We are committed to supporting Nigerian economy through bespoke financial solutions – Rotimi
The Nigerian merchant banking industry is presently offering different tailor-made services to businesses and public sector players. In this interview with TELIAT SULE, the Managing Director of Greenwich Merchant Bank, Bayo Rotimi, explains the unique roles of merchant banks in Nigeria, and how his company’s uniqueness has contributed to the growth of the Nigerian economy. Excerpts:
Congratulations on your appointment as the MD/CEO of Greenwich Merchant Bank. Kindly provide information about you and your career trajectory prior to your appointment as the MD/CEO of Greenwich Merchant Bank.
I began my career twenty-eight (28) years ago at the old Fountain Trust Merchant Bank, which is currently part of Heritage Bank. Subsequently, I moved to Lead Merchant Bank, now Lead Capital before joining FCMB Capital Markets in 2001.
I worked at FCMB Capital Markets for approximately eight years and rose to the position of Chief Executive Officer in 2008. Having made up my mind that I needed a career change, I left to start my Securities & Exchange Commission (SEC) licensed boutique investment banking firm.
I wanted to do things differently, so in addition to investment banking, I also focused on building capacity to support the growth and development of the investment bank community
– which is my core competence. Later, I expanded to other aspects of financial services.
After operating my company for over twelve 12 years, the Directors of Greenwich invited me to manage the newly licensed merchant bank.
Coming back is an opportunity to take on a new challenge since we operate in a different era. Of course, the macroeconomic and global economic challenges are significant. Nevertheless, it is an exciting time, and merchant banks have a huge role to play in capital formation and economic development. I look forward to the opportunities ahead.
Our economy has faced a number of challenges: we went through two recessions, and unfortunately, the global pandemic struck and shut down everything. As the world began to recover from the devastating effects of the global pandemic in 2021, you became the MD of Greenwich Merchant Bank. How has the journey been so far for you and the bank?
Our world has become increasingly interconnected. Changes in the global economy will impact national economies, and whatever occurs at the national level will directly impact key economic actors. No one anticipated COVID-19, and we have already witnessed four or five different mutations of the virus, and experts have indicated that there may be more to come. Geopolitical tension also impacts the economy, as evidenced by commodity prices. Despite the challenges, the beauty of Nigeria and Nigerians lies in their resilience. A lot of Nigerians have chosen to rise above the dysfunction and convert the challenges into opportunities.
As a merchant bank, we see huge opportunities in this entity called Nigeria, a country with the potential to achieve double-digit GDP growth and ultimately outpace population growth – currently around 3 percent per annum.
In other words, our economic growth must consistently exceed the population growth before the average Nigerian can experience an improvement in their standard of living. There are several key sectors that we believe can catalyze the transformation of the Nigerian economy. Even though oil contributes around 80 percent of our foreign exchange earnings, the oil ecosystem accounts for less than 10 percent of Nigeria’s GDP, implying that there are several other viable sectors to focus our attention on. The question is: how can we build, expand, diversify, and scale our non-oil exports?
Greenwich Merchant Bank sees significant potential in providing innovative bespoke financial solutions to Government at Federal and Sub-national levels, as well as companies and businesses operating in that space, so that Nigeria and Nigerians can build and diversify their export base.
Nigeria can evolve into an export-oriented economy beyond commodities; we have a strong diasporan contingent while some Nigerian residents work for global companies and earn foreign currency. Technology has made this possible. This represents the potential of Nigeria, and our mandate at Greenwich Merchant Bank is to support critical economic actors.
In addition, the country struggles with a significant infrastructure deficit; we are therefore focused on supporting infrastructure development. For example, the Bank recently assisted the Federal Government to raise N250 billion, via a Sukuk issuance, for the specific purpose of expanding and upgrading our road infrastructure. In addition, Greenwich has advised about two-thirds of the 36 states of the federation at different times, raised money for them, helped them deliver critical infrastructure projects, and helped them improve education, health care, as well as other social services for their residents. This speaks to our essence as an impact- driven financial institution.
Greenwich transitioned from being an Investment Bank to a Merchant Bank in 2020. What factors influenced this transition and how has it unfolded?
The legacy Greenwich Trust Limited was founded in 1994, and for the first 26 years, it operated as a pure-play investment banking firm. On the 2nd of October 2020, the CBN graciously granted us a final banking license to enable us expand our range of services to include deposit-taking and lending.
We hitherto did not have our balance sheet as a pure-play investment bank. We could only raise funds from counterparties to support our clients’ business operations, capital expenditure, and manufacturing activities. We made the strategic decision to transition from a pure-play investment bank to a merchant bank, thus giving us the ability to leverage our balance sheet to better support our clients and provide end-to-end financing solutions.
Today, we provide 360-degree financial services in-house, with a corporate and an investment bank, an asset management subsidiary, a securities trading business as well as a stake in a Trust company.
In addition, we saw significant opportunities within the Nigerian economy that a banking license would allow us to explore. We have enjoyed tremendous growth within a year as our balance sheet has tripled to over N103 billion as at 31st December, 2021 with profitability growth of almost 100%.
Could you please provide a general overview of the Nigerian merchant banking sector? How large is that industry and are you anticipating more competitors coming in either locally or internationally?
Nigeria has ample room for multiple players. Currently, there are six licensed merchant banks in the country. The market is large enough for the existing players and foreign entrants who may choose to enter Nigeria. For instance, Nigeria requires at least $1.5 trillion worth of infrastructure spend, over the next 10 years, to bridge her infrastructure gap.
As intellectual powerhouses, merchant banking services will always be in demand. As niche players, our core role is to create bespoke, customized financing solutions for counterparties ranging from government agencies to private companies either on short, medium, or long- term basis. So there will always be need for the intellectual capital that merchant bankers bring to the table as we seek to grow our industrial and infrastructure base and diversify our economy away from that mono-product that currently provides 80 percent of our foreign exchange earnings.
We can also coexist with the commercial banks, the microfinance banks, and the new financial technology companies. There is more than enough room to accommodate a diversity of skill sets within the Nigerian financial services sector.
What are the products in the pipeline that people can look forward to this year and beyond?
At Greenwich, we are primarily concerned with supporting the Nigerian economy. In addition to funding infrastructure and economic diversification, we also offer structured financing solutions as well as traditional merchant banking services such as corporate or wholesale banking, treasury solutions and a bouquet of financial advisory services – mergers and acquisition, corporate restructuring, privatisation advisory, debt and equity capital raising.
We recognize that due to the lack of access to the long-term and appropriately priced financing, entrepreneurs face significant business challenges – whether it is for a greenfield project, business expansion or diversification.
It is necessary to have an institution capable of providing companies and end-users the bespoke funding that they require. For example, in general, if you are embarking on capital projects, you require long-term financing, but at present, the preponderance of funding available in Nigeria’s banking industry is of a short-term nature, and when you rely on short- term funding for long-term assets financing, you have created a mismatch. As a result, the client sooner or later becomes insolvent and is unable to service the debt.
We are a composite financial services group, which differentiates us from most our competitors as we essentially offer 360-degree solutions to all of our clients.
Different sectors of the Nigerian economy offer different opportunities for financial institutions. What sectors in particular, from your viewpoint as a merchant banker, do you believe benefit the merchant banking sector?
In Nigeria, every sector will benefit from merchant banking solutions, but I find the technology space particularly exciting. The heavy industries and the manufacturing space generally are also of great interest to us. We currently fund and provide advisory services to leading players across food and beverages, cement, real estate, agro-allied and breweries sectors.
The CBN is the largest foreign exchange supplier to the banking industry today, which explains why it is leading the charge for the development of non-oil exports to broaden our FX supply base. The country can also generate scarce foreign exchange by focussing on import substitution.
We must begin to industrialize. For example, a major client of ours is a leading steel manufacturer. They have been operating in Nigeria and within the steel industry for decades, and we are supporting their effort to reduce importation. In addition to manufacturing, technology, and agriculture, Greenwich is focused on supporting agro-processing initiatives that will feed the manufacturers and reduce their import dependence.
Recently, you received an Investment-grade rating from Global Credit Rating. What is the significance of that rating?
The rating was of great significance since our merchant banking operations only just commenced in October 2020.
Not only did we receive a rating, we were also awarded an investment-grade because the rating agency took into account our pedigree and the underlying strength of the legacy business. By sharing our plans and strategies with them, they were able to appreciate our sources of competitive advantage. We also expect that after our robust financial performance in 2021, we will receive a second and more superior credit rating which further catalyse our growth.
You mentioned earlier that six Nigerian merchant banks are currently operating. Is there anything that distinguishes these merchant banks from one another? What makes Greenwich Merchant Bank the investment bank of choice?
Principally, what differentiates us is our people. Our people were carefully selected because our clients demand excellent services, and these services are expected to be delivered with speed, efficiency, and consistency.
Beyond that, as I stated earlier, we are an intellectual powerhouse. We are committed to thought leadership and creating bespoke solutions. As a result, you can see that we have consistently participated in multiple landmark transactions. For example, we recently executed a N250 billion Sukuk issuance for the Federal Government, the largest ever in the history of Sukuk issuances in Nigeria. We advised on the first sub-national Sukuk Issuance in
Nigeria and, as far back as ten years ago, we created a bespoke debt resolution vehicle for the Federal Government through which N360 billion worth of Local Contractor Receivables were retired.
As exemplified above, we are committed to the provision of unique financing solutions to both public and private sectors.
What should people expect from Greenwich Merchant Bank this coming year?
Expect us to introduce more unique financial solutions to the market. The public should expect us to support more FGN impact initiatives as we did for the N250 billion Sukuk issuance. We would continue to actively support the sub-nationals because they are much closer to the people – we have raised long-term funds for their capital projects and assisted them in revitalizing their moribund industries. We would also continue to deliver value to the leading local and multinational corporations that we lend to and advise.
It is abundantly clear that the nation will continue to face significant challenges unless we develop Nigeria for all Nigerians. We must rebuild the Nigerian economy, and one way we can do this is by supporting both public and private sector players.
Our focus is on those companies that drive economic diversification, import substitution, and the development of a vibrant industrial base for Nigeria. We will achieve these through our internal capacity and strategic alliances with partners that bring diverse value propositions to the table. These are our key priorities for the year.