Ecobank is the continent's largest bank, present in 36 African countries, but Nigeria has recently been the center of the bank's attention. What importance does the Nigerian market have among the bank's operations?
Nigeria was the second subsidiary of ETI, after Togo, but started business years after Togo. It started as a small niche bank with a strong focus on corporate and investment banking, as well as wealth management. When the Nigerian banks started growing as a result of the commodity boom, it remained a niche player. The founders of ETI always considered Nigeria as an important country and, therefore, it was the second country where they launched their operations. It may interest you to know that the majority of the founding fathers were from Nigeria. Over the years, as banks in Nigeria grew we did not grow in tandem. Our operations in the region grew rapidly, but it did not improve its market share in Nigeria. The target was thereafter set to make the bank one of the top three players in the Nigerian landscape. Nigeria was a dominant economy and was playing an important economic and political role in stabilizing the region, and we were starting to see linkages in trade among all the other African countries. At some point a large presence in Nigeria will finance and better integrate the economies of some of the smaller countries, leveraging on the businesses coming from Nigeria.
What results do you expect for the second half of 2015?
Our growth last year was mainly from loan growth. We were able to finance good transactions in oil and gas, manufacturing, and other sectors. In 2015, there has been significant slowdown in loan growth as the Central Bank tightened its policies as a result of the oil price. People started to panic as, historically, when we have such a massive drop in oil prices it has created portfolio quality problems in Nigeria. But some of those weaknesses have been corrected by imposing sectoral limits across different sectors. In the past the finance sector was over concentrated on energy, and when that sector took a hit, the absorption capacity to deal with it was limited. Over the years, the Central Bank has managed that risk by diversifying the portfolio to avoid any concentration effect when there is a shock in any particular sector. There is no particular sector that has more than 20% of the loan book. I expect the trend that we saw in 2014 will holdout in the first half of 2015. When we get to the second half of this year, you will begin to see some drop off in some of the forecasts because the effect of the fall in the oil price, tightened liquidity, and the strict foreign exchange regime implemented by the Central Bank. At some point, we may start to see a slight compression of major revenue lines.
How have you been leveraging new tools in the banking industry to move your business forward?
The nation's strong focus on cashless policy has changed the banking habits of customers, particularly so-called millennials, who do not go into banks at all. They do their banking through alternative channels, the internet, POS, or ATMs. For any bank to be able to grow there must be a developed and functioning channel. You have to have a good internet banking system and mobile money payments. Today, the only reason you see people coming into the branches is to deposit money. For Ecobank, that has helped us to manage the large customer bank that we have—we have over seven million customers. Some of these customers are micro-finance customers and so we need to have a low-cost approach to deal with them, hence the various channels. The next segment that we are looking at is the agent banking system, which the Central Bank has also licensed. We are just waiting for a better roll out program so that we can license agents, whereby people can make cash pull and cash deposits of small values with agents. The telecoms sector, in contrast, has a much broader customer base than we do and we believe that, with mobile money, we should be able to reach out to most of their customers. That problem will be resolved subsequently and that segment will take off and at some point in time we will begin to see more acceptance of new channels by customers who are mobile phone customers. These potential customers are financially literate and can operate a bank account if the rules are clear through the mobile payment system. After oil, the next large foreign exchange earner is remittances. The Central Bank estimates that it this is about $20 billion per year. So clearly you need money services like Western Union and MoneyGram to tap into the pool of revenue coming from Nigerians all over the world. We also have our own money transfer product-rapid transfer system, which allows people from within our network to make domestic and regional transfers. Nigerians in the Ivory Coast, for example, can send money to their relatives here through that platform and vice versa. That platform has helped us to integrate our network within the 36 countries while also supporting the international flows coming into Africa through MoneyGram or Western Union.
What are your expectations for the year ahead?
In 2016, most of our economies will remain commodity dependent and thus vulnerable to price movements. In other words, as long as commodity prices remain low, they will depress government revenues. For example, oil revenue is a major aspect and that has come down significantly. There is a lot of adjustment underway, and some state governments are having difficulties funding their expenditure base. Across the African market, growth will slow down a bit, but we still think that 2016, from a banking sector perspective, will hold some decent revenues and profit.