My Sojourn At The UBA, By Elumelu

THE GUARDIAN Newspaper-Marcel Mbamalu

Now, UBA is regarded as leading bank, not just in Nigeria but also on the African continent; you have a global footprint. How did you achieve that in just a few years?

First, I will tell you a bit about UBA. Today's UBA is a product of the amalgamation of two banks in Nigeria. The erstwhile United Bank for Africa which was the third biggest bank in Nigeria and the erstwhile Standard Trust Bank which was the fifth biggest bank in the country.

In 2005, the two banks came together and created the new UBA. When we created this new institution, we agreed on what we called the three tier strategic intent for UBA. 1ST tier was to be the leading financial services group in Nigeria, 2nd tier was to be the leading financial services group in Africa and that is what we are trying to execute and this has taken us beyond Nigeria, across Africa and major economic regional blocks in Africa and this is the driving force in what we are doing across the continent and the third tier is the next phase.

What do you make of the current banking reforms in Nigeria, which has been in the headlines over the last three or four months; that is the intervention by the Central Bank of Nigeria with respect to the auditing of banks in the country, the stress testing and problems around risk management?

I like to say that our industry grew quite fast as a result of the consolidation in the industry and of course with growth comes its attendant consequences and challenges, one of which in Nigeria was the issue of risk management, governance standards, corporate governance etc. And I think the new CBN governor is interested as he said in many of his interviews, he was interviewed by CBNC and others and stated clearly his agenda. He wants to ensure that there is better corporate governance in the financial system, he wants to make sure that banks are well capitalized for the risks they take, he wants to make sure that there is full disclosure in the industry, he wants to make sure that there is a totality of the enterprise risk management framework in place and practiced by the banks. So I guess, the aftermath of what we see must have been driven by this objective that the CBN governor shared with everyone.

Now for UBA, we are one of the banks that were tested and we are happy that it came out well. But there are learning points for every one. The learning point is that the economy is growing; and in the industry, there are certain exuberances, certain practices, certain things occur; and as the industry moves into the phase that it is moving now, we begin to learn and improve on many things.

But for us, right from time, we had actually taken risk management to the next level. You will reckon that the CBN governor was with us in UBA and he was the Head of Enterprise Risk Management in the bank and helped to put the foundation for risk management in this bank, what we did was to build on the good foundation he laid and we got a Group Chief Risk Officer who is also doing well.

Now within this context, what is the next step for UBA? You have passed the stress test; you have come out of that and the reputations of the bank is in very good stead, and many people are saying some of the "rescued banks" are looking attractive, would UBA want to make a play for that?

Yes, I think as one of the key players in the industry, with a clear strategic intent as I said before, of becoming a leading financial services group in Nigeria, we think they could be opportunities in today's environment, and we could explore these opportunities with our global financial advisers to see where and what position to take.

Now, lets talk about doing retail banking in the African environment. You have already got a customer base of seven million in the region. Some people would say you are going against conventional wisdom, because the market or purchasing power in Africa isn't particularly good - the market isn't well-developed - and the risk of incurring default because of peoples' lack of purchasing power create

a business model that isn't particularly sustainable. How do you respond to that?

The truth is that we believe the retail banking or consumer-banking opportunities is even higher in Africa than any other economies. The reason for this is that the African banking public is grossly under served in the area of consumer banking products.

Abroad, you see consumer banking customer that has access to four to five different consumer products. In Africa, there is none. What we are trying to do is even to get people to have access to some of these basic consumer products, which they didn't have access to before.

Again in Africa, it is even different from what people think. People are quick to generalize; people are quick to say, 'don't go to that sector'; but the competitive advantage is our understanding of the African market, African businesses, and the African borrowing culture.

Also, in the area of retail, we know we have some of the basic retail infrastructure that we need to play in that market, because it is not just about lending. When we say consumer or mass market, some borrow; some don't borrow, some actually save. There is remittances business, there is savings or deposit business, there is also money-lending business.

So, we talk of money lending in Africa, thinking it is about lending; it is not about lending. Lending is part of it; and even in lending, people don't over-borrow; people are not over leveraged in Africa. We are grossly under-leveraged here. In fact, consumer finance, as a proportion of the GPD on average in Africa is less than eight per cent; in South Africa, maybe 40 to 50 per cent. But in Nigeria, it is less than eight per cent; and across Africa is very low. So, we do think across Africa what we offer is not only consumer credit; there is also wholesale banking credit, so we do both.

I want to talk about that element; let's talk about institutional investors - people who are coming in and want to enter into big projects; we are looking at $5million and above in a climate where, globally, liquidity is drying up. People are just averse to putting money into emerging market economies, that is where UBA comes in. You are competing with the established players - the Barclays, the Standard Bank etc - coming into the African market, and you need to create a leverage yourself. As a very credible Wholesale banking institutions, what are you doing in these areas?

The competition we have across Africa is not necessarily with the established European banks. The competition is amongst us - the African banks as key players, because the European Banks have a lot of constraints. They cannot just open the treasure, the vault and just lend in Africa; there are country limits, sovereign risks, and so on.

But it is quite different for some of us. And the experience we have is that, among some of the African lending institutions, is that we are able to syndicate sizeable loans to support the African businesses. UBA has done that across Africa, we have partnered with some of the European banks to lend money to the African corporate, African majors and the experience in terms of loan performance is very good.

For us again, Africa is shared into four - the oil-rich African countries, the mineral-rich African countries, the politically stable African countries, and the post-conflict African countries. They have their characteristics, their borrowing habits, and our lending is tailored to align with these characteristics.

What are your views about the future of African Capital Market? For Instance, we hear, in Nigeria, plans to launch a $500 billion bond for infrastructure. To do that in the current investment climate in itself is a challenge with volatile currencies, such as the Naira, the South African Rand, adds to the risk of these kinds of investments; where do you think the future lies?

I think the future is bright. I will like to go back to some corrections; the currency (Naira) is not very volatile currency. In the past one year, the Naira has been fairly stable, with three to four per cent volatility, which is fairly stable for raising capital. The capital market is wide but let's looks at it from the context of the bond market you are talking about.

Yes, investors' appetite is drying up around the world at this point, but we think that, given the nature of the oil-rich economies, raising money where the dollar and crude oil are doing fairly well and with reasonable reserves and ratings, present manageable risks.

For Nigeria, the bond market is beginning to look exciting; we think the CBN governor and his colleagues in government are working to make it attractive. Generally, I think to the extent that no

African country has defaulted in the bond market lends credence to the fact that we should be able, as a continent, to raise money.

The type of funding we need for infrastructure development in Nigeria, demands a combination of capital market initiatives, partnership with private sector and Nigerians across Africa; and the fact that there are also a few developmental African institutions that are interested in funding African projects too.

You also have a presence in Europe, New York and China. Talking about the Western market, first, how are you approaching that kind of environment, when so much is being said about bilateral relations, and we have seen much in the form of quality of easing when governments have to come and inject liquidity in the system? Do you think it is prudent to be there this time?

It depends on what is driving the objective. UBA has presence in London, through an investment banking unit; we also have representative office in Paris, in New York; we have a full-scale operations.

In London and Paris, it is more of supporting trade business. London has been a trading partner with Nigeria and Africa. Paris has trading partnership with a lot of francophone African countries.

Since we are spread across Africa, to support our customers in these economies, we need to have a strong presence in these places; so, for us it is not about being embedded in those countries, it is more of facilitating trade between those countries and Africans.

In the US, we are fairly embedded but we do wholesale business; we don't accept retail business, because we are more of a corporate type wholesale business.

Many people would say it is exciting times for the world there. The complexion of global trade business is changing; people see China and

India as catalysing growth (that is the optimism). The pessimism is that it is a saturated market and if you are really wise, you should not be going there because the market in China is full of disruptions.

What is your response?

The truth is that the volume of trade between China and Africa has grown astronomically over the past 18 months, and a lot more would even happen because China is interested in the mineral and oil potentials of Africa and we think that signals a lot of positive development between the Chinese and Africans. For UBA, we think a representative office in China will help us orchestrate, intermediate, and broker transactions in trade relations between China and Africa.

More so, given the fact that we are operating in a couple of African countries, we need to be seen to be bringing Chinese and African businesses together; that is the reason for our Chinese presence. Also, it has been laced with a further relationship we developed with the Chinese Development Bank, which gives us opportunity to the huge access of the China Development Bank in facilitating that relationship with China investment in Africa, somewhere in the region of $100billion, the biggest investor in Africa.

What are your views of the Chinese investors per say? People say they are immoral; they bring in their own skill, their own pool of talent, their own money. They reap from Africa but they sow very little. What are your views?

As CEO of UBA, and given the relationship we have with the Chinese, I will like to say that I have a slightly different viewpoint, and would like to share with you our own experience. When we signed the agreement with the China Development Bank, two years ago, they thought they should help us in building skills and competencies; and one of the things they did was to ask us to nominate someone to come and study Mandarin and do an MBA in China and also, given the level of relationship we want to build between the two institutions, it would be nice for some Nigerians to come there. They paid all the expenses. We have our people - UBA Staff there now studying MBA. These staff will now drive further the relationship between China Development Bank and the United Bank for Africa Plc.

If you therefore ask me the nature of my relationship, is it symbiotic? I would say,

Yes. We have been getting more from them in the area of skill development. Also, they are saying, 'UBA, we trust you, we trust your credit process and management process. In any private / public partnership you want us to support you in terms of funding, we will support you.' To us, we see things fairly differently.

So, you are Tony Elumelu, the CEO who has received numerous awards and acclaims; what is your philosophy to life and what guides you?

Basically, I think that this generation should strive to create enduring institutions. I read two books when I was growing up. One was the friction, Cane and Abel, Prodigal daughter, Shall we Tell the

President, and I read about the Cane family and they were able to build institutions that lasted almost forever.

When we talk of Africa, we talk of poverty, war, famine and other negatives. But we would like to see an African institution that competes with Microsoft, Citibank, HSBC, etc; and you know the journey of Citibank did not start in a day, but they were driven by a common vision of purpose, consistency and direction. To us, we are trying to build UBA to last, a UBA that will help catalyse economic development and growth across Africa. For us, it is not just about making money per say. Of course, we have to make money to sustain our ambition, but more of growing an enduring African institution that can compete with other companies anywhere in the world.

I want to challenge you on your vision as an African and corporate leader. You operate in

Nigeria primarily, with repeated power outrages, a real problem in terms of security and energy, which must add to the cost of doing business here and are beyond your control. What do you think can be done forging relationships between the government and the private sector to overcome a lot of these infrastructure problems that are adding to the cost of business and are beyond your control and your personal vision?

The truth is that we have environmental and institutional factors that could affect our ability to achieve our objectives, but I believe that the country and the society get the kind of leadership they deserve. But again, the society has a role to play; the private sector has a great role to play. We have to come, sit down with government and get it done.

If you look at the history of America and the construction of railway system, it was achieved by public-private partnership. If you read the "House of Morgan," people left the United

States and came to Europe to raise money to support that. Of course, institutional rigidity and infrastructural deficiencies should not be a sufficient justification for not achieving our objectives. Because we see in that inadequacy and problem, you can create a competitive advantage.

Everybody has power problem, this problem, that problem and all that. How did you or how have you as an institution, developed yourself to live with that problem, while focusing on the objective, and how also are you working with all stakeholders to see a better tomorrow, as relates to those infrastructural deficiencies. At UBA, we have an Infrastructure Desk; and we are working with governments to see how we can support that, not just in Nigeria but also across Africa.

You've got a significance presence in the Africa economic space, and may people say that by the year 2025, China, India and some Asian economies would be the center of global trade and economic activities. In that context, where do you think Africa would be in year 2025?

We have been told that Africa is the last frontier and, indeed, we think it could happen. But we also believe that the destiny and the future of Africans lies in our hands as Africans, nobody will make it happen for us. So, for Africa, private sector people and the government must engage and come together, assess the problem and fix it. We should look at Africa in the context of where we are today; in the context of abundant untapped potentials that we have - mineral potentials and others, and tell ourselves that it's time to make it happen. We must tell ourselves to make things differently, which is to stop fighting wars; we should have good governance to permeate the society.

We should develop physical infrastructure that would orchestrate this growth. If we don't do anything and even though we are told we are the last frontier, it would not happen. But we need to start something and call on the private sector and the pubic sector to come together.

It is not enough for private sector to criticize government and for the Govt to criticize the private sector; we must come together to create a platform that gets all of us thinking along the same positive line - harmonizing our viewpoints.

I think that Africa has a place if the leadership - public and private sector - would come together.

What's the evidence on ground for that happening at the moment? As a bank, you can look at the figures. You know what the capital outflows and inflows are. What do you make of what some people say that Africans are very good at making money, they are also very good at storing that money abroad and aren't committed to investing in the environment around them; they just absconded from their responsibility as private citizens?

Africa should be looked in the context of modern and Ancient Africa. The ancient Africans are our fathers and parents. They had little confidence in the African continent and so whatever little savings they had, they invested offshore.

But the modern African has confidence, is well educated, schooled with these people; has seen lots of potential in the African continent and would like to invest in Africa. That is why the likes of UBA, the likes of MTN and some others, will always believe in Africa and do so much to invest in it.

Mo Ibrahim is an African. We think that the modern African looks at things differently, not the ways our parents looked at things. There is no sense of inferiority in us so we can compete with others.

My final question to you is: What are your views on social entrepreneurship?

For us in UBA, we believe in the fact that you do well as a company; and you do good to the society. We try also to relate well, with the society we are operating in. We are only, as far as we know, the only financial institution in Nigeria that has a Foundation called the UBA Foundation.

Through UBA Foundation, a percentage of Profit Before Tax (PBT) is set aside for doing good to the society. And we emphasize education, environmental health, and economic empowerment.


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