A Review of the Nigerian Energy Industry

Nigerian banks recommits to fund critical sectors in 2014

Nigerian-Roads26 December 2013, Lagos – As the new year beckons for business and commercial activities, Nigerian banks, under the aegis of the Bankers Committee, at the 2013 annual retreat, said they had taken up the challenge to make their impacts felt in critical sectors of the economy come 2014.

Given the harvests of complaints that emanated from the rank of banking industry operators in 2013 over an increasingly difficult environment, which they operated in, industry analysts said little was expected of them as funding gap continued to widen in the nation’s economy. However, other members of the economic community who were naturally frustrated by the paucity of funds from banks in the year believe banks have what it takes to activate some dormant sectors of the economy.

It was perhaps the need for a response to this challenge that informed the decision of the Bankers Committee to pledge the support of Nigerian banks to sectors like Small and Medium Enterprises, agriculture, power, and telecommunications, among others in the coming year. The nation’s deposit money banks took the position under the auspices of the bankers’ committee following a retreat in Calabar, Cross Rivers state capital, recently. The retreat, which had in attendance, the Governor of the Central Bank of Nigeria Mallam Sanusi Lamido Sanusi as its chairman, deputy governors of the apex bank, the Managing Director of the Nigeria Deposit Insurance Corporation, the chief executive officers of deposit money banks, discount houses and development finance institutions, was convened for bankers to rub minds and brainstorm on ways to jumpstart the economy. According to a communiqué read on-behalf of the bankers by the central bank Governor Sanusi, the bank chiefs revalidated their goals for the incoming year to include increased funding of Small and Medium Enterprises, agriculture, power, telecommunication sectors; the modernisation of Nigeria’s payment systems; the promotion of shared services; reduction in cost of operations; the promotion of an environmentally friendly and financially inclusive banking system and increasing industry competency and capacity. “The resolution of the banks were apt as the positions taken by them fully identified with the programmes of the government and needs of the private sector to grow and diversify the economy, especially in boosting production, capacity and employment,” Wale Adebayo, Lagos-based financial analyst, said. Sanusi said the Bankers’ Committee had made significant progress in transforming the Nigerian financial system into an enabler and engine of real sector growth, through its advocacy, intervention and dedicated support.

Collective Decisions
“The collective decisions and actions of the Bankers’ Committee as an agent of transformation have delivered tangible benefits through increase in lending to micro, small and medium enterprises; advocacy and finance to the power and aviation sectors; increased lending to the agriculture sector and modernisation of the payment system,” Sanusi said. The bank chiefs reviewed the impact of the strategies and programmes of the outgoing year, over the last years and articulated specific actions to consolidate and improve on gains made in real sector development, towards a reduction in financial exclusion, the strengthening of monetary policy, modernisation of the payment system and the built up in industry capacity and competency. Sustaining the Momentum According to Sanusi, banks have made significant progress in contribution to economic development and growth. He said the banks in the past year associated with the President Goodluck Jonathan’s economic reform agenda and the objective of growing the economy. To sustain the momentum, the bankers affirmed their commitment to financial deepening of the economy, improving access to finance to reduce the financial exclusion and to make finance work to reverse disturbing levels of unemployment and poverty in the country, Sanusi said.

The foregoing was encapsulated in the set of programmes adopted by the banks for the next financial year, through December 2014. With a population of more than 160 million people needs $10 billion of infrastructure investment yearly to keep up with rising population and expanding economy, needing funding, Finance Minister Ngozi Okonjo-Iweala said in May this year. Given the nation’s development challenges, banks need to “strategise on a deliberate approach to sustain the momentum into the future.” The outgoing Managing Director of Access Bank and Chairman of the sub-committee on economic development and sustainability of the Bankers’ Committee, Aigboje Aig-Imoukhuede, told his colleagues at the retreat. The retinue of participants, which also included Governor of Cross River State, Liyel Imoke; Minister of Communication and Technology, Omobola Johnson; Minister of Mines and Steel Development, Musa Mohammed; former Minister of Power, Barth Nnaji as well as financial industry experts from within and outside Nigeria, provided the impulse for the bankers to get to the root of the problems encrusting financial intermediation in Africa’s second biggest country. Since inauguration of the Bankers’ Committee retreat process in Enugu in 2009, the annual meeting has become a milestone event in the calendar of the financial sector, providing a unique platform for peer collaboration, development review, cultivation of strategies and action plans for sustainable growth of the services and real sectors. According to the finance ministry, Nigeria needs annual economic growth of 13 per cent to bring down unemployment, now at more than 25 per cent, to single digits by 2020.

The implication being that whatever improvement by the banks to revamp the economy needs sustenance. In the light of the foregoing, the theme for the 2013 bankers’ retreat was “The Bankers’ Committee as an Agent of Transformation: Sustaining the Momentum.” The Minister of Agriculture, Akinwumi Adesina, said recently that the government planned to increase food supplies by 20 million metric tons by 2015. While Nigeria grew enough food to feed itself in the 1960s, it is now the world’s second-largest importer of rice and sub-Saharan Africa’s biggest importer of wheat. Agricultural Credit In support of various private and public sector agricultural initiatives, Nigerian banks increased agricultural credit from less than one per cent of loan assets some three years ago to about four per cent this year, Sanusi told reporters in Calabar. The move, according to analysts, is commendable and signposts the readiness of banks to leapfrog the economy from 2014. The deposit money banks, according to Sanusi, also took a position to entrench sustainable banking next year by adoption and implementation of agreed sustainable banking principles as they go beyond profits to promote social inclusion and consider environmental principles.

“Our strategies will include institutionalisation of governance for sustainability; advocacy of the corporate bill of rights for the customers and employees of financial Institutions; adoption of digital platforms and payments as game changers for financial inclusion; capacity building and effective collaboration with non-financial partners and other external stakeholders.” The banks also decided to address the gaps in the depth and breadth of products practices and infrastructure of the Nigerian financial markets, whilst acknowledging that small and medium enterprises, the agriculture and power sectors are absolutely vital to the Nigerian economy, Sanusi said. Capacity Building It is obvious the lenders were not oblivious of the essence of capacity and efficiency to achieve their objectives and set out to sharpen their tools and optimise the use of various factors of production. “We are committed to competency and capacity building of appropriate knowledge, skills, character, competence and experience to carry out key functions. The industry will adopt high benchmark and standards by which it measures its progress. Modernisation of the financial service industry infrastructure and payment system is critical to reduce cost of services to the banking public. We will continue to explore and develop areas of collaboration in shared services and infrastructure to reduce the operating cost structure of the industry,” Sanusi said.

Nigeria embarked on banking reforms following a debt crisis in 2008 and 2009 that brought the industry to near collapse. The central bank fired eight chief executives of the country’s 24 banks and created Asset Management Corporation of Nigeria (AMCON) to buy lenders’ bad debts and stabilise the industry. AMCON spent N5.6 trillion in 2011 to acquire the non-performing loans, according to Chief Executive Officer Mustafa Chike-Obi. The nation’s banks have since seen improvements in risk management and corporate governance, resulting in increased lending and profitability.

Syndicated Loans First City Monument Bank obtained $150 million syndicated loan from eight financial institutions this month to enable it meet oil, gas, and general lending purposes. The bank, which originally targeted $100 million increased the size after the deal was oversubscribed, according to a source that declined to be named because of the confidentiality of the transaction. Guaranty Trust Bank raised $400 million five-year note last month for general corporate purposes with JPMorgan and Morgan Stanley as bookrunners. Fidelity Bank Plc sold $300 million of five-year bonds to boost its corporate lending, the bank said in statement in May. Overall, Nigerian banks are raising various forms of equity and debt capital to boost their intermediation role. Believing that the banks have the capacity to achieve set tasks and are determined to succeed, the bankers, “resolved to monitor the progress of implementation,” Sanusi said, adding that they will also access the impact of their actions, “on Nigeria’s economic development goals and objectives on an ongoing basis.” With just a few days to 2014, there are hopes that a new generation of banks, well re-capitalised and desperate to make a change, will be able to lift the Nigerian people and rewrite the story of the economy.
*Festus Akanbi, Thisday

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