Despite a pride in its pan-African footprint, Nigeria continues to represent a pivotal role in Ecobank’s operations because of the size of its operations in Africa most populous country. Ecobank’s chief executive, Albert Essien spoke to BusinessDay with Stephen Williams.
Twenty-five years ago, Ecobank was created as a private banking institution, initially to serve West Africa, specifically the ECOWAS region. But in recent years, under a former chief executive Arnold Ekpe, it has taken on a pan-African vision, to serve what it defines as Middle Africa – south of the Sahara and north of South Africa.
Through a series of bold acquisitions and green-field start-ups, it now has a presence in 36 African countries including its move into Mozambique, concluded in the middle of the year with the acquisition of BancoProCredit.
But it is Nigeria that represents one of the bank’s most important markets, and it is treated as one of six African segments. The other segments are all multi country, comprising francophone West Africa; Rest of West Africa; Central Africa; East Africa; and Southern African.
With 610 branches (after the takeover of Oceanic Bank) and more than 10,000 employees, Ecobank Nigeria’s operational base is roughly equal of the rest of Africa combined.
For Albert Essien, Ecobank’s activities in Nigeria are extremely important. “It is central for us,” he states,“as we have 40 percent of our assets there.
“We had some challenges there coming out of the 2008 crisis with regard to margin loans and rationalising our staffing levels, but I think Ecobank Nigeria is now in a position to move up to contribute. They have just raised about $200mn in a bond issue earlier this month [August]. The fundamentals have always been strong in Nigeria.”
But there have been a number of mixed signals regarding the prospects for Nigeria, Africa’s largest economy, with one frontier market advisory reporting that “prolonged anemic economic growth stagnation, falling oil exports, a fast depleted forex reserve stock and declining equity market valuations may be more proximate than is currently apparent”.
Countering this negative view is a McKinsey report, published in July 2014,which stated: “Nigeria has the potential to expand its economy by roughly 7.1 percent per year through 2030, raising GDP to more than $1.6 trillion.
“This could make Nigeria a top-20 global economy –with higher GDP than the Netherlands, Thailand, or Malaysia by 2030.What is more, a large consuming class is developing in Nigeria, with potentially as many as 160 million members by 2030, more than the current populations of France and Germany combined.”
It seems clear that Essien inclines more to the latter view than to the former. He says: “I don’t have concerns with the economy. It is a question of how Nigeria manages it. I’ve always said that Nigeria has great potential – it’s always been how they manage it at any point in time.
“I’ve also said that if they can get the power sector right, and they now have the initiative on power in Nigeria, the country can really prosper.
“The beauty of Nigeria is that it has at its disposal the people who are so innovative, so entrepreneurial. And you also have the critical mass of a large population. I always get excited when I go there, but it has its challenges!”
Essien’s self-declared mandate has been to consolidate the bank’s position and reinstate stability and trust amongst the various stakeholders. But he also sees extracting value opportunities from the group’s investments as key to the bank’s sustainable development.
The wholesale side of Ecobank’s business has considerable exposure and experience of the oil and gas sector in Nigeria, and that gives Essien the confidence that Ecobank can play an important role in the business – particularly now as the IOCs divest from on-shore assets and indigenous players take a more proactive role.The oil and gas sector, at the 2013 year-end, represented 18 percent of Ecobank’s total African portfolio and 45 percent of its loan exposure.
But the oil and gas sector is notorious for employing relatively few people when measured against the value of the industry. So Essien makes the point that it is crucial for Nigeria to attract back to the country the highly-skilled people that currently reside in the diaspora.
“The government needs to galvanise them, to tap into that pool of really skilled people,” he says.“I deal with them on a daily basis and they are real quality people, as good as any you will find anywhere.
“It can be done, but we need good governance to start with. These people in the diaspora have been exposed to good governance, and I think they will want to see good governance back in Africa.
“I think once we get good governance we can meet the continent’s economic challenges and people can be sure that things will not return to the bad old days. Good governance is important to attract the young back to the continent.”
Many returnees would have obtained the skills and qualifications to enable them to find positions with the global corporates; regional corporates; public corporates; financial institutions; and international organisations that operate in Nigeria and represent an important market for Ecobank’s corporate and investment bank services.
Yet others will be seeking to leverage opportunities in the small and mid-size enterprises (SMEs) area, either joining existing businesses or launching their own.
Essien is clearly impressed with the Nigerian government’s support for SMEs. “They are tackling many of the issues,” he notes. “For our part, we are sponsoring the first African SME summit in November in Dakar,Senegal and we are championing support for SMEs as a pan-African institution, to drive the economy and boost employment.
“But the SME space is a tough area. There has always been a lot of talk, more talk than action, and I know that people believe that commercial banks should do more.
“SME investment borders on venture capital, and I think that governments, rather than blaming commercial banks, should partner with us in a true public-private partnership, to support SMEs, as was done in Europe and elsewhere. Nigeria is going in the right direction in that regard.”
The other area that is frequently mentioned as requiring a more concerted focus is agriculture. Indeed, the AU has declared 2014 to be ‘The Year of African Agriculture’.
During the AfDB’s Annual Meeting in Kigali, Rwanda, Ecobank signed an agreement with eleni LLP who are planning to roll out agricultural exchanges across Africa. ”We want to facilitate commodity exchanges,” Essien explained,” as a way of assuring market price stability for agriculture products. We believe that that has been part of the problem. Sometimes there are bumper harvests and you have no buyers, so the commodity exchange will bring that stability in terms of access to markets.”
“I think we have started planning an agricultural commodity market for Nigeria and that will certainly help the market and stimulate the agro-industry space.”
As well as the SMEs and agriculture, Ecobank believes the power sector reforms hold enormous potential, for Nigerian industry in particular.
The takeover of Oceanic Bank saw Ecobank inherit a seat on the board of the African Finance Corporation that is spearheading massive investments in West Africa’s power sector.
So too, the takeover of Oceanic Bank, that Essien describes as a “very good fit, especially in the north and south-south east of the country” saw the Ecobank brand gain an additional 364 branches in Nigeria, all of which are now integrated within Ecobank’s IT infrastructure and the same core banking application, Flexcube.
The bottom line is that Ecobank Nigeria, allied to Nigeria’s huge economic potential, offers a compelling banking proposition. It is, as Essien continued to repeat, all about “managing the risks and rewards, and to offer excellence”.