When Access Bank Hosted Finance Sector Leaders
The need for private sector players, especially those in the financial sector of African countries including Nigeria, to take the lead in the task of economic emancipation of their respective states was the main thrust of the recent Institute of Internati
As the wind of uncertainty in global economic climate blows to Africa, with the attendant threats to economies of African member states, some private sector players on the African continent have embarked on a rigorous search for ways out through collaboration with global economic leaders. This was the scenario that played out a fortnight ago when Access Bank Plc, hosted Institute of International Finance(IIF) Africa Financial Summit in Lagos, where contemporary challenges to African economies were thrashed out by eminent representatives of IIF and Access Bank team led by the bank’s Group Managing Director, Mr. Herbert Wigwe,
The Access Bank chief explained that more wealth has been created in Africa in the last decade than at any other time in history.
“Across the continent, we have seen a steady drumbeat of democratisation and political reform as governments are, with some exceptions, starting to provide the environment for businesses to thrive. They are creating greater feedback from and accountability to their citizens; ensuring that people’s needs are known and addressed. From Rwanda to Nigeria we have seen a steady increase in security of title and the rule of law; investment in regulatory and physical infrastructure to ease the doing of business; and a low-debt, low-inflation macro environment. All of these factors together help to build the first pillar of the African investment story – no longer is this the continent of coups and generals; instead it is a place of democratic as well as economic growth.”
Growth of Entrepreneurship
“At the same time Africa’s private sector has woken from its slumber and a new spirit of entrepreneurialism is sweeping the continent. The criticisms that Fanon levelled against the African bourgeoisie in the 1960s, accusing them of being an underdeveloped middle class that does not contribute to the growth of capital would be ludicrous today. A vibrant, growing consumer class is increasingly serviced by innovative local capital. From FMCG to telecoms, street vendors to sophisticated local retailers, the African private sector is driving economic growth. The second pillar is sound. Add to this a young, increasingly healthy and well educated population and you have a market that is growing exponentially, with plenty of spare capacity and tremendous opportunities to extend services to that market.
“When taken together the investment case is clear. We have the market, the market environment, and the entrepreneurial zeal that means that business can thrive,” he said.
Challenges remain, but so do opportunities
Wigwe believed that despite these achievements Africa does still face challenges.
According to him, these challenges are not peculiar to this continent, but the changing global financial landscape has made it ever more important that Africa catch up as quickly as possible with the rest of the world or risk being left behind.
Consequently, he said “We must align with global standards and best practice while maintaining the cultural identities and local knowledge and worldview which allow us to act and react to local economic realities.
“We must take on board and test new innovations in banking while ensuring that we maintain the best aspects of the ways we work today. And we must also take advantage of the technological revolution that is changing the face of banking all over the world but be careful to ensure that we do not become slaves of data; that it doesn’t replace judgment and experience. Technology has enhanced access to capital, expertise and distribution, and aided the storage and use of data; it presents us with a profound opportunity to deepen and widen access to financial services to people and companies across the continent and we should ensure that we use it for good.”
The change that Africa needs
Speaking on the focus of Access Bank, Wigwe said “at Access Bank we believe in the future of Africa.
We have set ourselves the ambitious target of becoming the world’s most respected African Bank.
“For us that means more than being the biggest, the fastest growing, or even the most profitable in the short term (though all those things are good as well!).
“It means building a strong, sustainable institution that sets new standards in governance and transparency and which actively helps other financial institutions to do the same.
“It means driving financial inclusion by extending banking services to a new and growing cohort of businesses and individuals who will be the growth champions of tomorrow. And it means keeping our customers at the heart of everything we do.
In her keynote address, the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, stressed the need for Nigeria and other countries on the continent to adopt belt-tightening measures in order to cushion the effects of the dwindling prices of crude oil on their economies.
She gave the advice in her address titled: ‘Positioning Africa in the Context of an Uncertain Global Environment,’ which she delivered at the third annual International Institute for Finance (IIF), African Financial Summit 2014, hosted by Access Bank Plc in Lagos.
She emphasised the need to plug leakages, increase the drive for revenue as well as develop the non-oil sectors in the continent.
The minister also urged policy makers in the continent to strive to ensure that economies in the continent continue to prosper, saying with the right policies, Nigeria and other nations in the continent would be able to sustain their growth path despite the economic headwinds.
Need for Diversification
Okonjo-Iweala however pointed out that “the central focus of these thoughts is that Africa must truly diversify its economic base to create jobs for young people and become more self-reliant and better integrated to position itself better in an uncertain global environment.
“First, I believe that whatever it is that Africa was doing right to get to this point, we must continue to do. And in this spirit, I believe we must continue with sound macroeconomic management.”
She revealed that Africa’s debt-to- Gross Domestic Product (GDP) ratio of about 30 per cent, fiscal deficit of about 3.3 per cent and inflation projected at 7.3 percent for the year 2014 are at reasonably low levels, saying that as a result of these, many countries in the region have been able to access the international credit markets at low interest rates.
She said countries in the region must aggressively look for alternative sources of revenues and stem leakages. It is now imperative to drive up domestic resource mobilisation especially taxes.
Continuing, Okonjo-Iweala said: “In several African countries including Nigeria, tax revenue to GDP is below 15 per cent – the conventional International Monetary Fund threshold for satisfactory tax performance.
“There are many leakages and gaps to be plugged, and more effective tax administration could contribute to improving revenues. For instance the Washington-based think-tank Global Financial Integrity, finds that at least 60 per cent of the nearly $1 trillion in illicit flows from the continent is due to trade mispricing and international tax invasion.
“So one can only imagine the boost to revenues if this practice can be curbed. This is why we have asked GFI to carry out a study on Nigeria. This, together with the work being done by McKinsey to strengthen tax collection will go a long way to support our efforts to drive revenues up.”
Earlier, the IIF had published a regional economic report on Sub-Saharan Africa. The report covers seven leading economies in the region: South Africa, Nigeria, Kenya, Ghana, Tanzania, Côte d’Ivoire and Zambia. Key highlights of the report include: The region as a whole remains one of the fastest growing areas of the world in 2014, estimated at 4.9 percent. However, several factors, both domestic and external, have stopped it form growing even faster. Prospects for stronger growth in 2015 and beyond are encouraging, but there are pockets of concern.
The report, among others, noted that lower commodity prices and faltering global demand in recent years have hit export earnings and weakened the current accounts in several countries. Saying the impact has not been uniform, however, due to varying degrees of natural resource dependence and deviations in price movements across different commodities, IIF said diversifying economic activity, broadening the export base, and adding domestic value to natural resource extraction will be key to sustaining growth and reducing vulnerability.
It explained that hydrocarbons are becoming more important in Sub-Saharan Africa, and will continue to do so going forward.
Oil and gas discoveries in East Africa could be a game changer over the next decade, providing revenue for much-needed infrastructure development and turning around large current account deficits.
Another factor identified is inadequate power generating capacity in most countries, saying the tide now appears to be turning, and plans are already being implemented in a number of countries to ramp up generation and improve transmission and distribution.