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A new mindset for real sector lending

Article - August 1, 2013
Fidelity Bank is a prime example of a lender that is supporting a more stable
A new era for the banking sector in Nigeria means the banks will have a huge part to play in providing capital to the real sector to promote stable growth and a diverse economy, particularly by supporting indigenous SMEs and entrepreneurs over the coming years.
The banking reform that was implemented following the 2008-09 financial crash by the Central Bank of Nigeria (CBN) has brought more stability and less irresponsible lending and speculative risk taking. There is a new focus on lending to the real sector.
“In 2013 and 2014 it’s going to be a larger economy. We will be able to have the benefits of at least three to four years of stable monetary policy and management, and hopefully a stable fiscal regime and fiscal policy,” explains Managing Director and CEO of Fidelity Bank Reginald Ihejiahi. 
“For the banking sector the challenge is how to actually participate in sponsoring the growth of a stable economy. It takes a bit more to understand the risks of the real sector; it takes a different attitude not to expect ready-made projects or proposals. You are participating in the making and the structuring of those proposals in a way that the risks are at a level where they are manageable.”
Fidelity Bank is ranked amongst the top 10 banks in the country and it is actively supporting the growth of the real economy through smart lending and investment (evident from its low NPL ratio of 4 per cent). Although it is a universal bank, 70 per cent of its loan portfolio is concentrated in corporate lending. The bank’s current focus is in the oil and gas, agriculture and SME sectors.
Oil and gas companies made up 13 per cent of its loan book in 2012. “We could see that rising in 2013 to perhaps 20 per cent or more,” adds Mr Ihejiahi.

“It takes a different attitude not to expect readymade projects or proposals”

Reginald Ihejiahi,
Managing Director and
CEO of Fidelity Bank
“Within oil and gas we are diversifying into several areas; we are doing some interesting things in upstream and midstream. We are dealing with engineering companies who want to elevate to larger levels of transactions. There is a risk involved but we have the capacity to really make sure that they themselves are probably able to make that transition.”
Another stalwart of the economy and area of interest for Fidelity is agriculture. It is a sector generally perceived as not having ample investment opportunities as it has traditionally been driven by the public sector. But all that has changed according to the Fidelity MD: “Those walls have come down and the government sector is trying to come up with a better policy by encouraging the capacity for financing.
“We’re looking for what we call the new generation of agri-business entrepreneurs who have been successful in other lines of business. They are people who know how to manage risks and then the proposals become financeable.”
SMEs will be crucial to sustainable growth and reducing unemployment in Nigeria and Fidelity is doing all it can to support viable micro and medium-sized enterprises. “We are doing two things. In the micro-businesses we are servicing demand of our branches; we have a standard pricing format for them so they can actually predict what the cost of services is going to be. Secondly, we’re putting in place the kind of credit structure to support that,” Mr Ihejiahi says.
“On the medium-scale side and the more active high-level entrepreneur businesses we are also supporting them through our advice service.”
With regard to foreign investors looking to invest in Fidelity, the MD urges them to look at the balance sheets and its capital adequacy and liquidity ratios. He assures that the bank has given dividends for 10 consecutive years and that they have superior local knowledge, which he says “is what people are mostly looking for in a country like Nigeria. We know Nigeria inside out.”