The human capital dilemma
Nigerian banks don’t yet have human capital to go multinational - Skye Bank MD
By SEUN ADESIDA (seun@sunnewsonline)
Saturday, March 22, 2008

Mr. Akinsola Akinfeminwa Photo: Sun News Publishing

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The banking industry in every emerging economy dictates the direction of the economy, and is supposed to engender. From 89 banks in 2005 to 24 banks today, the banks have gone through a major revolution in terms of power and quality, such that these 24 institutions now surpass the combined performance of the earlier 89 banks in the country. That is summary of the assessment of the industry in description of the gains of consolidation by the MD of Skye Bank, Mr. Akinsola Akinfeminwa.

Yet, with all the euphoria about the heights banks have attained in the post consolidation era, the bank chief feels something remains to be put right before the latest move to multinational scale by Nigerian banks would yield best results. That which needs to be done is shoring up the human capital base because it takes good skills to manage every successful enterprise,

Doubtful human capital
Capacity and capability in terms of human capital development are big problems in the industry today. The question is whether the banks are developing the right kind of human capital and capability to deal with growth, especially now that Nigerian banks want to be the hub of financial services in West Africa.
Nigerian banks are opening branches in the west, north and east coasts of Africa. We have to understand that managing subsidiaries within these countries is tough. When you are in Paris, UK, New York, Congo, Ghana definitely you need a new set of managers.

You are now a multinational manager, no longer a domestic manager. You understand the Nigerian business environment, because you can predict the behaviour of the regulatory authorities over certain issues, the Nigeria Deposit Insurance Corporation (NDIC), the Central Bank of Nigeria (CBN), the Security and Exchange Commission (SEC) and others. But it’s a different ball game altogether in other countries.
The way Ugandan authorities would respond to certain issues would be different from the way the authorities in Congo would react. These are the reasons you need new set of managers.

The real problem
When I was starting out in banking, I was told that it’s a banking rule not to bank government. I started out with First National Bank of Chicago that eventually became IMB. It was an exception to do business with the government. In today’s banks, we do all kinds of businesses with the government. In fact, 70 per cent of banks’ businesses are conducted with the government.

Now if you are coming from a background where banks don’t deal with government to an environment where banks deal with the government then you definitely need a paradigm shift to fit into the new system. What we have in the industry is a major dilemma of lack of skill to run the banks, though the CBN is doing its best to strengthen the Financial Institution Training Centre (FITC), and the Chartered Institute of Bankers of Nigeria (CIBN).

IT challenge
Another major challenge for the banks is Information Communication Technology. If you want to buy any ICT software, you can get it anywhere in the world, but the question you ask is: the money we spend on these softwares, are they realistic in view of the expected returns of the banks. The banks now have a lot of money, but how many companies in this country have capital base of N100 billion. I don’t know if there is any with such amount of money somewhere.

Instead of looking at the volume of money being pumped out by banks, I think the public needs to start looking at returns on capital from the banks. It hurts when you hear people talk about banks making excessive profits. These banks are owned now largely by all of us, which means we must make profit and pay dividends. You cannot compare returns on N2 billion capital base with that of N100 billion. We should look at these things totally, and not just that the banks are making excessive profit.

Recognized globally
Prior to consolidation, we knew what banks in Nigeria went through in terms of recognition at the global stage, but today the story has changed. A lot of financial institutions across the globe are developing investment interest in Nigerian banks. International financial institutions are all interested and are investing in Nigerian banks now. The entire Nigeria business landscape has changed dramatically, such that we are being challenged to deliver accurate and timely information to stakeholders at every level.
Skye Bank at the beginning of consolidation did its recapitalization locally, but the second stage which is practically market induced, made me travel abroad to discuss the possibility of raising money from foreign investors. I went to the UK, spoke to about eleven players in the private placement market there. What I saw was incredible and it made me feel that Nigerian market is well known to these international private investors. Without going through anybody, we where able to raise $100 million, That is about N13 billion just by discussing with these groups.

It excites me that a Nigerian bank can go out and make N13 billion just like that. What we are celebrating here is not only the success of Akinfemiwa or that of Skye Bank but the success of the Nigeria’s economy. This shows that the economy has gone a long way, from the point where we were not accepted by anybody to a point where we are now the toast of everybody.

See the paradox, in days of Prudent Bank I went to South Africa to discuss with a big company to invest in the bank. And all I got was interrogation about armed robbery cases in Nigeria, the instability of the political system and a lot of other issues while the issue of the bank itself was relegated to the background, it was as if I was the minister of finance for the country.

Now after consolidation, there is no one the same company did not send to me just to buy shares in Skye Bank, and I am sure they are not aware of the fact that the same bank had approached them years back and the offer was declined. The CBN and the economic team must be congratulated all the time for what they did to turn the Nigerian economy around.

The governor of Central Bank of Nigeria, Prof. Chukwuma Soludo has done his part, it is only left for managers of other sectors of the economy to do likewise. And he is not in charge of the road and power sectors.

More impetus
Skye Bank recently was in the market to raise N50 billion because of the peculiar nature of our bank. “We did not see the need for more than N50 billion, but by the time the whole process started and we kept having calls from people who wanted to invest in the offer, a member of the board challenged me that N50 billion too small for the bank.

But that for me is an irony because here we were trying to raise N25 billion just two years ago and now N50 billion is too small.

I remember when CBN asked the banks to raise their capital base to N25 billion the banks cried blue murder that he wanted to destroy the banking industry in Nigeria. Indeed, going by the result of the offer, N50 billion was too small. From inability to raise N25 billion, we have all graduated to companies that raise billions thrice of that without stress.

Consolidating other sectors
To me this is incredible, it has come to a stage that if your company is well organized you can raise N100 million from the capital market. It was so exciting that as soon as people got to know that we wanted to come to the market, we had all the cheque for the offer already.

Apart from the monetary gains of this development, sole business owners are now willing to share their business with other people. That is another form of development in the economy.
This where even the health sector can tap into. We have a health sector where doctors are not just opening individual clinics all over the place.

But if doctors can come together and raise money to build one big hospital that can rival any hospital in the world, you can imagine what that would do for the economy instead of the present arrangement. What has happened in the banking sector is best described as a revolution.
With a level of confidence, I can say that the banking industry in Nigeria has come of age in terms development. If you notice in the past two years; increased capital base, skill acquisition and rapid development of functional Information Communication Technology (ICT) platforms have been the order.