…As bank lowers 2016 growth projections for sub-Saharan Africa
Stories by Blaise Udunze
The World Bank said on Monday it expects its non-market rate lending to top $43 billion in the current fiscal year as developing countries face economic headwinds, bringing its total for the past four years to more than $150 billion.
The multilateral bank said its International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA) divisions are on pace to exceed the combined $42.4 billion reached in the fiscal year ended July 1, 2015.
IBRD lending in fiscal 2016 will exceed $25 billion, compared with $23.5 billion in fiscal 2015. A decade ago, the IBRD lent about $14 billion but peaked at $44 billion in fiscal 2010 as the financial crisis stoked demand from middle-income countries.
“We are in a global economy where growth is expected to remain weak, so it is critically important that the World Bank play our traditional role of helping developing countries accelerate growth,” World Bank Group President, Jim Yong Kim, said in a statement.
In February, the World Bank signed a deal with Peru for $2.5 billion in credit lines to help the Andean copper and gold exporter cope with lower global commodity prices and budget pressures. The bank is also in talks with oil exporter, Nigeria, on loans tied to policy reforms.
Kim said World Bank lending was “highly complementary” to the International Monetary Fund’s role as the main international crisis lender.
“The use of these types of loans are important because the bank is basically signalling to the financial markets that a country’s actions are technically solid, the country will follow through on these commitments and the reforms will help and not hurt the poor and vulnerable,” Kim said.
Meanwhile, World Bank lowered its 2016 sub-Saharan African growth forecast to 3.3 per cent from a previous forecast of 4.4 per cent in October, citing plunging global commodity prices.
The bank said the commodity price rout, particularly for oil which fell 67 per cent from June 2014 to December 2015, as well as weak global growth were behind the region’s lacklustre performance. “Overall, growth is projected to pick up in 2017-2018 to 4.5 per cent,” the World Bank said in a statement.
It said a projected uptick in economic activity next year would be driven by economic powerhouses, South Africa, Nigeria and Angola as commodity prices stabilise.
Nigeria and Angola are the continent’s top two crude oil exporters whose economies have suffered as a result of sharply lower crude prices, while South Africa was also hit by lower platinum, iron ore and coal prices.
“There were some bright spots where growth continued to be robust such as in Cote d’Ivoire, which saw a favourable policy environment and rising investment, as well as oil importers such as Kenya, Rwanda and Tanzania,” the World Bank said.
Ecobank to drive financial inclusion with technology –Kie
The Managing Director, Ecobank Nigeria, Charles Kie, has disclosed that the bank will adopt top of the range banking technology to push its market penetration strategy to become one of the top three Nigerian banks in the next three years.
Kie who assumed leadership of Ecobank Nigeria in January said rather than build new branches, the bank would continue to deploy its state-of-the-art technology including social media, analytics and cloud, among others, to reach every segment of the Nigerian population.
Kie, who was speaking to newsmen in Lagos, maintained that the best means to achieve penetration of financial services is not by branch network but robust technology through alternative channels.
According to the Ecobank Managing Director, the bank has no plans to embark on branch expansion or merger and acquisition to achieve financial inclusion in Nigeria.
In his words: “One topic that is dear to my heart is financial inclusion. The number of our branches that will be dedicated to separate activities will be defined, agreed on, duly approved and then we will roll out a strategy to touch the population that today requires such services. For instance, microfinance as a means to have access to financial services will be provided by dedicated branches, obviously for that and others; technology will be the main driver.”
Further, “social media, analytics and cloud are items that today drive what we do when it comes to operational efficiency and inclusion. And as a bank, these are the elements that we will embed into our technology strategy to precisely achieve that financial inclusion.”
Kie emphasised that the bank is also giving top priority to staff training and development to enhance customer service, stating that it was in line with the vision of the bank to produce the best manpower not only in Nigeria but in the whole of Africa.
“My view is that to achieve excellence in customer service, the teams have to be hired, trained and framed to achieve the level of customer service we want. Therefore, it can only become part of the DNA of the organisation, which is what we want to focus on to make sure that the people we attract, train and retain are molded to fully embrace the culture we want to build when it comes to customer service.”
He submitted that with the new strategies in place, the bank will be the preferred and respected bank in few years. “We are taking a five-year horizon as the least time to see the full impact of all the strategies we have put in place, and we think that by 2020, we should be in the leading position, that is, number one, two, or at a minimum, number three in the Nigerian market.”
Weak banks’ earnings may depress growth in Q4
A string of weak corporate earnings by quoted deposit money banks may trigger more negative impacts on the economy till the end of 2016.
Speaking with Daily Sun in Lagos last weekend, Managing Director/Chief Executive of Afrinvest Nigeria Limited, Ike Chioke, said the situation in the banking sector looks very dire to the economy and that is the signal to the drop in profits of some of the banks in 2015.
According to him, “first, we have to understand about commercial banking and the finance sector but commercial banks particularly serve like a toll gate for the economy. So they are the front line of defence of any nation.
“When they go down, it’s like a tsunami; it has critical effects, which simply means that when they go down, they will push other things down. So, when the banks are suffering, let say for instance, from their 2015 results, there is greater suffering waiting for Nigeria by end of 2016.
Chioke further explained that Afrinvest was already feeling it because the investment climate in the country is so dry and investors are no longer coming into the country because of the uncertainty surrounding Foreign Exchange (FX) market and its regulatory policies.
He said, “people that even have money to invest in the country may be concerned about the extreme scrutiny on the team doing the anti-corruption fight, to the point that if you have good money to invest in something but due to fear of the unknown will rather do nothing than investing because of all manners of leakages.
“For instance, some people often moved money from one account to another to do business but before you know it, the next day EFCC has blocked it. But essentially, when you see the banks reporting reduction in their earnings, making provisions from exposure to the power sector, provision from exposure to the oil and gas sector, all of these often have effects because economy is one single family, that are all connected.
“Someone has pledged his real estate asset which might include hotel, a laundry business and a restaurant, borrowed money to do oil which has run down the banks. However, the bank business is not to own the restaurant, the hotel or the laundry mart, rather sell because of certain CBN guideline not to own non-banking businesses.”
He, however, noted that banks’ challenges today are forerunners to greater challenges for the economy in the next three to nine months and even towards ending of 2016, stressing that all the challenges pointed out by the banks will come back to haunt Nigerians.
Chioke who is known for his continuous advice to Nigerian banks on how they can become more agile and proactive in lending to the real sector if they are to survive the next decade, had lamented that despite the huge contribution of the real sector to the country’s GDP, the percentage of banking sector credit to manufacturing, small businesses and the agriculture sector still remains in single digit.
He said no country grows with a low lending to the real sector. Chioke said lending in the BRICs countries is more diversified and impacts more on the real sector than what is obtainable in Nigeria, adding that “most of our lending is concentrated in the oil and gas sector.”
Presently, the oil and gas sector,s which contributes about 11 per cent to Nigeria’s GDP takes up more than 27 per cent of the credit given by Nigerian banks, while the power sector, a new entrant, which contributes about 0.6 per cent is taking about five per cent of all credit.
Abia welcomes new Union Bank to Aba, Umuahia
Union Bank recently unveiled four of its newly upgraded branches as part of efforts to make banking simpler and smarter for its teeming customers in Abia State. The four upgraded branches of the bank unveiled located in Umuahia and Aba, all in Abia State, are meant to improve customer experience.
The bank, which has been launching its simpler and smarter products and newly upgraded branches in different states of the country was received with excitement by customers in the state, who expressed joy over the transformation of the bank into a simpler and smarter bank.
Speaking at the branch unveiling in Umuahia and Aba, the Transformation Director for the bank, Mr. Joe Mbulu, said Union Bank used to be among the first six top ranking banks in the country until the 2005 Central Bank policy on re-capitalisation, which adversely affected its operations.
He, however, noted that some investors who cherish the integrity of the bank recently decided to revamp it by injecting the needed funds, which was responsible for the current transformation journey which the bank started two years ago.
Mbulu said, “the rebranded bank had a lot of products tailored towards customers’ needs,” adding that the bank has refurbished over 60 branches across the country and a lot has gone into the innovative propositions, which the bank is offering. “The transformation of the bank is a response to customers’ desire and the bank’s commitment to serve its customers better,” he stated.
In his speech, the Head of Retail, Union Bank, Mr. Carlos Wanderley, said “Nigeria is a young country with huge potentials and investment opportunities.” He reiterated the readiness of the bank to help grow the country’s economy using its product offerings and services.
“We believe in Nigeria and we are ready to make her economy work better,” he said, adding that 3,000 staff of the bank are trained every quarter for effective and efficient service delivery.
Commenting on the unveiling, the Abia State, Commissioner for Women Affairs, Lady Chinedu Brown, expressed the willingness of the state government to partner with the bank as long as the partnership complements the government’s transformation agenda.
Tier-1 banks retire staff without severance benefits
AS part of measures to survive the hard times, commercial banks in the country have embarked on stringent cost reduction programmes that have forced some to lay off staff without paying their gratuity, severance and other entitlements as the sluggish economy and regulatory headwinds continued to erode profits.
The development which confirms earlier predictions by Managing Director of Financial Derivatives Company Limited (FDC), Bismarck Rewane, that the tough business environment in the country would make lenders to, “commence massive staff retrenchment in second quarter of 2016 is already painting banks in bad light.”
Daily Sun findings showed that some old generation banks caught in the web of poor results are largely guilty of this conduct which has left affected workers suffering after serving several years with the banks.
This is even more worrisome as dwindling economy, uncertainty surrounding foreign exchange market, regulatory policies and the introduction of the Treasury Single Account (TSA) have dealt a hard blow on banks leaving them prematurely weaned from government’s liquidity breasts.
Sources revealed that the two banks requested staff who had served 25 years and above to voluntarily retire and get some of their benefits but not equivalent to the year put in service. While those who willingly obliged were paid, those who failed were retired without any benefits.
However, a source hinted that the bank did not stop at that as it had earlier retired all the secretaries working in its different branches across the country without benefits except for the salaries they received for the month after the sack letters were issued to them.
According to the source, in February 2016, Regional and Area Managers of the bank across the country were retired with a letter of notification that their services were no longer needed.
“Most banks are cutting budgets in areas of advertising, entertainment, stationery, travel, recruitment, maintenance of generators and Information Technology (IT) infrastructure.
“The business environment is getting more difficult by the day and that is why, for instance, you will discover that instead of replacing old and problematic Automated Teller Machines (ATMs), some banks will prefer to continue to maintain them.”
Banks go paperless also, an assistant manager at a second-tier bank, who did not want to be named, disclosed that the lender’s management had set 2017 as the year the financial institution will go paperless, adding that to ensure that this target is met, each branch now gets only one carton of paper.
He said: “If we run out of paper it is up to us to devise how to get a fresh supply if we have need for paper. This is to make us start preparing for 2017 when the bank will go paperless.”
Besides, he revealed that as part of the cost-cutting measures, the bank has scrapped its variable pay programme for staff. Analysts believe that because of the immediate impact it would have on their balance sheets, more lenders are likely to resort to staff retrenchment in the coming weeks and months.
Fitch Rating had warned that Nigerian banks were heading into financial and operational storms because of what it said were the increasingly difficult conditions under which they are operating.
It made it clear that the difficult times are likely to result in a sharp deterioration in profitability, asset quality, liquidity and capital ratios. The agency’s Director, Financial Institutions, Mahin Dissanayake, pointed out that Nigerian banks were highly exposed to the domestic market and that the economic slowdown would affect their performance.