Standard Chartered Bank is doing a lot with African governments, especially in the area of solarisation and infrastructure, Sarmad Lone, Regional Head, Client Coverage, Corporate, Commercial and Institutional Banking, Africa & Middle East, Standard Charted Bank, gives this highlight, in this interview with Hope Moses-Ashike on the sidelines of the Global Research Summit in Lagos. Excerpt
You had an interesting event today. A lot of issues were raised during the sessions. What are your takeaways from today’s forum?
I do believe that the solutions to tackle any issue are there. Are they depending on external multilateral agencies, bilateral agencies, and different countries to handle issues like debt sustainability and foreign exchange? No.
The problems that the country faces are domestic. Whether they are security-related, FX-related or subsidy-related, they are well-articulated and well-known. So, a number of panellists mentioned that it is a question of political will. If there is that political will, they will be able to resolve these problems. I am quite hopeful.
In your own recommendation, how would you want the Nigerian authorities to address some of the issues raised here?
I think, again, they were well articulated. I think security is an important one, subsidies are important and normalisation of FX availability will help.
There was much discussion around FX reforms. Do you agree with them on the need for Nigeria to liberalize its FX regime?
I think it is sensible. I mean, it is very difficult to argue against. The panelists and experts have said so, yes, I tend to agree with that.
The Central Bank of Nigeria (CBN) just increased its benchmark interest rate to 15.5 percent and the Cash Reserve Ratio (CRR) to 32.5 percent. How is this going to affect the businesses of your corporate clients?
Inflation is a challenge that is felt globally. Rates are going up everywhere. You would have seen the increase in dollar rates. You would also have seen an increase in pound sterling and Euro rates. This is tough, an increase in financing cost, the suboptimal for businesses, but it is kind of the medicinal rectification of inflation and hopefully, it could help calm down inflation.
Given that oil and gas is the mainstay of the Nigerian economy, how is the Bank balancing the need to meet its Net Zero commitments/policy statements vs supporting companies (and the government) who are not yet at the same pace of progress on Net Zero commitments?
To answer this question, we need to realise the fact that there is no one-size-fits-all solution or policy prescription that one can assume for the entire continent with different demographics, economic and environmental forces that shape each African nation.
As an international bank that is deeply rooted in Nigeria, & with our local market knowledge combined with International best practices; we are well positioned to strike a balance between understanding the need to support economic growth, unlock revenues that can be used to fund wider development for countries in Africa & aligning our work to international environmental and social standards- as set out in our Position Statements, including in relation to climate impact and community consultation.
Climate change and net zero are some of the most important commitments for us as a bank. We have announced a number of groundbreaking commitments as an organisation and we have said that from our own operations, we are going to achieve net zero by 2030. And from a financing business, we will achieve net zero by 2050. So, we have a dedicated Environmental, Social, and Governance (ESG) framework that we follow. It is a global requirement. It is present in all the major centres around the world, which enables clients to get into products and services which will help transition their business into a sustainable business. We are doing a lot of work with governments on the African continent and equally with a number of companies in terms of educating them, bringing them up the curve and driving that behavioural change into a more sustainable way of doing business with us.
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So you are doing a lot of work with governments across the world?
Yes! Across many sectors around the world. That’s the beauty of working with an international organisation that is present in all dynamic markets across Asia, Africa and the Middle East.
So specifically, what business are you doing with the Nigerian government? Can you share your experience?
For the Nigerian government, I know you talked about climate change. First of all, we are working with the Nigerian government to provide solarisation solutions, right? As an alternative to fossil fuels. That will go a very long way to reduce the carbon emissions. That is first. is The second thing, we are working with them on other areas. Apart from that solarising project, we are working on other areas in terms of provision of sustainable infrastructure,. So, there are quite a number of projects. We are focusing on the right ones that aim at reducing carbon emissions and also provision of infrastructure, which is much more needed in Nigeria.
It is a pre-election year and a change in government is imminent (as the current President would have spent the constitutionally allowable period of 8 years by May 2023), would we expect to see a bearish position from the Bank and its risk appetite towards its corporate clients’ projects?
I hope this election will be peaceful and stable and will bring in a positive change to the country in all aspects of life from a political dimension and also from an economic perspective.
We are looking forward to a positive development in terms of things improving from where they are, and I do not see any reason for us to manage risk down because of an election. We don’t do that. Having said that. We always adjust your business to developments in the market every day, not at the back of an election but at the back of global events.
The African continent has been disproportionately impacted by conflicts and economic dynamics that are far from its shores. This is exemplified by the effects of the Covid Pandemic and the fallout of the Ukraine War. However, the medium to long term trajectory remains positive as today’s African citizens continue to build the enabling environment for future generations. Sustainable economic development is core to the ongoing success of the continent and in Nigeria, and that’s the added value that we can bring.
Of recent, we have seen Nigerian tech talents migrating to other countries perhaps for a better life and due to insecurity in the country. This has affected many companies and banks in Nigeria. Is your bank feeling the impact too?
I would say that we as a global organisation we benefit from the quality of the Nigerian talent. What we try to do is to harness that talent abroad within our network.
So, we have over the years managed to keep a lot of Nigerians within the network of Standard Chartered outside Nigeria by exporting highly talented capable people outside from our franchise in Nigeria and to other location across our global network.
What is your outlook for the banks in Nigeria in terms of project financing?
It is positive. I believe that there is a deficit of infrastructure, which creates opportunity. I believe the government is driving the need for infrastructure and therefore, there is room for financial institutions to actually come in and provide not only the funding but the advisory solutions to the government. What is holding back or slowing down the progress? Maybe you could talk about liquidity. But those are just short-term challenges. In the long run, the liquidity is expected to be in place and the projects we expect to actually ramp up for the banking sector. Whether it is a wholesale bank or you provide infrastructure finance, trade finance, commercial banking, if it is the retail sector, there is also a deficit of capital.
More people need capital than is provided. And therefore, there is a deficit and that gives room for opportunity, even within retail banking, to actually provide liquidity for Nigerians. So, end to end, very positive.
Nigeria is broke, its debt-to-revenue is worrisome and optimistic of liquidity being in place. Where should the liquidity come from?
Okay, when you are talking about debt service, debt to revenue, I believe that quite a number of those issues are already been addressed by the government. It is just a matter of time. On the revenue side, whether it is within the oil sector or the non-oil sector, a lot of initiatives have been put in place to ensure that the revenue actually is improved upon. That is one.
Even if there are issues around this, we appreciate the solutions. We understand them and initiatives have been taken by the government to make the outlook even more positive.
Nigerian banks are feared to experience tough times following the tightening stance of their regulator. Is your bank going to experience the same?
As a bank, we are always guided by whatever the regulator says. If the CRR goes up, the CRR goes up; we do not have a problem with that. We will figure out how to work with it and to facilitate our business around it, but the regulator overlook us and we will do whatever they want us to do.
