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Bank’s Ajekigbe:Banks are now testing new markets
By OBIDIKE JERRY
Saturday, February
16, 2008
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•Ajekigbe
Photo: Sun News Publishing |
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In an area now characterized by banks foray into untapped
markets both locally and internationally, the managing director
of First Bank Nigeria Plc, Mr. Jacob Ajekigbe has said that
Nigerian banks are now moving into untapped markets because
of the availability of funds to be invested in those markets.
In this chat with Saturday Sun, he reveals some of the achievements
of the banks in the past two years post consolidation and
in his submission Nigerian banks are not raising money just
for the fun of it but because they have discovered what they
could do with every extra money they can raise from the market.
Why banks return to market
Banks are returning to the capital market to raise more funds
basically because of the need to develop infrastructure that
are lacking and for them to operate optimally and competitively.
Banks are not just interested in returning to the market just
to raise additional funds but the banks indeed needed these
funds to execute strategic business plans. The Nigerian public
should not throw the baby away with the bath water, to address
the issue of incessant bank offers that is why the Central
Bank of Nigeria (CBN) came out with the comprehensive business
plan idea.
Offer processes
Nigerians and the investing public must know that going to
the market is a very long process. Before any bank can approach
the authorities to raise money, the management of such a bank
must convince the bank’s board that the extra money
is necessary and needed.
The board also must convince the shareholders, the owners
of the business, the CBN and Securities and Exchange Commission
(SEC) that it needed the funds to sustain its projections
based on historic parameters.
These projections are contained in the business plans and
the document is subject to critical appraisal by company accountants,
so the issue of banks going to the market just to raise money
in order to benefit from the $500 million foreign reserve
investment portfolio carrot from CBN is not true.
Big ticket projects
There are many things banks need money to execute and examples
abound with what we are now seeing. You can see that banks
are now doing those things that they could not handle before
consolidation. Before consolidation the number of banks branches
was just a little above 3,000. Now because of consolidation
banks are building branches everywhere.
When you conduct a personal survey in Lagos you will discover
certain areas where you don’t have banks at all. Not
to talk of going to the sub-urban and rural areas. So the
need for banks expansion is always there.
Foray into new markets
The need for banks to go into new markets like mortgages,
go to Lekki, Isheri, you will see building projects springing
up. This is to ensure that more Nigerians have access to owning
properties of their own in Lagos.
We have the oil and gas sector, terrain Nigerian banks are
now playing more active roles unlike pre-consolidation, the
banks are now going into infrastructure financing, the road
reconstruction along the Lekki financial corridor is being
financed by a consortium of banks. The telecom sector is not
left out of the many areas banks are pushing financial resources
into to make sure that the impact of banks raising money is
being felt in the system.
The reconstruction of the burnt Murtala Muhammed Airport Local
terminal (MM2) is being financed by a consortium of banks
so there are so many possibilities.
Investing in offers
Now before you invest in any bank offer look at the document
on the offer, look at the track record and projections of
the bank. Don’t just buy because the bank is saying
come and buy, and that is why what the CBN is doing in the
area of banks submitting comprehensive business plan is a
welcome development. All this is to protect investors investments
and boost confidence of investing public in the future.
Common year end for banks
All Nigerian banks are required to report their financials
in December not July, or March as was the practiced before
now, this is in line with best practice all over the world
among financial institution, and since we are now moving our
banks to meet international standards our financial reporting
system must indicates that also.
Rating agencies
Equally, we have rating agencies that normally use these financial
reports to prepare their rating reports, so if a bank financial
year ends July and our common year end is December then such
a bank will be rated by previous years’ report. But
as it is now, we have a commonality, which is reporting at
the same date, which permanently settles the issue of who
is the biggest in the industry. There is no hiding place for
operators, and it will engender transparency that is urgently
needed in the industry in line with global best practices.”
Challenges
He revealed that though there are some challenges with this
simplification, but assures that these would be addressed
by the regulatory authority and the banks. In the light of
this development, the CBN is set to release guidelines on
common year ends for banks, awards and banks public offers.
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