that this will al-low between 60%-70% of the under-banked population to be financially included in the system.”

leaner and stronger banksThe mergers and acquisitions of 2011-2012 have created a smaller roster of larger and stronger lenders

For some banks and investors, the 2011 Nigerian financial shake-up may have posed a threat to the com-fortable status quo. To others, it sig-nalled a definite downfall. To some, however, the rearranging, the merg-ers and acquisitions, and nation-alisation process represented a huge opportunity. Those banks whose corporate governance had been good and financial figures solid, were well positioned to take advantage of the turmoil and come out ahead. Such was the case of Ecobank Tran-snational Inc (ETI), a Togo-based multinational group with a growing and sound business in Nigeria, who in the last quarter of 2011 took over one of Nigeria’s troubled banks – Oceanic Bank International Plc.

When shareholders first heard of the board’s decision to acquire Oce-anic Bank after it failed to pass the stress test jointly conducted by the CBN and the Nigerian Deposit In-surance Corporation last year, they saw an opportunity for growth. Fast forward to ETI’s 2012 annual gen-eral meeting. Shareholders praised the investment, recognising that it went a long way in giving Ecobank the thrust it needed to break into the top five banks in Nigeria, the most populous country in Africa.

For Arnold Ekpe, outgoing ETI Group CEO, this was the single most significant event in 2011 and helped fulfil his vision to place the bank in the tier one segment in Nigeria. This swan song feat transformed Ecobank into Nigeria’s second largest bank by branch network – with 610 branches – and fifth largest in terms of assets.

Though by far the largest and most important, the Oceanic Bank acqui-sition was not the first for Ecobank Nigeria, as previous reforms in the banking sector had required the fi-nancial institution to expand.

Jibril Aku, Managing Director, explains: “In Nigeria we found our-selves small, because historically the bank was a corporate and invest-ment bank that catered to a particu-lar class of customers. But after the 2005 banking reforms, which raised the capital level to $200 million, we had to expand into a full service bank and we started to grow. Before we acquired Oceanic, we had three other acquisitions: Allstates Trust, Hallmark and Africa International banks.

“That increased our market share but it was not going to take us to top three. Organically we could not do it because the other banks were also growing. With the monetisation of foreign currency, you can actually grow without taking business from anybody else.”

He continues: “With Oceanic Bank we found a bank that was well embedded in the middle market. While Ecobank had mostly corpo-rate accounts, it was missing that value chain of distributors, suppli-ers and employees, whereas Ocean Bank was missing the corporate value chain. So, it was the perfect combination. In Oceanic Bank we also found a vibrant microfinance business, being run as a department. At the time of the merger that busi-ness had N20 billion in assets – N1 billion in loans and the rest were deposits. These small savers borrow

money and repay every time, which encourages a savings culture.”

At year-end 2011, ETI’s revenue from operations in Nigeria had grown by 42% to $360 million, while profit before tax had risen by a massive 338% to $38.8 mil-lion. Assets also rose, totalling $7.5 billion, a 150% increase on 2010. Ecobank’s customer base rocketed from 1.3 million to 5.9 million, fol-lowing the acquisition.

Present in 33 countries on the continent, the pan-African group has pursued a growth strategy based on both mergers & acquisitions and greenfield projects. To date, ETI has made a dozen acquisitions, mainly during the commodity boom, when

African customers were especially keen on banking services that inter-connect African markets.

“We follow the African trade chain and provide the banking sup-port for it,” says Mr Aku. “We have built a One Bank concept. We can move workers across these coun-tries, regardless of language or na-tionality barriers. Truly, we are the pan-African bank. Our products are designed to provide convenience as you do business or travel across West Africa. Our remittance product provides a rapid transfer of service, and our debit card – which is used to access accounts in Nigeria – is called the Regional Card, because you can receive cash in local cur-rency in any country. We are the bank for clients who have regional ambitions beyond Nigeria and want to have an African footprint.”

ETI’s acquisition “frenzy” (in 2011, it also acquired The Trust Bank in Ghana) is winding down and now the bank plans to focus on its customers and internal efficien-cy, a strategy that should drive the group’s profits up across the regions.

Ecobank isn’t the only bank com-ing out ahead as a result of the CBN reforms. Another banking merger, completed in February 2012 be-tween First City Monumental Bank (FCMB) and FinBank PLC, is set to drive FCMB’s profits back into the black this year and has produced a customer base of 1.7 million.

The overall process, however, has not been as fluid as the Ecobank-Oceanic Bank one. As Ladi Balo-gun, Managing Director of FCMB, stated in the bank’s most recent annual report, it was “a transaction that tested our resources and resolve in a longer than anticipated acquisi-tion campaign.”

Although FCMB was strong enough to take on FinBank, it had recently experienced a few difficult years due to the 2006-2009 capital market bubbles and the excesses in oil prices. Mr Balogun remains op-timistic: “With the bold provisions and write-offs taken, we have now put these behind us and can look forward with confidence to signifi-cantly better years ahead.”

“We want to let people do business the way it is done in other parts of the world, so you do not have to carry large amounts of cash.”Godwin Emefiele, Group Managing Director of Zenith Bank

Zenith Bank was the first to introduce internet banking in Nigeria, and continues to innovate with technology

“We have built a One Bank concept. Our pro-ducts are designed to provide convenience as you do business or travel across West Africa.“Jibril Aku, Managing Director of Ecobank Nigeria

Pan-African group ETI is present in 33 countries


As a result of their expansion and internationalisation, many Nigerian banks aim to become global players, with corporate visions in tune with the government’s agenda to make the country one of the world’s top 20 economies. But if Nigeria is to suc-cessfully raise its international eco-nomic profile, then its banking sector must do likewise.

Diamond Bank is one of a raft of banks determined to highlight the service quality, strengths and compe-tences that can be found in Nigeria’s banking industry that fly in the face of global misconceptions. “The Nige-rian banking industry has learnt many lessons, the major one being corpo-rate governance,” says Dr Alex Otti, Group Managing Director and CEO of Diamond Bank. In June 2009, the administration changed at the Central Bank of Nigeria (CBN), and Gover-nor Lamido Sanusi’s team introduced

many far-reaching reforms, dispatch-ing examiners from the Nigeria De-posit Insurance Corporation (NDIC) and CBN to every bank in the country. “The CBN took action, which led to the reduction in the number of banks we have today after the mergers and acquisitions that took place. Three banks were taken over by AMCON (Asset Management Corporation Of Nigeria) and they have been recapital-ised and are in the process of being sold,” says Dr Otti.

The capital adequacy ratio, which is often used to measure a financial in-stitution’s strength, of Nigeria’s banks is between 15-30%, well above the CBN’s minimum stipulation of 10%. However, image and branding are es-

sential if Nigeria’s banks are to trans-late their strengths into international success, as both national and interna-tional perceptions are vital to attract-ing clients and banking partners.

In a 2012 report published by the London-based brand valuation con-sultancy Brand Finance, four of Ni-

geria’s banks make it into its list of the 500 most valuable world banking brands. First Bank of Nigeria was ranked as the number one bank brand in Nigeria, with its brand valued at $170 million (€135 million). It was closely followed by Guaranty Trust Bank, with a brand value of $169 mil-lion. Zenith Bank came third, at $147 million, and United Bank for Africa (UBA) had a brand value of $121 mil-lion.

The four banks’ brands are also amongst the world’s top 50 by total brand value by country. South Af-rica’s top 10 bank brands led the Afri-can pack with a combined brand value of $8.2 billion, followed by Nigeria’s four totalling $607 million.

Guaranty Trust Bank’s ranking as a global brand has been earned through a number of firsts in its business, part-nerships and corporate social respon-sibility endeavours. In 2007 it became the first sub-Saharan bank to be listed on the London Stock Exchange.

“We have picked nine countries in

which we would like to engage over the next five years. We are hoping that by then we will have a footprint in 12 to 15 African countries,” says Oluse-gun Agbaje, Group Managing Direc-tor and CEO of Guaranty Trust Bank.

So far, the group operates in three geographic regions: Nigeria, Rest of West Africa (Ghana, Gambia, Sierra Leone and Liberia) and Europe (UK and Netherlands).

Skye Bank is also looking into re-gional expansion. Group Managing Director and CEO Kehinde Duros-

inmi-Etti comments, “We are cur-rently active in three West African

countries: Guinea, Sierra Leone and Gambia. We have focused on

English-speaking countries to start with. We are in two such countries and have a foot-hold in a francophone coun-try. This is important because most of the countries in West Africa are French-speaking, which makes it key to have a

presence in order to access this wider market.”

UBA has also made s i g n i f i c a n t

strides: Boston Consulting Group has ranked UBA among the top 40 African Challengers – African com-panies competing and rapidly ex-panding in the global economy. With the start of operations in Congo DRC and Congo Brazzaville, UBA is now present in 19 African countries be-sides Nigeria.

Meanwhile, Zenith Bank has been growing its brand internationally in the UK, Ghana, Sierra Leone and The Gambia. It also has representa-tive offices in South Africa and Chi-na. “Our aspiration is to continue to expand and make our world-class products and services available to as many markets as possible. We will also ensure that we contribute to the growth of the local economies we enter,” says Godwin Emefiele, Group Managing Director and CEO of Zenith Bank Plc.

Finally, with a presence in 35 countries, 33 of them in Africa, Ecobank can claim to be a truly pan-African operation. Ecobank also has representative offices in Dubai, London and China. “If you want to do business in Africa, there is only

one bank that takes you to 33 coun-tries. We have relationship managers based in Paris that market European communities and businesses into Africa,” says Jibril Aku, Managing Director of Ecobank Nigeria, who also has plans for his bank to enter Angola and Mozambique.


Small and medium-sized enterprises (SMEs) are crucial to the develop-ment of any economy. They pos-sess great potential for employment generation, improvement of local technology, output diversification, development of indigenous entrepre-neurship and forward integration with large-scale industries. World Bank research reveals that, on average, for-mal SMEs contribute to 50 per cent of GDP in high-income countries. Also, in OECD countries, SMEs with fewer than 250 employees employ two-thirds of the formal workforce

According to the Central Bank of Nigeria (CBN), four key issues have hindered Nigeria’s SME growth: un-friendly business environment, poor funding, low managerial skills and lack of access to modern technology. Globally, commercial banks have in many cases shied away from lend-ing to small businesses because of perceived risks and uncertainties in recent years. In Nigeria, previous double-digit interest rates have been a further deterrent for businesses seek-ing out loans.

To improve access to finance for SMEs, Governor of the CBN La-mido Sanusi has announced the es-tablishment of a N200 billion micro business and SME (MSME) devel-opment fund before the end of the year. He affirms that the fund will be a veritable source of funding for small businesses in the country.

According to the Governor, “MS-MEs play a major role in Nigeria’s economy with about 95 per cent of firms in the organised manufactur-ing sector recognised as SMEs, which account for about 75 per cent of in-dustrial employment, yet contribute a mere 10 per cent to GDP.”

In addition, the Minister of Trade and Investment Olusegun Aganga has announced that the Ministry’s NIRP (Nigerian Industrial Revolution Plan) is to provide the framework for fast-

tracking the country’s industrial revo-lution and attracting investments into the critical sectors of the economy.

Efforts to kick-start small busi-nesses are not just coming from the government. In the private sector, Nigeria’s banks are also now pushing financial and business support pack-ages to budding entrepreneurs. Dia-mond Bank in particular has shone in this sector and its initiatives have garnered international praise, lauded as the best bank for MSMEs in the country. It has entered into partner-ship with the IMF to expand access to finance for SMEs across the country and Shell to increase support in oil-producing communities. Diamond Bank has also recently signed a mem-orandum of understanding with a Russian company that is experienced in consumer lending for the under banked and SMEs.

The small business department at Nigeria’s Zenith Bank is building up its portfolio. Its reserve for invest-ment in small-scale businesses cur-rently exceeds N3.7 billion (€17.9 million) and the bank is on the look out for viable projects and business opportunities with good returns and strong growth prospects. In addi-tion to funding, Zenith Bank pro-vides SMEs with business advisory and project management services to help new businesses start with good corporate governance practices from day one.

“As a Nigerian institution, we are supporting the government’s efforts in growing agriculture, manufactur-ing, infrastructure, and power sectors. These are areas that the government is looking at aggressively,” says God-win Emefiele, Group Managing Di-rector and CEO of Zenith Bank Plc. “That is why you see the government, the Ministry of Agriculture and the CBN setting up various financing schemes where banks are given guar-antees for loans to agriculture compa-

nies, or loans granted to SMEs. The CBN has agreed to award short-term liquidity to those who need to finance some operations, especially small manufacturing companies. Most manufacturing companies have em-braced this initiative and Zenith Bank has guaranteed some loans to these customers.”

At the Guaranty Trust Bank, Group Managing Director and CEO Oluse-gun Agbaje also highlights the agri-cultural sector as ripe for increased lending. “We should look at agricul-ture the way we look at any other commercial business – as an enter-prise that will make money and will pay back,” he says. “What we are concerned about is that any loan we give out gets paid back. So once the agricultural sector becomes commer-cially valuable, and the value chains

are quite clear, we will move away from the primary part of it and go to where there is added value; banks are always looking for new areas to put money into.”

As businesses take off and pros-perity spreads, Nigeria’s emerging middle class is opening up a poten-tially huge future market for person-al banking services.

“The middle markets and SMEs are areas where I envision much growth, as well as in agriculture. Nigeria has a very vibrant and grow-ing middle class, as is evidenced by the shopping malls you can see springing up in the cities. People are starting to exhibit lifestyles similar to those in more developed econo-mies. The middle class is very young and there is going to be tremendous growth in that area,” says Faith Tue-

dor-Matthews, Group Managing Di-rector and CEO of Mainstreet Bank.

“The government is investing heavily in the agricultural sector. As part of the efforts to reduce risk in that sector, they are subsidising loans to finance the agricultural value chain through a collaborative effort with the banks. We expect to see a lot of employment com-ing out of this sector in the future. Also, significant banking growth in the retail segment will be spurred through retail outlets and chains, such as hotels, supermarket chains or auto dealerships, issuing credit facilities to consumers through the use of credit cards. As people’s level of sophistication rises, you will find out that banks will begin to face competition from outlets outside the financial services segment.”

Banks are working together with government institutions to make financing available for small businesses

Providing support for SmEs to grow

The Nigerian Industrial Revolution Plan will help fast-track the country’s development

“We are supporting government’s efforts in growing agriculture, manufacturing, infrastructure, and power sectors.”Godwin Emefiele, Group MD & CEO of Zenith Bank

“SMEs account for about 75% of industrial employment, yet contribute a mere 10% to GDP.”Lamido Sanusi, Governor of the CBN

“We should look at agriculture the way we look at any other commercial business.” Olusegun Agbaje, Group MD & CEO of Guaranty Trust Bank

“The middle markets and SMEs are areas where I envision much growth, as well as in agriculture.”Faith Tuedor-Matthews, Group MD & CEO of Mainstreet Bank

“We provide limitless opportunities to small medium scale enterprises andsmall-medium corporates.”Kehinde Durosinmi-Etti, MD & CEO of Skye Bank

local banks go globalnigerian banks are taking significant strides in building a global brand and establishing international footprints

“Investing in a Nigerian major bank might actually give you a foothold into Africa because the mother bank will always be looking to expand.” Olusegun Agbaje, MD Guaranty Trust Bank



New policies introduced by the Central Bank to increase financial stability over the past few years have prompted significant changes in Nigeria’s banking sector. The in-dustry has been undergoing a period of transformation as banks have em-barked on consolidation initiatives involving recapitalisation, manage-ment shake-ups, mergers and acqui-sitions, policy reforms and other in-stitutional changes as they looked to strengthen their businesses and plan for future expansion.

In the world of retail banking, the landscape has changed with the crea-tion of larger competitors in the top tier of banks, who are aggressively pursuing larger market shares. Even smaller banks are also chasing greater deposits with more gusto, evolving their product ranges on offer to ap-peal to modern lifestyles and encour-age access in rural communities.

The retail banking sector – often viewed as the ‘high-street face’ of banking – incorporates private bank-ing services, individual customer cur-rent accounts, savings deposits, in-vestment savings products, credit and debit cards, customer loans and mort-gages. In addition to private individu-al customers, it also involves meeting the banking needs of small and medi-um-sized enterprises (SMEs).

The changing environment puts additional pressure on banks to focus on the quality of their customer serv-ice, as retail banking relies heavily on customer loyalty and the banks need to allay any feelings of uncertainty or instability in their current customer base, while at the same time seek out new accounts. Long queues and in-attentive staff are major annoyances for banking customers and the cur-rent trend toward mobile and internet banking means financial institutions need to sharpen their focus on both physical and virtual customer service.

“Within the process of re-tooling you have to bring in younger and brighter people, you must look at new horizons and continue to re-in-vent oneself. You must look at retail and try to analyse new sectors,” says Olusegun Agbaje, Managing Direc-tor and CEO of Guaranty Trust Bank, one of Africa’s leading banks.

Guaranty Trust Bank came out top in a customer satisfaction survey carried out by Nigeria’s S.M.A.R.T. Advisory Ltd, a business solution provider specialised in analysing cor-porate finance, business management and process improvement to help businesses grow. S.M.A.R.T. polled more than 7,000 customers of banks nationwide and Guaranty Trust Bank came out the number one choice as the bank to switch to if they were to change banks; 28 per cent of all re-spondents indicated their preference for Guaranty Trust Bank. The survey also reported that about one in five people had an account with Guar-anty Trust Bank and it got the most frequent recommendation from its customers to other people, reflecting a large army of support for the bank.

Until 2007, Guaranty Trust Bank was essentially a high-end wholesale bank – up to around 70-80 per cent of its business was dealing with that market. It then started to grow its retail base and in 2011 the retail seg-ment of Guaranty Trust Bank had 3.4 million clients and represented 41 per cent of the bank’s deposits, 8 per cent of its loans and 15 per cent of its prof-its before tax.

The bank is currently in the process of conducting a very strict segmenta-tion of its retail base. “As you go into retail you start to see even more op-

portunities,” says Mr Agbaje. Guaranty Trust Bank has separated

SMEs’ services from its main retail unit to allow it grow independently. It has also segmented the retail unit itself and developed a private bank-ing section to focus on the country’s emerging middle class separate from the mass retail business. Nigeria’s middle class is estimated at around 23 per cent of the population – a project-ed 36 million Nigerians defined as earners of average monthly incomes between N75,000 and N100,000 ($463-$617).

“The reality about retail is that while it has opportunities, it is a very expensive business if you do not scale it properly,” says Mr Agbaje. “For Guaranty Trust, if you compare us to our peers, we believe that cost is the only sustainable source of competi-tive advantage. Therefore, in every-thing we do we make sure we have a cost-effective model. We are going to try to serve our retail customers as much as possible, not through bricks and mortar but through alternative channels, and that is why we do not have a massive branch network. We

think that to service Nigeria effec-tively you do not need more than 250 branches, of which some of them will be e-branches. E-branches are a lot of what we are rolling out now: they just have cash deposit ATMs, cash pay ATMs, kiosks, so no physical staff are actually needed.”

Interestingly, the S.M.A.R.T. sur-vey noted that while 26 per cent of those polled look at the stability and the financial strength of a bank, many customers of Guaranty Trust Bank showed a departure from this trend as 36 per cent of its customers chose to open an account with the bank as a result of its customer service experi-ence – perhaps taking its financial stability as an assumed quality.

The bank’s aim is to reach 10 mil-lion retail customers in the next five years, up from its current 3.4 million account holders. “As the middle-class grows, we will create a way of servic-ing them in a manner they are used to. We went into retail and have learnt as we have gone along; we have ac-quired more than three million cus-tomers in just five years. A big thing for us now is to conduct the segmen-tation properly and service clients ac-cordingly,” says Mr Agbaje.

The S.M.A.R.T. survey also report-ed Nigeria’s Diamond Bank as be-ing well recognised for its customer support, noting that it was “strong in rewarding its customers for loyalty as 31 per cent of them indicated the bank rewards customers for being with them over a long period.” It also enjoys 55 per cent of its clients regu-larly recommending the bank to oth-ers. Similarly, the report showed Ze-nith Bank, which over the years has redefined customer service standards and created diverse service delivery channels, was equally appreciated, being recommended by 57 per cent of its customers on a regular basis.

Competition for retail banking raises the quality barWith a population over 160 million and a mere estimated 20-25 million bank accounts, there is significant room for expansion in nigeria’s retail banking sector

Diamond Bank’s unaudited results released on the NSE trading floor show gross earnings of N64.6 billion

“We are going to try to serve our retail customers as much as possible, not through bricks and mortar but through alternative channels“ Olusegun Agbaje, MD & CEO of Guaranty Trust Bank

Financial inclusion in Nigeria is low – approximately 40 per cent of the population are under-banked or completely unbanked, which means there is a huge untapped market, especially in rural areas, for banks looking to expand their reach. As modern developments in mobile banking mean a physi-cal branch is no longer absolutely necessary for banks to deliver eve-ryday banking services to custom-ers, electronic banking has become one of the greatest innovations in modern banking services, widen-ing access to banking products and adding a whole new level of convenience in personal bank-ing. Diamond Bank has been at the forefront of developing online retail banking in Nigeria since its inception more than 20 years ago.

“From day one, Diamond Bank integrated all its branches into an online network, so all you needed to carry was your chequebook. To-day, online banking is a given in the industry, but we pioneered the service in Nigeria. We have contin-ued that trend of pioneering, inno-vation, and product development, and we pride ourselves on being the number one retail bank in the country,” says Dr Alex Otti, Group Managing Director and CEO of Diamond Bank.

Diamond Bank ranks amongst the top 50 banks in Africa with around $3.85 billion in assets, 230 branches, some 300 ATMs and 1.8 million account holders. It was the first African bank to be listed on the Professional Securities Market of the London Stock Exchange fol-lowing $500 million in Global De-pository Receipts (GDRs) in Janu-ary 2008.

A multiple award-winning finan-cial institution with a presence in West Africa’s Francophone coun-tries, Diamond Bank has always paid close attention to emerging technologies. It was the first to introduce debit and credit cards in Nigeria that also work anywhere in the world. Additionally, its ATMs, point-of-sale terminals, internet banking, mobile banking and cards themselves are integrated on the same platform, so clients only need one PIN. In May, it announced that the bank’s internet banking serv-

ice, DiamondOnline, had gone live on CR2’s BankWorld internet platform. In partnership with Pa-gatech, the bank is also developing additional e-banking products and a mobile money system that effec-tively turns any mobile phone into an electronic wallet.

“These types of initiatives will make a difference in the rural pop-ulation in Nigeria,” says Dr Otti. “We have an advantage in that we have been able to go into many of the areas where there are more small and medium-sized enterpris-es (SMEs). We are probably one of the few banks in Nigeria that pro-vide good support for SMEs today. With a good business plan, we can award anyone an unsecured loan of up to 2 million naira ($12,320). Some people with very good ideas do not always have the financial security that banks usually ask for.

We have a good story to tell in the retail banking area.”

In addition to its Retail Bank-ing section, Diamond Bank’s three other units cater to other financial markets. The Corporate Banking department deals with large corpo-rations and multinationals in sec-tors such as the oil and gas industry, power, maritime, manufacturing, aviation and telecoms. Its Business Banking section serves the needs of the middle-market customer and the bank’s Public Sector unit is set up to serve the banking needs of the federal government, its agen-cies and parastatals.

Internationally, Diamond Bank has partnered with major banks and institutions such as Deutsche Bank and Commerzbank. “Ger-man banks can find more profit-able use for facilities they want to create by partnering with a local bank like ours. We have the local knowledge and can provide them with guarantees so they do not face any credit risks,” says Dr Otti. The CEO highlights various sectors where “the opportunities are huge” for German investors wanting to invest directly in Nigeria, particu-larly in agriculture, infrastructure and telecoms.

The bank is recognised by the IFC as the Best Micro and SME Bank in Nigeria and has worked with the IFC and World Bank to help boost the country’s small business sector. “The IFC gave us about $20 million for initiatives with SMEs and another $20 mil-lion for agriculture,” says Dr Otti. “Together with Shell we also put together a $30 million GroFin fund to support SMEs in the oil-produc-ing communities.”

Dr Otti adds, “We have gone into uncharted territories and pioneered a technology-driven service. We have retooled our bank, re-analysed our strategies, redefined our brand essence, and geared up towards excelling even more than we have done over the past two decades. We have the right people with the right skills, the right technology and the right kind of customers. Currently, we have a product range that caters to every socioeconomic segment. With Diamond bank, there is some-thing for everybody.”

A shining example of nigerian bankingFocusing on innovation and technology has put Diamond Bank at the cutting edge of the industry, and made it the number one choice for SmEs

”Today, online banking is a given in the indus-try, but we pioneered the service in Nigeria.”Dr Alex Otti, Group Managing Director and CEO of Diamond Bank

By 2011, 41% of Guaranty Trust Bank‘s deposits were from the retail segment





Raising capital through bondsnigeria’s $500 million Eurobond was oversubscribed 2.5 times, proving international confidence in the country’s economy as a whole, and its financial institutions in particular

Kehinde Durosinmi-Etti, MD & CEO of Skye Bank

Breathing new life into nationalised banksRecapitalised banks are going through a transformation to make them more attractive to potential investorsIn August of 2011 a decision was made by the Asset Management Corporation of Nigeria (AM-CON) to recapitalise three of the country’s banks to the tune of 15 per cent Capital Adequacy Ratio through the bond issuance. The recapitalisation of Mainstreet Bank, Keystone Bank and Enter-prise Bank was aimed at boosting the bond market. The Central Bank of Nigeria revoked the ope-rating licenses of Afribank, Bank PHB and Spring Bank for failure to consummate binding mergers and acquisitions toward recapita-lisation.

These events occurred on August 5th of last year, ahead of the ori-ginal September 30th deadline, and Afribank, Bank PHB and Spring Bank were replaced by Mainstreet Bank, Keystone Bank and Enter-prise Bank respectively. The ins-titutions are now run by AMCON. This nationalisation of some of Nigeria’s financial institutions is thought by analysts to minimize many of the risks and problems that would have stemmed from li-quidation. The full deposit liabili-ties of these financial institutions would have been a serious burden for the Nigerian Deposit Insurance Company and the Central Bank of Nigeria had liquidation occurred, and could have led to another cycle of job-losses.

Group Managing Director and Chief Executive Officer of Mainstreet Bank, Faith Tuedor-Matthews, has over two decades’ experience working with leading banks in Nigeria. At present Ms. Tuedor-Matthews is working with both the shareholders and manage-

ment teams at Mainstreet Bank in order to turn the institution around in preparation for its sale to pri-vate investors. From a customer’s perspective the bank had to be sta-bilised in order to win back confi-dence in the institution.

“There were a number of mea-sures that needed to be taken once we concluded a wide-ranging di-agnostic study of the bank. First, we needed to stabilize the organi-sation in terms of its staff and cus-tomers. This bank is over 50 years old, but has never gone through any major transformation. There had been about three government interventions before we came in.

So, some staff were apprehensive about their job security. Although the previous bank’s license was revoked, we took on every mem-ber of staff,” Ms Tuedor-Matthews said of the changeover, before go-ing on to highlight the investment potential the new rebranded bank enjoys. “There were issues that led to the nationalisation of the-se banks.These have largely been addressed now by the regulators. There is now greater levels of dis-closure and transparency; stron-ger risk management and corpo-rate governance framework in all banks, and as a result a stronger financial services sector.”

Faith Tuedor-Matthews, MD and CEO of Mainstreet Bank

Bonds are generally defined as a loan given to a government in ex-change for certificate of invest-ment and differ substantially from shares. While typical shares repre-sent an entitlement to ownership of a specific company, bonds are loans or debt which is owed by the issuer to anyone who may choose to take them up. This key difference represents one of the main advan-tages that investing in bonds holds over investing in stock. Generally, investing in debt is safer than in-vesting in equity, simply due to the fact that debt holders have a prior-ity over shareholders in the event of a company filing for bankruptcy. If this happens, debt holders will re-ceive capital before any sharehold-ers do. Creditors often receive their investments back in the case of bankruptcy while shareholders may lose their investment.

In January of 2011 Nigeria issued a $500 million Eurobond with a 7 per cent yield: the offer was over-subscribed 2.5 times. People have speculated as to why the country would take the bond option and the decision was widely discussed among those involved in the Ni-gerian economy, with members of different financial organisation ex-pressing concern as to whether the decision taken would be a successful one.

But Nigeria’s Minister of Finance at the time, Olusegun Aganga, was bullish in his assessment of the of-fer, and its success. “This single transaction clearly puts Nigeria on the global map. We now have a transparent and internationally ob-servable benchmark against which international investors can accu-

rately price risk.”The delay in the bond offering,

and the fact that the amount was relatively small when compared to other international dealings at the time, was due to caution and fear of failure in the international market-place. Eurobonds are issued in by an international syndicate and nor-mally categorised by the currency in which they are denominated. The

Eurobond issued in London by the Nigerian government was denomi-nated in U.S. dollars – known as a Euro-Dollar bond. At the time Ni-geria had the option to issue this Euro-Dollar bond in any country other than the U.S. The Eurobond represents an attractive financing tool to many countries as they offer the issuer the flexibility to choose any country in which to offer their bonds. This allows the issuer to choose a country whose regulatory constraints and legislation suits the issuer’s needs, as well as giving them the opportunity to denomi-

nate their Eurobond in whatever currency they choose. These bonds are attractive to potential investors as they tend to have high liquidity and small par values. The Eurobond issued by Nigeria last year is set to represent a benchmark yield curve for the country in the global mar-ket, resulting in the ability to easily repay investors rather than simply raising funds. At the time the Eu-robond was issued Nigeria’s foreign reserves were over sixty times the size of the bond itself. The country also had an external debt to Gross Domestic Product ratio of just 2.3 per cent, meaning the risk of default on the Eurobond was negligible.

However, some experts are spec-ulating whether this Eurobond puts the Nigerian economy at risk, as it may expose the nation’s banks to foreign exchange fluctuations and other risks that can occur because of external borrowing. However, the decision made by Nigeria to raise funds from the international financial market is not an indica-tion that its banks are experiencing problems, but rather a reflection of the strength, capability and cred-ibility displayed by these financial institutions.

Many Nigerian banks have al-ready successfully sought funds from the international financial market and multilateral institutions, or have announced plans to do so. Guaranty Trust Bank‘s five-year Eurobond offer of 2011, the larg-est by any Nigerian corporate to international investors, was rated ‘Best Financial Institution Bond for Nigeria’ by EMEA Finance UK. Olusegun Agbaje, Managing Direc-tor, Guaranty Trust Bank says, “We

will continue to seek for funds that would enable us carry on our global expansion programme, acquire the best IT infrastructure to enhance service delivery and compete fa-vourably with other international banks in terms of ability to lend. Our 2011 Eurobond offer was to-tally oversubscribed, and is placed with over 30 accounts in Europe, United States, Asia and Africa.”

Meanwhile, Skye Bank has re-cently raised over $100 million at a floating coupon rate of 6.3 per cent spread over the course of seven years. Kehinde Durosinmi-Etti, Chief Executive Officer and Managing Director of Skye Bank, has stated that the bond issuance programme will boost the bank’s capital base and add almost 2 per cent to its capital adequacy ratio. And Diamond Bank is to seek the approval of its shareholders at its next general meeting in order to raise $200 million, claiming they would target strategic investors including the subsidiary of the World Bank, the International Fi-nance Corporation.

At the time the Eu-robond was issued Nigeria’s foreign re-serves were over sixty times the size of the bond itself, and the external debt to GDP ration was just 2.3%



Nigeria has the potential to become the gateway to African capital mar-kets. It has more than a quarter of the continent‘s population, a solid, productive base to its economy and has increasingly become more po-litically stable – all key factors in attracting capital.

One of Nigeria’s premier Invest-ment Banking firms, Kedari Capital Ltd, is well positioned to guide in-vestors into a variety of the country’s prime investment prospects. “Ni-geria is about business and invest-ment, people who are determined to make things work, and people of integrity,” says Odun Odunfa, CEO of Kedari Capital Ltd. “You need to find the partners you can work with, the areas you are interested in, and a platform to make those investments a reality. You will typically walk away with very good returns, much more than you can get from many world economies today.”

Kedari Capital Ltd is a full-serv-ice investment bank focused on pro-viding tailor-made long-term capi-tal appreciation solutions for each of its clients. Its diverse portfolio of clientele includes governmental organisations and agencies, private corporations, financial institutions and high net-worth individuals. The bank’s broad business offerings in-clude corporate finance, financial and business advice, asset manage-ment, financial markets services and risk management consulting.

Mr Odunfa says, “What we do differently is focus on a few areas. To a large extent, we do not wait

for business to come to us: we seek out the business. We recognise in an economy such as ours that skills and capital are limited. So if you have a combination of the skills and the capital, you are better off putting the deals together yourself. That is what we are trying to do in power, infrastructure, and with our bank acquisition in Ghana.”

Kedari Capital Ltd together with

other investors has acquired a 75 per cent stake in First Atlantic Merchant Bank Ghana and plans to make it one of the top five banks in Ghana within five years. “We are doing everything possible to make that happen; leveraging e-banking platforms, international partnerships, and deepening our branch network on the retail side,” says Mr Odunfa. “It is a strategic

acquisition for us, it complements the business we do in Nigeria and opens us up to more investors and clients to whom we can cross sell products, either in retail, invest-ment, or wholesale banking.”

Kedari’s main expertise areas in-clude investment in infrastructure, the oil and gas industry, project fi-nance, real estate, non-banking fi-nancial institutions, energy projects and renewable energy development.

“Most of the initiatives that Kedari is undertaking are in the productive economy: power, in-frastructure, ports, etc. The op-portunities for German businesses or investors to partner with us are tremendous,” says Mr Odunfa. “I believe one of the challenges for European businesses in Africa is identifying good projects, and good partners to work with to make those projects happen. Kedari would offer them an opportunity to achieve both objectives in one. We have a host of projects, which are ours and third-party projects, whether public or private sector. Investors can also find a partner in us that is serious, focused, and will do everything to ensure that things are done properly.

“The differentiator is that we are happy to sponsor projects, form teams, look at different ideas, and put together the building blocks of what would make it work. That will continue to be the way we do business. We also believe in doing things right, we do what we say and we believe in what we do.”

Identifying the nation’s potential comes easyComprehensive financial services from Kedari Capital ltd are connecting new investors to the heart of the nation’s potential in numerous sectors

“We do not wait for business to come to us: we seek out the business. That is what we are doing in power, banking and infrastructure.” Odun Odunfa,CEO of Kedari Capital Ltd

nigeria’s top lendersl Access Bank With an asset base in excess of N2.02 trillion as of Feb-ruary 2012, Access Bank has placed excellent corporate governance at the very core of its operations, and was named “2011 Sustainable Bank of the Year for Africa and Middle East” by Financial Times/IFC. The following year, it completed the recapitalisation of Intercontinental Bank Plc.

l Diamond Bank Operating on one of the most advanced banking technology platforms in the market, Diamond Bank is a full-service inter-national commercial bank. Financial results for year-end 2011 were N723 billion in assets and N630 billion in liabilities, of which N544 billion were customer deposits. The bank posted gross earnings of N89.3 billion.

l Ecobank When Ecobank Trans-national Inc. (ETI) acquired Oceanic Bank last year, it entered the Nigeri-an top five. Some 5.9 million Nige-rians are ETI customers, accounting for more than 70% of the group’s total for all its operations throughout 30 African nations. As of December 2011, the ETI group’s total assets were valued at $17.2 billion.

l Fidelity From merchant to com-mercial to universal bank, Fidelity’s 24 years of history has helped shape it into becoming one of Nigeria’s ten largest banks. In 2011, it was ranked the 25th most capitalised bank in Africa. Fidelity Bank closed last year with N739.5 billion in as-sets and N603.2 billion in liabilities, and posted a profit of N5.36 billion.

l First Bank Nigeria’s oldest bank and largest retail lender, dating back to 1894. Today, the bank enjoys strong ratings and posted total assets of N2.9 trillion as of Q3 2011.

l First City Monumental BankA wholesale banking group with an emerging retail business, and flag-ship of the First City Group. Having recently acquired 100% sharehol-ding in Finbank, FCMB has enjoyed robust growth in return on equity, deposit growth and return on assets year-on-year 2010-2011.

l Guaranty Trust Bank Made an indelible mark upon the financial sector when it became the first Nigerian bank to undertake a $350 million regulation S Eurobond issue and a $750 million Global Deposi-tary Receipts Offer in 2007. Today,

Guaranty Trust Bank has an asset base of more than N2 trillion.

l Skye Bank The result of a 2006 five-way seamless merger that compiled the individual banks’ strengths into one, solid institution that has made a positive impact on various sectors, including oil & gas, construction, real estate, agriculture, telecoms, retail and manufacturing. Assets and customer deposits for 2011 were valued at N893 billion and N643 billion, respectively.

l United Bank for Africa With subsidiaries in 20 sub-Saharan countries, UBA is the product of the merger of Standard Trust Bank Plc and the old UBA, and the subse-quent acquisition of Continental Trust Bank Ltd. Total assets for 2011 were up 17.4%, at N1.94 trilli-on, while total deposits rose 14% to N1.45 trillion.

l Zenith Bank Just 22 years old, but a leading institution, having posted N2.2 trillion in assets as of Q3 2011. With more than 350 dome-stic branches, the bank has explored opportunities abroad and is now present in Ghana, the UK, Sierra Leone, Gambia and South Africa.



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The great financial fightback · 2014-10-14 · the bank’s share capital was a mere $6 million. Current share capital is N250 billion ($1.5 billion). The cumulative value of fresh