By Omodele Adigun
As opportunities start to crop up for those interested in exporting Nigerian made goods, the Managing Director of Fidelity Bank Plc, Mr Nnamdi Okonkwo, has promised that his bank has the capacity to support exporters and ease one the problems of access to finance.
At a joint programme with the Nigerian Export Promotion Council (NEPC) recently, Okonkwo said the bank has committed about N30 billion of its loan portfolio towards export.He noted that this would make much impact on the SMEs in that sector.
How much are you bringing to export promotion?
When you ask how much are we bringing? Honestly, we haven’t place end limit. But what we have done, how we approach programme like this is to create a product programme. And we are saying to ourselves that if we give about N30 billion of our loan portfolio towards export, then it would be something that would be quite impactful.
But then, the details of how to access this would be driven by a product paper that pre-qualify people to meet certain conditions. And this capacity building program me would be one of those, because I answer the question this morning in radio when people malign banks. I ask a question, how can I not want to do what I am set up to do as a company? We are set up to take deposits and lend money. But in doing so, we do so safely. So we don’t want to jump into financing export without creating capacity for the would-be borrowers. So the emphasis for us is to develop those exporters. And then definitely, we would support them, working in conjunction with the Central Bank of Nigeria (CBN). And that is where CBN has a program me on export finance. And CBN is not a retail bank. So they can’t sit in their offices and lend to these exporters. So they need banks like us to do that. You know that most developmental finance programmes of the CBN and BoI are usually single digit. So this one would also fall into that kind of category.
Solid minerals
We still need to do a lot about institutional framework for solid mineral sector because for products or projects that are bankable, there must be some level of preparations that are adequately helping to mitigate the associated risks. If I don’t even know what the policy framework is, but the industry is not structured or develop enough to attract finance. Finance is not going to go there because there are other financing opportunities.
Mr. Segun Awolowo, has given us enough information about what government is doing to make that sector bankable.
Export value chain
That is what actually Fidelity Bank is already known for. We use the cluster approach because those …… I keep giving this example. We keep winning Best SMEs Bank of the Year. And one of the occasion to receive our plaque, my colleagues in other banks were saying to us that very soon, you will be the Best Bad Loan Bank in SMEs. Now this was three years ago. And I am happy to inform you that their dreams have not come to pass. And why? It is because we approach this from a structured perspective. That is why we have a General Manager, heading the SMEs division. What we will do is clusters. Businesses that look alike. And their needs are similar. You pre-qualify them. Study what they do. And then you create financing products for them.
In a manner that even these companies are self reinforcing. If I am lending to him for purchase of raw materials, his need is also the same as if these guys are a clusters. So that helps us mitigate all those risks. If you take some examples, we have done successfully. In Aba, we have Aba shoes and leathers’ clusters. In Abeokuta, there is Adire cluster. In Kano, there is tannery cluster. We study their peculiarities; we do the risks and mitigates; we do the analysis properly. And say, look all these people, if you do to say ASPAMDA, and you take the cluster of people that sell break fluids, you find out that their needs and risks are similar. Then, you create a product that helps them. And this answer dovetails now into impacts of increase in interest rates. There is usually a lag in time because when rates move and when they actually begin to impact the borrowers. But is not automatic for the SMEs.
At the moment MPR goes up by one percent, the next day, we will write all our customers to say interest rate has gone up by one per cent. I mean it is the same thing when we used to have COT at N3. It does not mean everybody will get charged at N3. If you cluster the approach, it also means that you can balance up this increase in interest rate. For instance, by increase float from deposits. Because you have given them similar needs, you use risks assets as penetration strategy and then that leads to how cost deposits with you because daily sales are lodged with you. So for SMEs, if you bank them they way we bank them, without banking them haphazardly, you will find out that on account of supporting them, they need to take loans. There are those also who in anticipation of being supported, also begin to deposit money with you.
Now you ride on the benefit of building up this core deposit base is to pass on the lower interest rate to those who are borrowing. By the end of the day, you are still a profitable company. And those companies are still profitable. So it is a win-win situation. So it is not all the time that one rate increase, you jump up on everybody.
Remember, speaking specifically about SMEs if for example, you take the upper end of the market, it is corporate banking, today, multinationals or corporate like Dangote. Companies like that don’t borrow money at 20%. You see them borrowing at 15%, 16%. So it is all about capacity and risks.
How come banks are not lending to SMEs?
It may be true banks are not lending to SMEs but you can’t be referring to Fidelity Bank, obviously because we are known to support SMEs heavily.
The Central Bank of Nigeria created N120 billion SMEs funds, in conjunction with SMEDAN and all that. Today, Fidelity has disbursed N2 billion of that money to SMEs. Some months ago, we celebrated our first set of beneficiaries who repaid fully. Today, 10 of them have already repaid and we have avail this fund to 120 of these customers.
Now as a bank, our loan portfolio to SMEs is about N60 billion that we have given as loans to SMEs. In terms of the customers’ count, for three million customer count, we have SMEs probably account for about 40 per cent. So we are definitely SME-supporting bank.
Why can’t borrowers access long term capital?
A whole lot of people do not realize that banks’ business is to buy and sell money. So, I come to the market to purchase my raw material is cash and my finished goods are also cash. Every other thing banks do are added services. Banks get a lot of bashing for not lending long-term. Then I ask you, if as a banker, I know that secret place, where I can find long-term funds, we will be the number one bank in Nigeria today, because I can lend long-term.
“I want borrow N100 million, then bring me one depositor who will place N100 million with me at 10 per cent and I will lend at 15 per cent. Remember that in calculating those 10 per cent of N100 million, what you have actually given me is N75 million because N25 million will be placed with the CBN as Cash Reserve Ratio (CRR). And for me to access N5 million out of the N25 million CRR cash, I have to lend the money for use in industrial production. Then what are your risk assessment criteria if the industrial sector you want to lend to is fighting for breath.
Besides, the CRR, such lender has to pay five per cent of the N100 million initial deposit to Nigeria Deposit Insurance Corporation (NDIC) premium. People actually believe that banks are not lending long-term because they do not want to. We do profitable business. When there is a run in the system, the owners of the short term funds will come for their money and you have to pay them. And if you pay them, the people you gave long-term loans cannot pay up. Then you begin to have distress in the system,”
SMEs fund
The challenge we have in Nigeria is that we have got so skeptical about good intentions of either the government or the finance sector that people read a lot of meanings to them. But the Central Bank of Nigeria (CBN) is very serious about the N220billion SMEs’ fund. We are witnesses because we have customers who accessed the SME funds through us.We have done about N2.2billion of the funds. We have got repayment of about N400million.We haven’t had any default because of the process through which these funds were accessed.CBN can not go to Aba and start lending money.T hat is why they need a bank like Fidelity. Our team spent about two weeks there.So we have not
abandoned those people.Instead, we planted a bank there, we are even lending to more and more of the customers.I just want to encourage the people to take advantage of this.