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Nigerian Banks and Entrepreneurs

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Olaseni Durojaiye in this report examines the relationship between banks and private businesses in Nigeria, regretting that the way some banks go about their businesses may dampen entrepreneurship spirit and stifle the economy.

The world over, entrepreneurs occupy a central position in any market economy. They serve as the spark plug in the economy’s engine, activating and stimulating a greater percentage of economic activities. The economic success of nations worldwide is the result of encouraging and rewarding the entrepreneurial instinct. A society is prosperous only to the degree to which it rewards and encourages entrepreneurial activities because the entrepreneurs and their activities (form the two legs of the tripod that are the critical determinant of the level of success, prosperity, growth and opportunities in any economy. The critical third being inter-related issue of regulations and compliance

This explains why an analyst posited that “The most dynamic societies in the world are the ones that have the most entrepreneurs, plus the economic and legal structure to encourage and motivate entrepreneurs to greater activities.”

Managers of great economies go to great length to promote entrepreneurship because they recognize that the story of competiveness of their business environment is best told by using the same entrepreneurs to tell the story.

Between Banks and the Economy

Economists argued that banks and financial institutions on the other hand contribute to economic development and the improvement in living standards by providing various services to the rest of the economy. Some of these services are offered through clearing and settlement systems to facilitate trade, channeling financial resources between savers and borrowers, and various products to deal with risk and uncertainty.(The role of the banks as financial intermediaries has a major bearing on how efficiently the economy allocates its resources between competing uses.

According to a Research Analyst with Frigate Consult, a Lagos based financial advisory firm, Soji Ibiwoye, “commercial bank is basically a collection of investment capital in search of a good return by granting loans and extending credit to people who can pay it back on the bank’s terms.

This is why banks specialise in assessing the credit worthiness of borrowers and providing an ongoing monitoring function to ensure borrowers meet their obligations. They are rewarded for these services by the spread between the rates they offer to the accumulated pool of savers, and the rates they offer to potential borrowers. This process is at the heart of modern banking,” Ibiwoye explained. He however added that “Whether the structure of Nigeria’s financial system is optimal for the economic growth outcomes the country would like to achieve is another topic entirely.”

It is somewhat difficult to measure the impact of banks financing in providing support for entrepreneurs in Nigeria.

However, there have been some success stories and leading lights that signpost Nigeria’s entrepreneurial spirit. Aliko Dangote owns the Dangote group, a conglomerate with interests that cover food processing, cement manufacturing and freight. The company operates in Nigeria and other African countries, including Benin, Cameroon, Ghana, South Africa, Togo, Tanzania, and Zambia. The Dangote Group employs over 11,000 people.

Astute and highly successful investor and entrepreneur, Otudeko’s Honeywell Group invests in diverse sectors of the economy since its inception in 1972 and has grown to become one of Nigeria’s leading indigenous conglomerates.

The Honeywell Group is now a major diversified group engaged in select businesses in key sectors of the Nigerian economy, namely; foods and agro-allied, energy (oil, gas and power), infrastructure, services and real estate, and through other portfolio investments the group is also a significant provider of capital to other sectors of Nigeria’s economy. Honeywell Group employs over 10,000 people.

In the services sectors, Jim Ovia and Tony Elumelu stand out. Ovia is the promoter and founder of Visafone and was a co-Founder of Zenith Bank Plc while Tony Elumelu is the Chairman of Heirs Holdings, the United Bank for Africa amongst other interests.

Check also revealed that these entrepreneurs through their businesses have at certain times enjoyed and continue to enjoy the support of the Nigerian banking and financial system through loans and credits with which the businesses are funded for growth and expansion. It is fair therefore to conclude that the Nigerian economy is fueled by entrepreneurship and funded by the banks.

Ibiwoye insisted that these two must work hand in hand and argued that no one can exist without the other adding that the relationship banks have with their customers and businesses must therefore be maintained with a degree of professionalism as expected from a well-regulated sector.

Between Banks and Entrepreneurs

Due to the numerous risks that are inherent in commercial/contractual transactions, disputes are often times inevitable.

The banker – customer relationship being contractual in nature is not exempted. With the pivotal role of banks in the growth of entrepreneurship in Nigeria, analysts argue that it is essential that there is a strict adherence to professional and ethical standards within the industry and also a framework for the resolution of disputes arising from a departure from established standards and practices.

One of the initiatives set up to address customer complaints and disputes arising from banking practices was the establishment of a sub-committee on “ethics and professionalism” by the Bankers’ Committee. The Bankers’ Committee is an umbrella body comprising the Central Bank of Nigeria and commercial banks.

Whilst the Sub-committee on Ethics and Professionalism has resolved over 1000 cases or petitions since it was established in December 2000, the Sub-committee’s ability to ensure compliance by the banks with its decisions remains a critical issue. This has led some of the often asked questions among industry insiders: Can entrepreneurs rely on the Sub-committee to ensure that all banks adhere to the code of ethics and professionalism? Can the decision of the Sub-Committee compel a bank to honour its commitments/responsibilities to a customer?

The ongoing situation between Honeywell and Ecobank highlights these issues and the impact they can have on the growth of entrepreneurship and the economy. “This may turn out to be a litmus test for the bankers’ Committee,” stated a branch manager with one of the third generation banks. “How the saga plays out will mark a watershed in entrepreneur and bank relationship in the country,” added the banker who wished not to be identified.

Between Honeywell and Ecobank

According to media reports based on facts from ongoing court proceedings as instituted by both parties, Honeywell Group through three of its companies (Anchorage Leisure’s Limited, Siloam Global Services and Honeywell Flour Mills) obtained various banking facilities from Oceanic Bank. These facilities were subsequently inherited by Ecobank Nigeria Limited upon its acquisition of Oceanic Bank.

Due to various factors and within established norms of banker/customer relationships, Honeywell Group, in 2012, reportedly commenced discussions with Ecobank for a full and final settlement of its obligations to the bank. At a meeting in July 2013 between the two organisations which was led by the Chairman of Honeywell Group on one hand and the MD/CEO of Ecobank on the other hand, an agreement was reached for the payment of N3.5 billion in full and final settlement of Honeywell’s indebtedness to Ecobank.

Reports further indicated that an initial and immediate good faith payment of N500 million was made and a balance of N3 billion paid subsequently, making a total of N3.5billion paid in accordance with the agreements reached.

Ecobank reportedly duly acknowledged the cumulative payment of N3.5 billion in a letter dated February 2014 and agreed to update its records with the credit registry. However, nine months after payment was effected, Ecobank informed Honeywell that its representatives at the meeting did not obtain board approval before entering into the agreement.

Honeywell reportedly kicked against the feedback from the bank arguing an agreement entered into with the bank’s managing director who ordinarily should be able to bind the bank on agreements of such nature and further documented in numerous correspondence.

Knowledgeable insiders disclosed that this thus became a basis of dispute between Honeywell Group and Ecobank as it was clear to Honeywell that it had fulfilled its obligations to Ecobank based on agreements reached.

The dispute was submitted to the Bankers Committee, Sub-Committee on Ethics and Professionalism and a ruling was issued by the committee in July, 2015 to the effect that “the agreement between Honeywell Group and Ecobank to pay N3.5 billion as full and final payment of the borrowers’ indebtedness is valid and should be complied with”.

Ecobank till date has not adhered to this ruling. Both parties have filed suits at the Federal High Court with respect to the matter.

When contacted, the Head, Legal and Regulatory affairs of Honeywell Group, Yemisi Busari, said “We are surprised by the actions of Ecobank, which have been very inconsistent and short of the standards expected of a bank of its standing. In our opinion, there was a valid agreement to pay a sum in full and final settlement of our obligations and we have met our part.

“Independent third parties have also attested to this fact. Are Managing Directors of banks no longer recognised agents, able to commit their organizations to agreements? Why did it take the bank nine months to realize they didn’t have board approval for their Managing Director’s actions? Does Ecobank, which subjected itself to the hearing by the Bankers Committee, Sub-Committee on Ethics and Professionalism, not believe it is accountable to the Bankers Committee, because the ruling was not in their favour? What is the objective of the bank in making multiple filings before different judges in the same Federal High Court? she asked.

Many banking industry insiders whose comments were sought, though familiar with facts of the matter asked not to be quoted. However, they opined that the dispute will raise serious concerns in the minds of most entrepreneurs in Nigeria as funding from banks is critical to the running of most businesses.

As one of them asked rhetorically “Will the banks respect the sanctity of agreements reached with their customers going forward? What recourse is available to entrepreneurs when banking standards and decisions are not adhered to? How is compliance to standards and codes enforced in the banking industry? Without a resolution of the issues highlighted above, entrepreneurship will gradually become stifled and the impact on the budding Nigerian economy may be colossal,” he concluded.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Fidelity Bank To Develop SMEs Capacity in Non-oil Exports Sector

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In furtherance of its resolve to help Nigerian businesses build sustainable export capabilities, leading Nigerian lender, Fidelity Bank Plc, is set to host the 11th and 12th editions of its highly acclaimed Export Management Programme (EMP).

Launched in 2016, the EMP is targeted at preparing participants for real-time experiences in the international non-oil export markets and the broader export market at large. The session typically covers a wide range of topics including Export documentation, Selection and Implementation of Supply Chain Management for Exports, Application of Export Development Business Processes amongst others.

Speaking on the programme, the Managing Director, Fidelity Bank Plc, Mrs. Nneka Onyeali-Ikpe noted that, “As a leading supporter of small businesses, we introduced the EMP five years ago to bridge the knowledge gap in the export business locally and to help participants to compete effectively in the global export market. Given the success, we have recorded in the course of the programme and following the yearnings of potential participants, we decided to host an edition of the training in Kano for those who are unable to attend the session in Lagos.”

While EMP 11 is scheduled to hold at the Lagos Business School (LBS), Lekki, Lagos between 4 and 8 October 2021; EMP 12 would hold at a soon-to-be-announced venue in Kano State from 11 to 15 October 2021. The sessions would be facilitated by leading faculty from LBS, Nigerian Export Promotion Council (NEPC) staff as well as experts in financial management and exports.

Fidelity Bank has over the years demonstrated its resolve to grow the non-oil export side of the economy through strategic initiatives and partnerships. For instance, the bank provided over N32.7 billion in credits to businesses operating in strategic sectors including rice, dairy, poultry, oil palm and cocoa in 2019. The bank has also successfully leveraged strategic partnerships with the Central Bank of Nigeria (CBN) and Development Finance Institutions (DFIs) under various industry targeted intervention funding programmes to enhance access to credit for eligible players in the agribusiness and non-oil exports space with the aim of addressing food security gaps and enhancing foreign exchange earnings.

“The benefits of supporting the non-oil sector of the economy cannot be overemphasized given the immense benefits that it provides to the economy and the nation in terms of providing much needed foreign exchange investments, increasing our Gross Domestic Product (GDP) and employment generation. This informs our decision to host the EMP regularly and we enjoin interested entrepreneurs to take advantage of this initiative to take their business to the next level,” Onyeali-Ikpe explained.

To register for the event, kindly visit www.fidelitybank.ng

About Fidelity Bank Plc

Fidelity Bank is a full-fledged commercial bank operating in Nigeria, with about 6million customers who are serviced across its 250 business offices and various other digital banking channels. The bank has in recent times won accolades as the Best SME Friendly Bank, Best in Mobile Banking and the Most Improved Corporate/Investment Bank among several industry awards and recognitions. The bank was also ranked the 4th Best Bank in the Retail Banking Segment in the 2017 Banking Industry Satisfaction Survey conducted by KPMG.

Focused on select niche corporate banking sectors as well as Micro Small and Medium Enterprises (MSMEs), Fidelity Bank is rapidly implementing a digital-based retail banking strategy which has resulted in an exponential growth in savings deposits over the last 3 years and a corresponding surge in customer enrollment on the bank’s flagship mobile/internet banking products.

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Afrexim and Asoko Partner to Help List African Companies

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Afreximbank - Investors King

Asoko Insight, Africa’s leading provider of corporate data and engagement services, is pleased to announce a partnership with Africa Export-Import Bank that will help African companies list on its due diligence platform, the MANSA.

Launched by Afrexim in 2018 to counter the cuts in trade finance and investment financial flows to Africa, MANSA aims to be a single source of the primary data required for Customer Due Diligence (CDD) and Know Your Customer (KYC) checks on African entities. The transparency MANSA provides will address key trade-related challenges facing the continent, including the lack of market information, the high cost of doing business in Africa and the challenges around discovering African counterparties.

The corporate information gathered through this KYC platform provides an additional layer of confidence for international financiers and African companies seeking business partners,  unlocking the flow of capital and creating a more transparent operational landscape for trade and investment.

Onboarded as an official data partner for the project, Asoko will host access to the MANSA platform on its Digital Engagement platform through which African companies can register and submit their CDD/KYC information to be listed on the MANSA platform.

Rob Withagen, co-founder and CEO of Asoko Insight, said, “Easing access to African companies for trade and investment opportunities is at the core of Asoko’s work. MANSA is a key tool for facilitating data sharing about members of Africa’s vibrant private sector and we’re pleased to offer a route to it via our Digital Engagement platform.

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HOPE Consortium and Astral Aviation Sign MOU to Enhance Vaccine Distribution Solutions in Africa

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HOPE Consortium - Investors King

As part of its continued commitment to vaccine distribution in Africa, the HOPE Consortium has partnered with Kenya-based cargo airline, Astral Aviation, to offer vaccine distribution solutions to Africa. This highlights the HOPE Consortium’s efforts in reinforcing partnerships that focus on fighting the COVID-19 global pandemic, as well as fulfilling the organisation’s mission as a global logistics facilitator, by aiding in vaccine delivery.

As part of the partnership agreement, both entities will focus on intra-African cooperation to enhance vaccine distribution within the African continent. The HOPE Consortium will utilise Astral Aviation’s comprehensive network, technologies, and market expertise, to support its global objective of facilitating vaccine availability with a specific emphasis on the African continent. The alliance will ensure timely delivery of vaccines and critical supplies to all 54 African nations.

Astral Aviation operates a diverse fleet of 14 freighter aircraft and provides innovative, flexible, and cost-effective UAV (Unmanned Aerial Vehicle) and UAS (Unmanned Aerial Systems) integrated drone-based solutions, as well as warehousing solutions to both in-store and remote locations.

This synergetic collaboration with the HOPE Consortium will see Astral Aviation provide capacity for vaccine deliveries on its scheduled and charter freighter network, in addition to world-class drone solutions and systems to Africa, with the purpose of facilitating immunisation programmes.

Commenting on the partnership, Mr. Sanjeev Gadhia, CEO of Astral Aviation said: “We are truly honoured to partner with the HOPE Consortium and participate in the critical distribution of COVID-19 vaccines, based on our track record in performing humanitarian initiatives and vaccine flights within Africa. Astral will add further technological and warehousing solutions for distribution of the COVID-19 vaccines from the hub in Abu Dhabi, to all the 54 countries in Africa directly or via its Nairobi Hub, which occupies 9000 m2 of cold-storage facilities.”

It is worth mentioning that Astral has also been selected by UNICEF to perform vaccine flights for COVAX and for the African Union via the African Medical Supplies Platform.

Through this partnership, the HOPE Consortium furthers its end-to-end supply chains required to distribute vaccines from their base in Abu Dhabi to all African countries. The HOPE Consortium has geared its operations to transport millions of critical COVID-19 vaccines to any country in need and thus far has handled over 100 million vaccine doses across 40 countries.

Robert Sutton, Head of Logistics Cluster, Abu Dhabi Ports, said: “Africa has always been a high priority market for the HOPE Consortium, and to that end, we are pleased to join hands with Astral Aviation. With a track record of operating over 20 years within Africa, their expertise provides a new dimension towards achieving our overarching objectives. This partnership reinforces the HOPE Consortium’s aim of creating a sustainable ecosystem, based on our collective global networks, logistics and supply chain capabilities, in order to facilitate vaccine distribution across the world. Our partnership with Astral Aviation is another benchmark towards our commitment to serve every country, region, and locale. We are confident that this partnership will help enhance HOPE Consortium’s efforts in Africa and ensure that no one is left behind in the quest against the pandemic.”

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