MONDAYBUSINESS CEO INTERVIEW How we are funding agriculture – Fidelity Bank MD
Mr. Nnamdi Okonkwo is the Managing Director/Chief Executive Officer of Fidelity Bank Plc. In this interview, he speaks on various issues bordering on the economy, industry as well as the bank’s performance in the first half of the year. Excerpts
Recently, the Nigeria Bureau of Statistics (NBS) said the country is now out of recession, as a top industry player, can you tell us some of the damage the recession caused the economy?
Recession simply means negative growth in an economy over a specific period of time. I am not in a position to quantify the damage but I am in a position to know that a lot of things slowed down in line with the slowing economic growth, because the banking industry is a melting point of what goes on in the economy. For instance, if my bank has a customer at Idumota, in Lagos who normally lodges in N1 million into his account daily and now he is lodging N200,000, it is because something is amiss, or the engine of what was responsible for generating those revenues, is no longer firing as before.
Also, if a bank gives out loan to a customer and it is not performing, it is probably because that customer, that government employee or corporate employee is not getting his salary on time in line with the situation in the economy. The same thing goes for when a bank finances a factory that was expanding its production line to increase output and suddenly that company realizes that it cannot kick off that line because there is no longer demand for its products because of general slowdown in demand.
So I won’t be able to calculate the quantum that was lost but in terms of everyday impact on business, it was a thing everybody felt.
Having said that, let us take the news of being out of recession with caution and it’s not time for us to celebrate. The Federal Government started the economic recovery and growth plan. It is the disciplined execution of that plan that matters for now. On the monetary side, I want to commend the governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, and his team because they were under intense pressure to devalue the naira but they stayed focused to address the issue from the retail end of the market by opening up a window where banks were given $2 million weekly to enable individuals buy foreign exchange to pay the tuition fees of their children in foreign higher institutions and before you know it, the exchange rate dropped from N520 per dollar to about N370 presently.
Besides tuition fees, the apex body also allowed Small and Medium Enterprises (SMEs) and operators in the aviation industry to have access to foreign exchange but perhaps the most significant move by CBN in stabilizing the currency was the introduction of the investor/exporter foreign exchange window which has resulted in major inflows by portfolio foreign investors.
Why are banks reluctant to lend to agric and the real sector of the economy?
There has been so much talk about banks not willing to fund the agricultural sector of the economy and I have asked repeatedly why would a bank that is set up to buy and sell money see an opportunity to sell money that it has bought and would not be willing to sell. The answer is, if a bank sees a bankable agricultural project it will fund it. For instance, if a person has personal money to lend as a money lender, I don’t think such a person will like to go to a village and lend the money to a farmer who does subsistence farming, who does not know how to use herbicides, who does not understand book keeping and who does not know that the money the lender gives to him is a debt that needs to be paid back.
Thankfully, we now have an avenue to fund such local farmers through Anchor Borrower Scheme (ABS) where their produce are guaranteed off-take by bigger companies such as rice mills. And guess what, the scheme is producing great quantities of rice in the country. So, if subsistence farmers in the villages could be put together by professional private sector operators under cooperative societies, and extension services are used like what obtains in the CBN’s Anchor Borrower Scheme, banks will be willing to fund such farmers because their produce have guaranteed off-take and there are some organized structure under which they operate.
Having said that, there are lots of bankable agricultural projects that banks had and are still funding across the country. For instance, Fidelity Bank has
huge a
portfolio of agricultural projects it has supported over the years. One of the best rice mills in the country today, based in Kano, was funded by the bank and I am not talking about now when everybody is talking about agric. I am talking about as far back as 2010. If you go there today it is a very solid company that we are proud of.
Despite remarkable performance of Fidelity Bank in the first half of the year, there was a slight decline in its deposit base what was responsible for this?
We had a slight drop in deposits because of the high yield in treasury bills and bonds which attracted depositors to migrate to such instruments. Secondly, we deliberately took a decision to optimize our balance sheet because we do not want to be known as a bank with a big balance sheet without efficient returns.
Therefore, though our deposit grew by say N20 billion, using expensive deposits but profit and returns will suffer. The half-year result showed that we are producing more revenue with less assets and we are springing out more revenue with a more efficient balance sheet. Finally, our numbers depict a substitution situation where the major area of growth is now in low cost deposits which currently account for 75 per cent of our total deposit base.
How does Fidelity Bank’s outlook for the end of the year look like?
Well, our half year audited accounts made us happy but we are not relenting in our quest to deliver even better returns. Therefore we will stay focused on executing our strategies so that full year will meet expectations.
Your bank is one the banks that loaned out fund to Etisalat. Now that the telecommunication company has changed to 9mobile, how is the bank handling there?
its investment
As you are aware, the creditor banks came together to appoint a new board and management for the company with the deputy governor of the CBN as chairman of the board. The company has good fundamentals, with about 22 million subscribers and it is also very strong in data. Our interest is to ensure the company remains as a going concern so that it can attract interested buyers. The banks are working collectively on this.
What are your plans for your Eurobonds maturing next year?
On Eurobond, we have $300 million Eurobonds maturing in May 2018 and we advised the market that we are considering various options such as, should we refinance; should we issue another one or should we pay off the one that is maturing? We have informed the market that come September 30, 2017, we would make announcement on the options we have chosen.
Why are you not giving out loans to operators in the nation’s oil and gas industry?
That is not correct, oil and gas is about 27 percent of our loan book mainly in the upstream sector.