Access Bank is one of Nigeria’s fastest growing banks. It is a key player in the consolidation process and a major participant in the money and capital markets. One of the first to successfully comply with the Central Bank of Nigeria’s banking consolidation policy through the acquisition of Capital Bank International (formerly Commercial Bank Credit Lyonnais) and Marina International Bank, Access Bank now ranks among the top 10 banks in Nigeria with assets in excess of N200bn ($1.56bn) and a net worth of approximately N30bn.
Q Describe the product and service range of Access Bank?
A We are selling the best service to corporates and the middle and higher earning income group of individual clients. We focus on cash management solutions for corporates, and all the services involved in payments. We also emphasise project finance, structured finance, trade, treasury, particularly fixed income and the money markets. At the retail level, we focus on the salary payment and wealth management aspect. We are migrating to consumer loans, but not too aggressively given environmental constraints. Today, we are mainly a corporate-commercial bank, but we are trying to build strong retail competences.
Q What are your capital raising capabilities and expectations?
A We have always had a very clear vision as to what our target capital structure should be. As a rule of thumb, we typically relate our capital structure to our total assets and our basic principle is one unit of capital to 10 units of assets.
The largest bank in Nigeria currently has total assets of N1200bn. Given the current industry growth pattern, it should have between N3000bn and N4000bn in total assets by 2010.
Under our ‘one for 10’ principle, it will be required to have capital of $3bn. We have projected that for us to rank among the top five Nigerian banks, we need capital of between $1.5bn and $2bn. Today, we have total capital of $350m. So we have a continuing major capital raising programme ahead.
In the meantime, we will have to do a lot of capital raising. We have led the market in terms of structuring Tier 2 capital. We started by placing debentures directly with multilaterals such as the International Financial Corporation and the Netherlands Development Finance Company.
Q Why the rush to build up capital?
A Nigerian banks are in a capital raising frenzy. They need to raise pure equity to take advantage of the huge opportunities available in the country and indeed the rest of Africa. Those who don’t are going to be in deep trouble, strategically. They will be starving themselves of oxygen while their competitors are tanking up with oxygen and strapping it to themselves.
Q How significant is capital raising in dollars in the Eurodollar markets?
A You must appreciate that today Nigerian banks can generate those dollars internally, rather than going to the Eurodollar markets. Nigerian banks can raise what we call ‘Niger dollars’ through domiciliary accounts.
There is a significant amount of dollar deposits within Nigeria. It comes from oil and from remittances. Our straight dollar deposits are $130m and we haven’t started to drive that. We could grow that by 100% by the end of the financial year if we wanted to. Interestingly, the dollars are costing us Libor minus, in sharp contrast to the more expensive Nigeria bank debt.
Q Explain the implications for Nigerian banks of the growing amounts of capital in their balance sheets?
A The more capital you have, the more risk you have to take and vice versa. The amount of acceptable risk available in this country far outstrips the amount of capital within the banking system. Local businesses are still severely restricted from taking advantage of the opportunities out there. By scaling up their capital base, a whole range of opportunities that have always been there, are now within reach of Nigerian businesses and, by extension, Nigerian banks.
Our banks have started to deploy their capital in ways they did not think possible and this is generating healthy returns. The banks are now saying: ‘Wait a minute, even the capital we’ve raised is not really a whole lot, given the sphere of opportunities. So let’s ramp it up again.’ They will find again that the market is bigger than they thought. So through [Chukwuma] Soludo’s [the governor of the Central Bank of Nigeria] consolidation reform the hope and opportunity for Nigeria is becoming realised, and Nigeria can become one of the world’s top 20 economies in 20 years.
Q What are the opportunities and challenges for Nigerian banks?
A Nigeria has access to sea, oil, agriculture and rain. All we need is continued peace and good governance. We have all the conditions necessary to compete with the developed countries.
There are many areas of opportunity. The first is retail banking. Most Nigerian banks were historically wholesale banks. But there is an emerging middle class and Nigerian banks want to serve it.
Second, the corporate names are getting bigger. Nigerian banks have to grow in tandem if they don’t want to be left behind. Five years ago, a $200m syndication was a big deal. Today, it requires just two banks. The corporates are getting bigger, so the banks must get bigger.
Third, there is regionalisation and the push by Nigerian banks into the whole of Africa. The foreign banks have struggled to put their footprint in Africa.
If a foreign bank wants to set up a commercial bank in Nigeria, it shouldn’t bother with anything less than $2bn. The Nigerian banking industry is growing fast. It is growing at 30% to 40%, year on year. By 2010, at least three Nigerian banks will rank among the top 200 banks of the world.
Q Why have foreign-owned banks struggled to set up operations in Nigeria?
A The paradigm of the foreign-owned banks creates unnecessary hurdles. When we go to markets that have been dominated by those banks, you see frustration. People say, they don’t help to develop the local markets.
We feel that Nigeria gives us a platform to create a world-class, pan-African bank. We are taking clear steps to have a 15-country footprint within the next three years. We are starting with west Africa, then we will go to east Africa, and then to central Africa. Quite a few Nigerian banks will have offices all over Africa.
Q And other opportunities for local banks?
A The Central Bank of Nigeria has moved faster than the operators to build a world-class, national payment system. This is moving very fast and it provides opportunities for banks. Mobile banking is a great opportunity and we have invested in the required technology to do it properly and not as a stunt, so that when we decide to enter the market we can do so in no more than 30 days. We don’t have to write software or call in consultants, we have to just switch the system on.
Q How significant are international concerns about governance in Nigerian banks?
A We conduct ourselves by standards that are best-in-class. Our know-your-customer practices are in line with global standards. A few Nigerians have of course given our country a reputation for fraudulent behaviour, but this will change as they see the benefits of good behaviour accruing to those that embrace best practice.
Q How do you see developments in the relationship between the central bank and Nigerian banks?
A Very healthy. The central bank has implemented the key reforms needed to enable it to focus on economic management and let the forces of the market determine the rest. We now need reforms in the capital market. We need to bring down the cost of transactions and we need to speed up the process of capital raising.
Q Finally, what do you see as the future of consolidation for Nigerian banks?
A I foresee the emergence of 10 pan-African banks anchored in Nigeria within 10 years. The reduction in numbers will happen naturally. Some will see that it has become too competitive to compete and choose to go with another bank.
Aigboje Aig-Imoukhuede: Access CEO
