Banking industry needs new quantum leap - Oduoza
The Nigeria’s fifth merchant bank, Nova Merchant Bank Ltd, was launched yesterday in Lagos. The Pioneer Chairman, Mr. Phillips Oduoza, spoke on the new bank and what should be done to take the banking sector to a new level. Except:
What informed the name Nova?
Nova means “new” in many languages including Latin, Portuguese amongst others. The reason why we chose the name, is because Nova Merchant Bank Limited has come with new ideas, fresh thinking, cutting edge technology and excellent customer services. Our key focus is wholesale banking and investment banking and we want to bring innovations in these areas. We believe the industry has reached a stage where it needs another quantum leap to move it to the next level. Banking is changing globally with the emergence of new entrants and the infusion of non-traditional business models leveraging advances in technology. We believe Nigeria should not be left behind. Therefore, Nova is here to bring a new experience in the banking industry. We want to do new things.
Why did you choose this period to launch Nova Merchant Bank?
Historically, you will notice that many organisations that emerge from economic recessions end up doing very well because they are focused on providing solutions to the myriad of economic and financial challenges arising from such difficult periods.
Take Nigeria for instance, where we have gone through a very challenging period which saw oil prices drop significantly impacting negatively on foreign exchange liquidity. We believe the economy has turned the corner and there could not be a better time to come into the industry than now.
As the recession is now over, the economy is on an upward trajectory. In NOVA, our products, ideas and knowledge are suited to dealing with the challenges faced by Nigeria businesses. This means as the economy normalises, we scale up with it. That is why we are coming out now.
As a new bank we have come with a clean slate and are well positioned to take advantage of emerging opportunities as the economy recovers.
There are four Merchant Banks already in Nigeria and NOVA Merchant Bank makes it the fifth. What are those attributes that would distinguish it from the others?
In the past, we used to have Merchant Banks as well as commercial banks but that boundary was removed because of the onset of the universal banking licence just before the consolidation exercise. The implication was that banks could do both commercial and merchant banking.
In 2013, the demarcation was brought back following the review of the Universal Banking license. Therefore, you now have merchant banks and commercial banks with different areas of focus and permissible businesses.
Merchant Banks are very important because they support the economic development of the nation through the provision of long-term funding. In Nigeria, Merchant Banking has not been fully tapped into. Banking penetration in Nigeria is mostly retail banking focussing on retail and corporate clients but we have opted for merchant banking in the strict sense of it with focus on corporate clients and investment banking.
NOVA brings the total number of merchant banks in Nigeria to five, which I believe is still very low in number. There is opportunity for more, considering the key role merchant banks play.
Why am I saying this? Merchant banks focus on wholesale and investment banking where you have advisory services, wealth management, asset management, debt capital markets, equities, project finance etc. These services are still evolving in Nigeria. The major international financial institutions involved in investment banking are doing very well. Today, we do not have any of these banking institutions in Nigeria and this is the space NOVA would occupy not only in Nigeria but across Africa.
Bear in mind that ours is the first green field licence for a merchant bank, therefore from day one, we have been structured to operate as a merchant bank.
We have equipped ourselves with talents and cutting-edge technology suited for merchant banking business. We have structured our products and designed our business model around merchant banking.
NOVA adequately capitalised above the regulatory minimum capital for the roles it has set for itself. is
With the competition in the industry, are there strategies you have developed to create a niche?
We are starting fresh from day one with skilled people and technology that are cut for merchant banking. Our products and services have been tailored and are suited for the intermediation roles we are set to play as a merchant bank.
It is very important we remain focused in the wholesale banking and investment banking niche we selected to operate. I did mention that as far as wholesale banking is concerned, we have prepared ourselves adequately to play in that sector and we believe that we have the capabilities, technology and products to be able to compete strongly.
NOVA has been very selective in its roles and will not go into areas we consider irrelevant to a merchant bank. We are just going to focus on wholesale and investment banking.
Again, we have a very strong Board that is made up of people that have distinguished themselves in various sectors and have international exposure. This comes with very strong governance that will help shape the Bank.
What are the steps you’ve taken to ensure that you don’t encounter the problem of nonperforming loans that is a challenge to most banks in Nigeria?
In terms of risk management and credit profile, you will find that the customer segments we are playing in have a lower risk profile because they are well-structured and have very strong balance sheets.
Secondly, we have put in place a very strong enterprise risk management framework covering market risk, operational risk, credit risk, etc. It is important to emphasise that the MD/CEO’s last role was as an Executive Director overseeing risk management in a major international bank in Nigeria. So, where you have a CEO that has risk management background, of course you should know risk management will be driven from the top.
One of our targets, beyond being one of the most efficient banks in Nigeria, is to be one of the best in terms of credit risk quality. In terms of asset quality, we want to have one of the best in this country and the lowest non-performing loan book. So, in terms of credit, we are building a very strong credit risk culture in the bank which will be institutionalised.
In terms of technology, we deliberately selected technologies that are suited for merchant banking, both on the digital front, and effective customer service delivery. In addition, we have deployed very strong firewalls among other security measures to ensure our IT security architecture is full-proof. So, for technology we do not see much risk.
As regards terms of long-term funding, we are going beyond the Nigerian market. We are tapping into the development finance institutions outside the country that provide longterm on-lending facilities for customers given the fact that we have a very good customer profile. So, as far as we are concerned, we do not see any issue with that. We also believe that the Nigerian economy is moving in the right direction and that the economy will continue to expand. We have seen some diversification in the economy today and I believe the decline in oil prices may have accelerated this process. We have seen what the Central Bank of Nigeria has done with respect to the Anchor Borrowers Programme as the country is almost self-sufficient in rice production. So, you can see that the economy is moving in the right direction and we believe NOVA is going to benefit from the expanding economy. For instance, the fact that we have a brand-new licence implies that we get it right from beginning. Efficiency is very key to us, we are not investing in huge technology infrastructure but leveraging modern technology to optimise our resources.