Managing Director/CEO of First Bank of Nigeria Limited and Subsidiaries, Dr Adesola Adeduntan, in this interview reveals that with about 12,000 agents across the entire network, the distribution of its automated teller machines across the country, the bank has built a solid foundation upon which it can rapidly grow its business and that the financial institution will continue to be a dominant player in the retail banking segment of the industry. Obinna Chima, Goddy Egene and Nume Ekeghe present the excerpts:
There was a major development in the banking industry some days ago, which saw Access Bank and Diamond Bank signing a business combination agreement. How did you receive the news considering that it is one that is going to shift the balance of power and ranking in the banking industry, and for First Bank being one of the industry leaders, are you prepared to cope with the emerging competition in the industry?
We have had two waves of consolidation in the market. The first was in 2004-2005 which was orchestrated by Professor Chukuma Soludo. The second wave happened between 2009 under Governor Lamido Sanusi which was what saw to the acquisition of Intercontinental Bank by Access Bank. So, we have seen two big waves and there have been other minor waves. And if you also look at the number of tier 1 banks we have today in Nigeria, that is compare the size First Bank, GTBank, Access Bank, Zenith Bank and the United Bank for Africa, when you put them on an African landscape, our banks are actually quite small. That is the truth.
In fact, from the last statistics I reviewed, there was no Nigerian bank in the top 10 banks in Africa. When you then realise the fact that Nigeria has the largest economy in Africa, but we are not in the top ten banks, that tells you two things: Firstly, that there is a significant opportunity for growth for banks but secondly opportunities for further consolidation. So what is contemplated by the merger agreement between Access Bank and Diamond Bank is not strange. For operators like us who have been watching this strategic landscape, it was not unexpected. For banks and indeed any institution or any business venture, you do have two opportunities or two key options of growth. You can decide to grow organically or you can decide to grow inorganically, which is what Access Bank is doing.
You may now go further to look at the tier 1 banks. There are banks in the tier 1 bucket who have never done any M&A and GTBank and Zenith Bank stand out. FirstBank has done one or two relatively small M&A which in reality you can take out. So it would appear that just looking at the market, that banks like FirstBank, GTBank and Zenith have perfected the act of growing organically. Whereas when you look at Access Bank, the bank was a major beneficiary of 2004/2005 consolidation in the industry. As at that time, they acquired Marina International Bank, Commercial Bank Credit Lyonnais, so they were a very key participant in that wave. In the second wave which happened between 2011, they were also a big beneficiary bank. So what I’m saying is that broadly speaking, there are banks that have perfected the act of growing organically and there are banks that have also perfected the act of growing inorganically. Nothing precludes one, and none is mutually exclusive.
What does it mean for the industry?
I think it is very good. I think for the size of our economy, we actually require bigger banks. Like I said, there is no Nigerian bank in the top 10 banks in Africa whereas Nigeria is the largest economy. So it is kind of counter intuitive and that scenario is wrong. The top four banks in Africa are South African and that speaks to the strength of South African banks. If our economy is bigger than that of South Africa, naturally you would expect that we should have bigger banks and even if not bigger, but to become comparable in terms of size to those banks. I think we are on a journey it is an industry that would continue to see growth from my perspective. Like I said earlier, people can choose a path on how to grow and all they can also choose both.
But with this development, do you foresee First Bank also adopting an inorganic growth strategy in the medium term, considering the intensive competition we expect to too in the industry?
As an institution, you always have the option of organic versus inorganic growth. Unlike two of the tier 1 banks that have never been involved in any M&A activity, we have a history in M&A. Also, a bigger part of our history is actually growing our businesses on our own. So what that says is that both capabilities are inherent in our DNA and are available to us. What we would do continuously as a management working under the guidance of our board is to re-evaluate our position. And to say what are the growth opportunity for us, either inorganic or organic growth.
What is the update on your African subsidiary, are they now profitable?
I’m happy to announce to you that we have fully recapitalised our subsidiary in Ghana. You would recall that in the course of 2017, the Bank of Ghana announced a significant increase in the minimum pay up capital for all banks operating in Ghana. I’m happy to inform you today that First Bank Nigeria own 100 percent of FBN Ghana. We have fully recapitalised FBN Ghana and we are now fully compliant with the new minimum capitalisation. What we done with our subsidiary is that we have basically reposition all of them and they have moved from where I would call them net taker of resources, we have broken even and as we journey in 2019 we expect growth and an increasing contribution to the groups profitability.
Last year, you had expectations for your bank, were your economic projections and expectations for the bank met and how will you describe 2019?
You would recall that the Nigerian economy was recently in a recession and we came out of the recession in 2017 and what consistently the key operators have said is that the recovery remains fragile. However, we have recovered and we are recovering. When you look at the growth that has been recorded in the course of 2018 you sit back and say we could have done more but, if the growth was also not well orchestrated the way it has always been orchestrated, we could have also slipped back. So for me, I would give the economy a pass mark.
As we move into 2019, the expectations are that things may be a bit slow on the back of the elections and given the fact that naturally, key players, especially on the fiscal side of the economy, would be focussing on re-elections.
But post that, the projections that I have seen are all quite positive and they all speak to the fact that the expected growth should be higher than what we recorded in the course of 2018.
For First Bank, we started a massive transformation program in 2017 and 2019 is the end of that strategic cycle. That plan is focused on transforming the entire business with the work stream focusing on the way we serve our customers and around innovation. There are projects around reigniting the passion of our people, there are projects around strengthening our technology platform and there are projects also around save guarding our assets which is essentially risks management. We are quite delighted from the progress we have made over the last two years and we believe that in the course of 2019, we would have accomplished all the critical components 2017-2019 strategic agenda. We are also looking forward to 2019 because with what we are doing; we have basically built a new foundation to enable our bank to run more as digital bank rather than a branch led institution. Today, based on what we are doing, more than 80 per cent of our customer-initiated transactions are actually carried out on alternative channels.
That means 80 per cent of our transactions happen on Firstonline which is done online, Firstmobile which is done with your mobile phones and USSD which is done on both smart and basic phone. That for us is our star product because today we are the clear leader in that segment of the economy. We currently have almost 6.3 million customers processing transactions on our USSD platform. If you look at Firstmobile, we are a very close to number two, with over 2.5 million of our customers processing transactions. We process very close to 25 per cent of the industry volume in terms of transactions. We are quite delighted with what we have achieved so far. We are basically building the foundation and we believe our next cycle would be around significant growth on the back of the fact that we have fixed the foundation and we trust the foundation that we have built that it would enable to grow rapidly and we are going into 2019 with that highly optimistic mode.
You predicted growth for the economy in 2019, with the recent interest rate hike in the US, don’t you think this would affect Nigeria’s growth trajectory next year?
You need to sit back and look at the impact of the US on the global economy. The reality of it is that because of the size of the US economy and also because for all practical intent, a chunk of global trade is denominated in the US dollars. So, whatever happens in the US economy because it has a vibrating impact across the entire world, affects other economies. So when US interest rates go up, it does have an impact on everybody. Don’t forget that whether as a country or as a financial institution, we all are going into the international capital market to borrow money. So when interest rates go up, the implication is that when you want to tap that market again, you have to go at a higher rate. Because the question the investors would always ask is why they would want to take emerging market risks when they can also get a decent return within their own economy.
The simple answer is that it would impact economies that are US-dependent, Nigeria being a key one. But globally, any action or inaction in the US has a significant impact because of the size of the US economy on the global space.
One issue manufacturers and some businesses complained about in 2018 is the tight Monetary Policy Rate (MPR), how did that impact on your operations during the year?
The Central Bank of Nigeria (CBN) Monetary Policy Rate stance has always been tight. So what I would say is that it was not unexpected. If you look at the major pronouncement of the Monetary Policy Committee (MPC) throughout the year actually retained for the most part all the key MPC matrices. So it is something we have all been dealing with and would continue to deal with. But you need to also understand the contest which the CBN has adopted those measure and that is also equally very important.
First Bank is the cashcow of FBN Holdings. What are you doing in terms of risk management as well as to ensure you deliver maximum returns to shareholders?
I alluded to it when I spoke about the projects and all the transformation work we are doing. You are right; First Bank is a big entity within FBN Holdings and the largest. Part of the work stream I earlier mentioned is one that focuses on safeguarding our assets. We have done a lot of work around our risk management. For example, when we started this journey about three years ago, we recruited a new Chief Risk Officer (CRO), we revamped the credit risk system, we have implemented a new risk management solution and in fact we have also implemented one now that has reached a very advanced stage. And what you see, if you have been monitoring the NPL ratio for FBN holdings, of which First Bank is substantial contributor to that, is that it has dropped materially. We still have some waves but we are quite optimistic that by the time we are wrapping up our current strategic cycle by December 2019, we would be single digit which is quite significant.
What are some of the initiatives taken by the bank to drive financial inclusion, especially in the area agency banking?
Agency banking is one of the most successful initiatives we have introduced over the last 12- 18 months. Indeed, over the last year, we now have close to 12,000 agents across the entire network. Our agents are present in all local government in Nigeria except for one or two local governments. And what means is that when you layer that over 700 operating branches and we also have the largest distribution and network of ATM of about close to 3000. So that makes First Bank a bank with the largest distribution network as far as financial services is concerned and that is quite significant. With the kind of foundation, we have built; we are confident that we have built a solid foundation upon which we can now rapidly grow our business. And that was speaking to the distribution network and to the revamped risk management system within our institution.
Looking at the retail business space, what is First Bank going to do differently in 2019, to ensure you remain one of the leaders in that segment of the market?
Remember my response to the issue of agency banking. Agency banking is actually targeted at the unbanked and the people at the base of the pyramid. Our star product; USSD banking I referred to where I currently said we have customers in the excess of 6.2 million is also targeted at people at that level. So a combination of our agency banking and it is still growing. I mentioned that we currently have about 12,000 agents and we do have a growth projection around that but equally important is the fact that our USSD continues to grow. The reason why we have been quite successful with that is that you don’t need to have an expensive phone to be able to transact. Once you have a basic phone and you are able to send an SMS then that automatically becomes a tool to which you can transact. So a combination of growing our agent network and our very solid and rapidly growing USSD banking for us remains the winning formula in ensuring we have more people at the bottom base of the pyramid.
Don’t also forget that we operate from over 700 branches and our mobile banking called Firstmobile is actually the second in the industry today and we would continue to also focus on that and that is focused more on the middle income earner.
Sustainability banking is one the areas the CBN is asking banks to embed, what are you doing in this area?
First Bank is committed to Global Sustainability as it is an area we have been very active in over the years. For many years, we partnered with Lagos Business School on its Sustainability centre. In addition to this, we are a member of The United Nations Disarmament Commission (UNDC). Internally as a bank, we have the right policies, the right framework and when we are going into projects that we believe would fall into sustainability; there are certain things that we look out for as part of our transactions or credit review. For example, when we look at a credit, we look at the environmental impact and analysis. We would now often ask questions on how projects would impact on the environment; if it would result in flooding or displacing people and what plans do you have to ensure that the environment is not destroyed or degraded on the back the project you are doing. So it is a critical part of what we watch out for.
There is a perception about First Bank as not appealing to the younger generation, what are you doing to do to attract a younger generation?
That used to be the case some three to five years ago. I don’t have the statistics readily available now, but I would tell you that even from an internal perspective, more than 75 per cent of our workforce is less than 40 years. So that is a very young workforce. In the course of 2018 alone, and no other bank has done anything near that, First Bank recruited 700 fresh graduates to join our workforce. Mind you, the maximum entry age is 27 so that gives you an idea of what you have done. And as I am speaking with you; we have advertised that we want to bring in younger people. So we are carrying out massive refreshment of talent and injecting a lot of young people at the base of our institution. If you also look at our customer profile within the retail statistics, I also know that between the age of 18 to 45 that is the age bracket between which the majority of our customers are. It is a perception issue that we have been working on and perception takes a while before you can completely change. So whether you are looking at our staffing or our retail base, we are actually indeed a very youthful bank.
Do you think the budget proposal presented can drive growth?
What is your outlook for 2019, and what message do you have for customers of First Bank?
We are quite optimistic about 2019 despite the fact that there is an expectation of a slowdown in the first half of the year on the back of elections. I did mention that GDP growth expectation based on IMF predictions is actually better than 2018.
For us at First Bank, 2019 is also a very significant year for us. By March next year, our bank would be 125 years old and that is quite significant. We are by far the oldest financial institution in Nigeria and in the entire West Africa. But we are old in terms of age and if we have a large chunk of our customers that are youths. So we are old in terms of age but very youthful in terms of operations.
You would also notice that in the course of 2018 we launched our financial laboratory which we call First Digital laboratory whose essence is to do research for our new products and innovations. For example, today we are the only bank doing WhatsApp Banking. So this is an institution that is old but in terms innovation, culture it is youthful. To our teaming customers, First Bank has always been there, we would continue to be there for them and more importantly, we intend to take our game to the next level in terms of innovation, quality of customer service, in terms of our ability to provide customer with necessary support to grow their business.
First Bank Partners NIBSS to Promote Digital Payment Convenience
By Sodeinde Temidayo David
Nigeria’s top first-generation financial institution, First Bank of Nigeria Limited, has announced its partnership with the Nigeria Inter-Bank Settlement System (NIBSS) on its recently launched Nigeria Quick Response (NQR) Payment Solution, in a bid to improve customer digital payment experience.
This was revealed by the Chief Executive Officer (CEO) of First Bank, Mr Adesola Adeduntan, who noted that the NQR is an innovative payment option implemented for all financial service providers.
“We are delighted with the adoption of the Nigeria Quick Response (NQR) payment solution, an initiative by Nigeria Interbank Settlement System plc (NIBSS) which has been instrumental to easing and promoting payment convenience with the use of mobile phones,” the CEO expressed.
As stated by Mr Adeduntan, the NQR is designed to promote quick and fast transactions by scanning the code on one’s mobile device.
He noted that the NQR is set to promote the vision of the bank, embracing technology to deliver quality and satisfactory services.
“At First Bank, we recognise the indelible role technology plays in promoting businesses across diverse frontiers and we remain committed to reinventing our technology infrastructure to meet global standards whilst being committed to staying true to our mantra in always putting You, our customers First,” he stated.
This new initiative reduces costs for merchants and banks in delivering instant value for a person to business (P2B) and person to person (P2P) transactions by simply scanning to pay.
Unlike other QR schemes, the NQR is implemented with reduced charges that are cheaper for merchants.
The initiative is accessible on the bank’s payment infrastructure as the NQR code can be used to make payments through one’s FirstMobile App and it is also available for the merchant in facilitating their business activities.
The touchpoint and use cases of the NQR payment solution include convenience stores, supermarkets, shopping malls, pharmacies, ride-hailing or taxi payments, bus fares, tolling booths payments, vending machines, e-commerce sites, online businesses amongst many others.
To access the service, customers are expected to launch the FirstMobile App and select QR payment. Afterwards, NIBSS can be chosen as a payment provider, then the seller’s NQR barcode can be scanned.
The amount is inputted for the transaction would be followed by a request for personal identification number (PIN) validation to generate an instant confirmation of the transaction successfully.
On the other hand, merchants are to visit any First Bank branch closest to them for service enrollment.
Appzone Relaunches BankOne
By Modupe Gbadeyanka
The digital core banking solution for Africa’s fintechs and Neobanks, BankOne, has been relaunched by Appzone and re-engineered with the functionality expected to drive the exponential growth of fully digital offerings.
This follows Appzone’s Series A raise in April 2021, the largest locally-led raise in Nigeria which repositioned the organization to roll out new innovative offerings that help financial institutions function in a fully digital and automated way.
Having previously built out functionality to automate and run traditional Banking operations, Appzone is now deploying BankOne as a platform for technology-driven financial institutions intending to adopt a 360-degree digital approach that does not involve physical branches or human interaction.
With operations in Nigeria, Ghana, Gambia, and Kenya, BankOne currently hosts over 10 million customer accounts with balances totalling $105 million while managing over $650 Million in annual loan disbursements, and $2.9 billion in total transaction value.
Asides from managing customer records, loans, deposits, and accounting, BankOne provides an omnichannel self-service platform, USSD interfaces, Payment ecosystem integration, agent banking capabilities, and card management services.
These functionalities are available to Fintechs like digital lenders and neobanks, as well as traditional banks like MFIs, mortgage banks, consumer lenders and commercial banks.
Currently, challenger and traditional banks in Africa are limited to using foreign technology solutions tailored for Western markets, and many of these solutions are hindered by prohibitive pricing, poor market fit and a lack of local tech support.
BankOne’s major differentiation lies in its fit-for-purpose functionality and integrations with the local ecosystem of third-party services. These characteristics in addition to ease of customization and availability of local support ensure that the platform seamlessly plugs into the needs of African Banks and Fintechs.
Speaking on the relaunch, the CEO of Appzone Core, Mr Mudiaga Umukoro, said: “For over a decade, BankOne has played an active role in driving the digitization of Nigeria’s financial services industry.
“The platform has now been repositioned to serve the continent’s growing number of Fintechs and neobanks.
“BankOne’s major advantages are market fit and affordability which allow financial institutions deliver highly relevant products at a fraction of cost while leveraging our numerous integrations with mainstream payment systems to achieve instant interoperability with other industry players at no extra cost.”
Originally launched in 2011, BankOne is delivered and run by Appzone Core, a subsidiary of the Appzone Group.
The platform played a significant role in the first digitization phase of Nigeria’s financial sector and came to further prominence and adoption as digital challengers and neo-banks began to emerge.
As Africa rapidly accelerates towards a fully digital banking future, BankOne is being positioned to provide affordable and purpose-built digital infrastructure to enable this transition.
Wigwe, Emefiele Get Juris Law Award
By Modupe Gbadeyanka
For their outstanding contributions to corporate governance and rule of law in Nigeria’s banking industry, Juris Law has honoured the duo of Mr Herbert Wigwe and Mr Godwin Emefiele.
Mr Wigwe is the Chairman of Body of Bank CEOs and Group Managing Director of Access Bank Plc, while Mr Emefiele is the Governor of the Central Bank of Nigeria (CBN).
They got the award at the 2021 Judges Workshop on Banks and Other Financial Institutions Act (BOFIA) 2020 held on Tuesday, October 12 in Abuja.
Mr Wigwe and Mr Emefiele have partnered in the creation of several positive socio-economic initiatives such as the Creative Industries and Financing Initiative; a loan scheme developed to provide access to long-term and low-interest financing for entrepreneurs in Nigeria.
In addition, they were key parties in the formation of the Coalition Against COVID-19 (CACOVID) – a vehicle created to spearhead corporate Nigeria’s support for the federal government’s fight against the deadly virus.
The successful coalition funded the establishment of response centres, acquisition of medical equipment, supplies and food palliatives for vulnerable Nigerians.
Speaking on the recognition, the Access Bank chief stated that he was honoured to receive the Juris Law award, adding that “through innovative banking initiatives and our underlying sustainability drive, Access Bank will continue to create shared value for all our stakeholders, striking a balance between competitive advantage and corporate social responsibility.”
The 2021 Judges Workshop on Banks and Other Financial Institutions Act (BOFIA) 2020 focused on reforms and the statutory requirements imposed by CBN on all banks and other financial institutions in Nigeria to adopt policies on anti-money laundering and combating the financing of terrorism and cyber security in Nigeria.
Present at the occasion were the Attorney General of the Federation (AGF) and Minister of Justice (AGF), Mr Abubakar Malami (SAN); the Appeal Court President, Justice Monica Dongban-Mensen; the Chief Judge of the Federal High Court, Justice John Tsoho; the former Chief Justice of Nigeria and former Chairman, Board of Governors, National Judicial Institute, Justice Mahmud Mohammed and other high ranking judicial officers and the legal community.
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