Adeduntan: Banking Penetration, Still Very Low
Managing Director/ Chief Executive Officer of First Bank Nigeria Limited and Subsidiaries, Dr. Adesola Adeduntan, spoke with Chika Amanze-Nwachuku, Obinna Chima and Nume Ekeghe on the sidelines of the World Bank/International Monetary Fund Annual Meetings
Congratulations on your award here in Washington D.C. by the Global Finance Magazine. What were the factors that qualified your bank for this global recognition?
Thank you for the question. A couple of things that we are doing differently. FirstBank is one of the few banks in the market that is fully entrenched in the economic fabrics of the country. I remember when I met with your team about a year ago, I did mention the fact that one thing about FirstBank is that profitability is important, but economic growth and development is equally important. There was an award also in Lagos by BusinessDay, where we were given the award as ‘The best Bank in SMEs’. As you are aware, if we continue doing the right thing in SMEs segment, that is actually where the growth of the economy is going to come from. If you ask me again what we are doing differently, I would say that we are supporting government’s initiatives in those critical areas that matter most -SMEs, power sector, oil and gas and general development of infrastructure. So, that is one thing FirstBank is doing differently.
The other thing we are still doing differently is our programme and our initiatives around financial inclusion. As you aware, the level of penetration of the banking sector is still relatively low compared with other emerging markets and certainly compared with developed markets. A number of our citizens in the country still do not have access to basic banking products. And FirstBank, with 750 branches, we currently own about 20 to 25 per cent of the ATMs deployed in the entire country and the bank is better positioned and we are working very hard to be in a vanguard of getting more people to the formal banking sector. I am not too sure you noticed but about two to three weeks ago, FirstBank celebrated a very important milestone in the history of the bank. We were the first bank to have issued 10 million cards to customers. And that was quite significant. Over and above the sectors I have mentioned, our role in financial inclusion is also an area that has clearly attracted the attention of global partners and everyone is keen to work with us. We would also soon be rolling out our agency banking on a very large scale in the nottoo-distant future.
At a time when some banks are closing down branches and scaling down their African operations, Firstbank in the past year has been aggressively driving its expansion into other African countries, what is behind this new drive?
We haven’t aggressively expanded our African footprint. What we have been doing since I assumed office about two years ago was actually to make those footprints or subsidiaries more effective and to run them in a more integrated way and manner. The only acquisition that we have done and is actually not a new acquisition. What we did in the last one month was to basically increase our equity holding in FBN Democratic Republic of Congo from 75 per cent to 100 per cent. Which means it is now a wholly owned subsidiary of the institution.
For us, our African footprints are quite important to us and we continue to see opportunities in all the locations. Although the size of the opportunity varies from country to country. If you look at a country like Democratic Republic of Congo for example, it is a country of about 80 million people. So that is a huge market. We see a significant opportunity for FirstBank in that market to lead the market and thereby making good returns for our money. So for the priority countries for us, we continue to see opportunity to grow our business, we see opportunity to also serve the citizens of Africa at these locations. But more importantly, we followed our customers. Our major customers are operating in some of those jurisdictions and it is important that we make our services and products available to them irrespective of where they are operating geographically.
How profitable are these subsidiaries?
Most of them are in very early stages of operations so profitability is currently relatively low. But in the fullness of time, we expect them to be profitable. It is a journey and it is like a marathon. We are in the phase where we are basically putting in technology, training people, implementing your own processes and ensuring that the business ethics and culture and everything is aligned with that of the parent bank. At those initial stages, you are actually investing a lot of resources and time. But in the fullness of time, we would be very profitable.
I go back to a country like Congo again, 80 million people, the banking sector is not as sophisticated as that of Nigeria, so there is a tremendous opportunity for us to leapfrog the market.
Do you have plans to close down some of your branches as most banks are focusing on digital banking?
For the branches, when you look at the vastness of a country like Nigeria, digital is very important but physical footprints are equally very important. I mentioned something during my introductory remark earlier, when I said we are currently piloting our agency banking in the six geo-political zones of Nigeria. We expect to roll out agency banking across the entire country within the next one year. That for us is expected to be a quantum leap in terms of what we are doing. And we believe that would assist us to pull more Nigerians into the formal banking sector. It is only after then that we are satisfied then we can determine whether we have any excess in terms of our brick and mortar. But for now, we are happy to keep all of them to provide services to our customers.
In terms of technology, is Firstbank coming out with any new initiative?
We are constantly investing in technology. The way we like to describe what we are doing currentlyis that the previous leaders of FirstBank built branches, but we are building technology. Our technology spend and investment in technology over the last two years and over the next two years would be significant, which is why today, we are one of the key leaders in digital banking in the country- USSD banking, mobile banking, internet banking, etc. I mentioned the fact that we celebrate about two weeks ago, the fact that we have successfully issued 10 million cards. All those things were on the back of a very robust technology. So if you don’t invest in technology your ATMs, internet banking and mobile banking platform would be erratic and your customers would be quite displaced.
We are making the right investment in all aspects of information communication technology. For us, that is a key area of focus. If you ask me, in terms of brick and mortar, the number of branches we have is very unlikely to grow materially in the coming years. What we would be increasing is our investment in technology that would enable us to serve our customers 24/7 across boundaries and across geographies.
Don’t you think that would lead to downsizing of your workforce?
Not necessarily. Don’t forget the fact that I had mentioned that a larger percentage of our countrymen still do not have access to banking services. So when you invest in technology, what that does is that it frees people up to go and do other types of banking. So people are going in there to market customers, sell products and everything. So it would not necessarily result in retrenchment.
FirstBank celebrated a very important milestone in the history of the bank. We were the first bank to have issued 10 million cards to customers. And that was quite significant. Over and above the sectors I have mentioned, our role in financial inclusion is also an area that has clearly attracted the attention of global partners and everyone is keen to work with us. We would also soon be rolling out our agency banking on a very large scale in the not-too-distant future For us, our African footprints are quite important to us and we continue to see opportunities in all the locations. Although, the size of the opportunity varies from country to country. If you look at a country like Democratic Republic of Congo for example, it is a country of about 80 million people. So that is a huge market. We see a significant opportunity for FirstBank in that market to lead the market and thereby making good returns for our money. So for the priority countries for us, we continue to see opportunity to grow our business, we see opportunity to also serve the citizens of Africa at these locations
Can you tell us some initiatives you support in the agricultural sector?
Agric is one of the major areas where FirstBank is partnering with government. Earlier this year, we organised an agric expo where all the key players in agric value chain were present. The Minister of Agriculture was also there and he delivered the keynote address. For us, what we have seen, with this current administration is a very focused attention to the development of agriculture and that delights us. Because for us, that is one sector where we believe growth would come from, and that is one sector we believe employment of our countrymen would also come from. We are doing a lot, not only are we financing facilities, we also have capabilities to assist medium scale farmers with what I call skills enhancement on the business side of farming. It is not just enough to go into agriculture because agriculture today is a big business. I once said at a forum that if we all agree that we are country with a population of somewhere between 180 to 200 million people, the business of feeding 180 million people is a massive business. So we must focus on that because as a nation, unless you have food security, you really do not have country. So agriculture for us is an area where we are collaborating very closely with the federal government.
One of the things you inherited as the CEO was high NPLs. To what extent is FirstBank under your management addressing that?
If you look at our results over the last few quarters, you would see that the number is trending downwards. We are releasing our third quarter result any moment from now and you would see that every day, there is an improvement. It is a commitment that we made that the NPLs ratio would come down gradually and would fall within the normal ratio shortly. We are doing recoveries and paying very close attention to what we need to do; but more importantly, ensuring we do not create additional NPLs. So we are basically strengthening the risk architecture and the risk bearing capacity of the bank, to ensure that going into the future, we have the right risk architecture that is able to cope, under all scenarios.
Now that the numbers show that country is out of recession, what areas do you think the federal government should focus on to stimulate growth?
I think the focus is already there. It is just to ensure that we don’t take our eyes off the ball. Like I said, agriculture is very important. What the Office of the Vice President is doing around the Ease of Doing Business in Nigeria is extremely important. People must find it easy to come into our country; they must find it easy to invest in our country and they must find it easy to basically transact business with us.
And because capital will always flow to the most competitive environment, is why part of what the Office of the Vice President is doing is to make Nigeria a more competitive destination for capital. And I think that is one of the areas where we have seen progress and it is very important we continue to focus on that growth.
What are your projections for the economy?
You were at the session with the Governor of the Central Bank, where he was given the Forbes award here in Washington, I think the outlook is positive. And if I link that back to the immediate question, for as long as we keep on doing the right things, some would be painful because some of them are structural and we need to just live with that. I believe generally, the economy can only grow and the more of the right things we are doing, the better for the overall economy.
For your customers, what should they be looking out for?
A FirstBank that remains extremely reliable, a FirstBank that puts its customers first, ‘You First’ is our mantra; a FirstBank that is repositioned to delight our customers, a FirstBank where customer is king. So that is our expectations and that is what customers should look forward to.
We expect to roll out agency banking across the entire country within the next one year. That for us is expected to be a quantum leap in terms of what we are doing. And we believe that would assist us to pull more Nigerians into the formal banking sector. It is only after then that we are satisfied then we can determine whether we have any excess in terms of our brick and mortar. But for now, we are happy to keep all of them to provide services to our customers