Economy Requires Fiscal Restraint to Complement Monetary Policy- AKU

Economy Requires Fiscal Restraint to Complement Monetary Policy- AKU

Managing Director/Chief Executive Officer, Ecobank Nigeria, Mr. Jibril Aku, in this interview with Obinna Chima reasons that the federal government should introduce fiscal restraint to complement monetary policy. Excerpts:

How do you feel to be the chief executive officer of the subsidiary that is sustaining the Ecobank Group?

I won't put it that it is our subsidiary that is sustaining the group. The good thing about the power of the group is that you have diversified revenue, which is the first thing, such that if it is a one-country business, if there is a downturn in that country, all the revenues go down. But if you are in a group, if one country has a downturn, the other countries can be moving up. So, you have something that you can call a hedge, such that revenues are not all at risk. They were times when the Nigerian subsidiary's numbers weren't good, but the group was benefiting from other countries. Now, it is becoming the other way, the Nigerian numbers are now looking up and again, some other members of the group are having challenges.

So, that is the power of the group. It offers you diversified revenues and that is why people have invested in it. That is the pan-Africanism in it. When you create your pan-African portfolio, you create a diversified revenue base and if all of them are growing at the same time, you get consistent revenues and if there is any problem with one, it doesn't pull down the entire number. So, that is how I see it. The group offers us an opportunity to be part of the bigger club where we also contribute our own quota.

In the spirit of equity, does that have anything to do with remuneration in terms of those subsidiaries contributing higher to the pool?

Of course, it does have. This is because the group also has in place a bonus scheme which is country specific. The bonus scheme allows the staff members to share five per cent of profit before tax. So, the rate of you profit before tax determines how much you share in the group. So, it does have an effect. If you contribute more, you get a bigger piece of the profit before tax of your country and not of the group. So, that stimulates the workers to produce more because they know that the group will give the five per cent of their profit, in addition to their normal salary.

What is the strategy of the group, Ecobank Transnational Incorporated (ETI)?

ETI has a strategy to run a pan-African bank that would contribute to the economic development of African countries. So, that strategy, once it is taken is domesticated. Each country would look at how to implement that strategy to meet the ultimate goal of ETI, which is to develop a world-class pan-African bank that would contribute to the economic development of those countries, and as a whole, lead to the economic development of the African continent. So, that is the overall strategy.

So, when it comes up with its strategy, it now hands it over to individual country where it has presence to domesticate. That is why you see that for example, we run a corporate bank. This is because when we decide to bank a company like Dangote, it is because Dangote is present in at least six or seven African countries. So, we won't just do business with Dangote in Nigeria alone. We would do business with Dangote in Kenya, Zambia, Cameroon, Senegal and other countries in Africa where Dangote has plants. So, you are giving him a whole business such that sitting in Lagos, Aliko Dangote can see the value of his operations in those countries. So, that is an example of our pan-African business.

The Central Bank of Nigeria (CBN) have directed banks to publish the list of delinquent debtors from August. Do you think that will make the debtors to repay?

Yes, I believe that would help us in debt recovery. Two things - the value of the publication is to prevent what the central bank described as serial debtors. A serial debtor is somebody who is owing more than one bank. Now, if that publication is done openly, then everybody can see and that will help to close the banking system such that, that person cannot go and borrow from another bank, that is the first thing. Secondly, you can call it a name and shame list and it would also affect the business from the way if generates consumer credit. So, getting credit would be very difficult for such customers who don't repay their debts. So, those are some of the effects of that list. So, it would help our debt recovery drive.

Talking about assisting you in debt recovery, do you see the relevance of credit bureaus in Nigeria in assisting you in credit information and avoiding the rise of non-performing loans?

I think credit bureaus are fantastic and it would help us particularly in the area of consumer credit where you are dealing with a large number of people. At some point in time, as the information is consolidated, supported by the bank verification number project, which makes biometric identification easy. You can't be bearing different names in different banks. Once we put your identity card, if you come with three different identity cards, it would show you as one. So, that way, you will be very conscious about how you destroy your credit because it will technically shut you out of the system.

So, the bank verification number project, plus credit bureaus and if the credit people continue to get the data in, they can come up what is called credit score, where you have a rating which assist us (bankers) with the kind of loans you can take. It determines your spending pattern because they can also pull you spending pattern from your account. And because we have all gone cashless, we are beginning to see your spending pattern in a predictable way because you use your cards and we can also begin to analyse your credit pattern. All those goes to the credit bureaus. So, I think the credit bureaus are very well needed to consolidate information and determine credit scoring. We do it for corporate businesses, but the credit bureaus would help us for small and medium scale enterprises and retail businesses.

Looking at the harmonisation of the cash reserve requirements (CRR), your bank seems biased in terms of private sector deposits, what has been the impact of the CRR harmonisation on your bank?

The CRR is a direct tool. The central bank is at liberty to employ the best tool(s) it thinks for monetary control. It discriminated in the past when it used to penalise more of public sector, than private sector deposits and it felt that was not a sustainable approach and it harmonised it. For us, the harmonisation brought a credit to us, so it wasn't a debit. This was because somehow, they pulled too much from our public sector, so the refund offset more than the debit that they took. So, we got a credit. But the more important thing is that we prefer that the ratio comes down and I think the next thing the central bank should do, working with the government should bring some fiscal restraint to complement monetary policy, to allow the central bank to have a much more control over monetary policy issues. That will allow for exchange and interest rates stability.

How has Ecobank Nigeria been supporting SMEs in the country?

We launched our SME club which allows us to categorise the SMEs into two different segments and allows us to select products that we give to them. At Ecobank Nigeria, we are really prepared for SME because depending on your profile, we can determine the type of trade finance and other types of finance we think that you need and work with you to grow. Another thing we do for SMEs is capacity building. We know that one big challenge they have is capacity in terms of personnel.

So, we are working with the Entrepreneurial Development Centre of the Lagos Business School to help them with capacity building and record-keeping. When you enter the SME club, we give you those complementary service to assist you develop your accounts, record-keeping and if you need some training in specific areas, we can help you. Those are the added advantage that we put into our SME business. So, we are really willing and prepared to push SME businesses. This is a sector that can hire two or three people and before you know it, the numbers are growing and that contributes to economic growth.