From the outset, Ecobank Nigeria was designed – and destined – to be a regional banking leader, with the belief “that there was room for a regional bank to interconnect West Africa” and promote interregional trade. Jibril Aku, Managing Director of Ecobank Nigeria, discusses the nation’s banking sector, its potential as a regional hub, and how Ecobank can offer investors a single, region-wide entry point to “hit the ground running” in a variety of markets.
If you look at the structure of the Nigerian banking sector today compared to 2008/09, there were around 89 banks but now there are roughly 22 banks. There has been a considerable decline, but that is still quite a lot compared to developed countries. How do you view the banking landscape in Nigeria, and how do you see it changing in terms of transparency and corporate governance?
Jibril Aku: To put it simply, it is a lot better, but we have to look at the progress we have made. We were 90 banks in 2004/05 and the CBN’s first consolidation in 2005 reduced that number to 25 by increasing the capital requirements of banks. Many banks either merged or they did not make the hurdle. There were portfolio issues in 2008/09 in two key sectors, which were impacted by the global recession – the capital markets and the oil and gas sector. Because the banks were heavily exposed to these sectors, a lot took the heat. The Central Bank however showed that growth in the banking sector was cyclical as there are times when you have growth in certain sectors and subsequent contractions which may cause portfolio challenges. The problems were also that in addition to portfolio challenges there were corporate governance abuses against banks and the CBN addressed the gross governance abuses by removing the management of these banks in line with the banking laws. Since then I believe we have had a more inclusive and participatory engagement with the CBN in terms of strengthening governance and risk management in the industry.
The introduction of the Asset Management Corporation of Nigeria (AMCON) has also helped us manage the portfolio issues and banks have therefore recovered faster and have become profitable once more.
Nigeria is always viewed as a financial hub, at least in West Africa. How do you view Nigeria’s potential to become a financial hub and overtaking other African economies?
I think that is a good question, because it underscores how we at Ecobank
have organised our business. Historically, the bank had an ambition to become a regional bank. It was not an afterthought – it started off originally like that, because we felt that there was room for a regional bank to interconnect West Africa. That has been the founding fathers’ dream – to start a regional bank that could begin to promote trade amongst West African countries. We have dominated 15 countries in West Africa and then we moved into Eastern and Central Africa eventually becoming the pan-African bank we are today.
With that in mind, it is clear that Nigeria has a role to play as a regional hub, first in terms of support for some of the countries, so they can sell their products here. We can also look at our manufacturing base itself and its products into those markets.
We are looking at regional air transport routes and today we support some of the countries with crude oil exports, and those countries with refineries. When you define the hub, we look at it like an economic hub. It is a big market, so there is potential for everybody to sell their products. We think that will propel growth. As GDP (gross domestic product) growth continues to be sustained, there will be more of a middle class created, who will want to buy more products. We see the potential, as other countries see Nigeria as a market. We think it can really feed that hub.
South Africa has a more developed financial market, which has been around for much longer, and they have more capitalised banks. But in terms of the population and the market, Nigeria remains the economy of interest to all global investors.
2012 was quite a good year for the industry as a whole. Your bank had a 65% increase in profit before tax, and revenue increased by 106%. What have been the key factors contributing to this growth, and how do you see it evolving in 2013?
One of the big stories for Ecobank was the merger in Nigeria and Ghana. Those results were the results from the integration of the acquired banks. When you consolidate the revenue, you will show a quantum growth in terms of your revenue. So the acquisition was beneficial for the bank and the group. As we stabilise and fully integrate, we believe that we will have a much bigger platform to be able to generate more revenue and business for our shareholders.
Looking back over the past six years, I believe that you were one of the top 21 banks in Nigeria in around 2006, and now you are a tier one bank, contributing to 42% of the group’s overall revenue. That has been quite a remarkable change with a number of M&As. In which direction is Ecobank heading now?
Prior to 2006, Ecobank was essentially a private corporate investment bank, so it was a niche player. After the 2005 consolidation, it emerged as a very small and over-capitalised bank. So the strategy was developed to grow fast into a fully-fledged universal bank, and then we ramped up on retail banking growth.
The first thing we did was start an acquisition drive, with some of the banks that had failed the consolidation process in 2005. To date, we have made four acquisitions. We also acquired a bank in Ghana. We have made acquisitions in the two big markets that Ecobank is present in, to give us considerable scale. Today we are one of the top six banks, with a good chance to fight for the top three in Nigeria; this is our current strategic goal.
Will that happen with further mergers?
Presently we intend to grow organically in Nigeria consolidating on the previous acquisitions and stabilising our platforms with increased efficiency.
It has been said that developing the real sector is key to the economy and ensuring the future growth and development of Nigeria. How important do you think real sector lending is and how will it enable growth in Nigeria’s economy and Ecobank Nigeria?
In terms of the employment of labour, the manufacturing sector, and small and medium-sized enterprises (SMEs) and small businesses that hire one or two people are key to reducing unemployment. Access to finance has however been a challenge, as well as the infrastructure deficit, which continues to pose a problem. Wherever you can reduce costs, including financing costs, this will help the sector tremendously. There are areas where cost reduction will help them, but our role will be in respect of financing costs. We are looking at shared services, to see if we can reduce our total cost of doing business.
Banks in Nigeria under the umbrella of the Bankers Committee are looking into areas to work together, such as the payment system, cash handling, disaster recovery sites, etc. If we reduce costs, we can reduce our lending rates. We are looking to reduce these to accommodate for some cost reductions for SMEs. I think some discussions are going on. There are ongoing consultations in the industry to come up with some reductions in financing costs to stimulate economic growth. When the consultation is completed, an announcement will be made.
How is Ecobank looking to further protect and enhance its brand, introduce new ideas and products, and continue being the leading pan-African bank?
First of all, we want to promote our pan-African brand and platform, which we have used successfully to differentiate ourselves. All our products – card products, remittances products, etc., are not restricted to the borders of Nigeria, and our customers have the flexibility of accessing our services in any of the 33 countries we operate in.
Secondly in terms of product innovation and the IT platform for collections and payments, we are strengthening our existing platforms. Our retail banking has been acknowledged as having very good security features. We are looking at differentiating our trade products, because we are not restricted to just one country. So we bring in different features to make the products more attractive no matter the market.
Overall, we continue to compete in terms of service. We feel that we need to give our customers good service, for them to be able to retain and grow their business volumes. We are enhancing our ATMs and POSs to be more efficient. We also have a new mobile money platform, although adoption is still slow. We are beginning to see acceptance. As we continue to see it integrate into the payment system, we will see more adoption as an electronic wallet for people to use when making payments.
Already present in 33 countries and with ambitions to reach out to clients in emerging markets, what is the key beneficial factor for investors to partner with Ecobank as a group?
First of all, we tell any investor who is looking for a diversified opportunity in Africa that they can have a single entry point with Ecobank. We can be their advisor on the ground and show them the rules, and how they can navigate the African business environment. Our economic research can help them position their businesses. When you want to set up a banking account, you can have online access and make payments and collect goods and services. When you look at countries specifically, there are areas of opportunity in each of the 33 countries; we can guide partners through that process.
In Nigeria, the power sector is undergoing reforms, and investors are coming in. The agro sector is undergoing reforms too. Traditionally, investors have concentrated on the oil sector, and we are beginning to look at how we diversify the oil sector. Ecobank is well positioned to guide investors through that process.
We always tell investors that we are like a single entry into Africa, particularly Nigeria. We can guide you through that process to make you hit the ground running faster than you would if you went through another bank.
You have been the managing director of Ecobank since 2010. You have vast experience behind you (26 or 27 years in the industry) and you are always advancing towards efficiency and customer satisfaction and shareholder value of course. What made you come to this sector and what has motivated you throughout the years?
I guess the integrity of the industry and the working experience. It is the only industry I have worked in since school. I guess the challenge has always been the excitement of working with different people, interacting with them and developing them whilst also watching businesses grow. Every time you satisfy a customer, you feel very happy and that propels you to do more.
And what more can we expect from you?
We still have this job to do, and as such the future will take care of itself.
What is the most important skill you have learnt over the years?
I would say resilience. There are always challenges and cycles in every industry – you just have to be resilient to excel. You go through the obstacles, and then you will succeed.