Right policy mix, consistency will boost private sector’s participation in economic revival, says David-Borha

Mrs. Sola David-Borha is the Group Chief Executive Officer of Stanbic IBTC Holdings Plc. A consummate banker and professional, who has crisscrossed banking industry top level management, she has stood as a shining star among women in the corporate world. In this interview with select journalists recently. CHIJIOKE NELSON was there.

Public-Private Partnership has been a recurring proposal recently. How comfortable are you with the legal framework?
Public Private Partnership (PPP) is right in the middle of what the Nigeria Economic Summit Group is all about- the coming together of public and private sectors. And given the billions of dollars that are required to fund infrastructure development, government, for sure, is not capable of doing it alone. There is a semblance of a legal framework in place. It’s clear that at the state government levels, some states are yet to pass their PPP laws. And what sometimes is even more important is actually the implementation of the law and what happens across the life of different governments.

Because the projects typically are long term, they can span over 12 years and the risk we see many times is when the government that initiated that project is different from a new one that comes in and the commitment of the new government to keep to the terms that were agreed with the previous one. Financiers and investors have invested in the project based on certain terms. So, once there is any change of any sort, it almost triggers an event of default, which then affects whether the project can be completed in some cases or continued.

So, I think that to help encourage more PPPs, there has to be an education about PPPs in general- both in the public and private sectors, as to what financiers are looking for and the risks of policy changes that affect PPP projects. If the political will to ensure PPPs are protected from many of the vagaries of changes in government, there will surely be a rise in PPPs. The Lekki toll road is one of the PPPs that this country has had. It has seen its own challenges as well and in fact, we are hoping that the model can be replicated on other roads in the country and even bridges as well.

Are you comfortable with the regulatory policies of the nation’s financial system?
Globally, the regulatory environment has been much more intense and regulation is important for any industry or sector. The most important thing is that the regulator should be firm and fair because regulation is important, especially when you have free markets operating. The regulator needs to step in when required, but then should not hinder the free flow of businesses.

There is nothing you can’t improve upon. Given the fact that Nigeria is in a recession right now, it is important that regulators work with businesses to ensure that we all come out of that recession faster and sooner. If you come down too heavy, you can actually destroy businesses. I think the most important thing is to ensure that the regulators focus on ensuring that businesses are done properly and not hindering businesses.

How true is the alarm over the health of Nigerian banks?
All I can say is that we are in good health and we are adequately capitalised and our liquidity ratio is well above the regulatory threshold. Our rating was recently reaffirmed as Triple A. We want to assure everyone that Stanbic IBTC is an organisation that they can continue to do business with.

Many banks have been struggling with the issue of bad loans and AMCON’s interface. What about you?
There is an economic recession and you find that companies find it more difficult to repay loans. For consumers, if you haven’t been paid salaries, you are unable to service your loans. So, it is an outcome of the recession and the non-performing loans across the industry have gone up. Having said so, I believe that banks are doing their best to manage the situation. We believe from our own perspective that the worst is over and we continue to look for new opportunities, particularly in growing sectors where we can mentor.

What is the business case of the 2016 Made in Nigeria campaign?
The theme, Made in Nigeria, is particularly important at this time when the economy is in a recession. Of course, the Nigerian Economic Summit Group is the leading platform for public and private sectors’ engagements. Granted, this is not the first time that Made in Nigeria has been promoted or discussed but you find out that during crisis people are more attentive. We now have a better understanding of why it is much better to use local goods and services because that ultimately helps to achieve an improvement in productive capacity of the economy.

It is to tell both domestic and foreign investors that Nigeria is still an economy with great opportunities. The current challenge, which is primarily driven by the commodity price drop and subsequent foreign exchange scarcity, is temporary. It is a business cycle and hopefully, if we do the right things in terms of policy direction and also work together with the government to promote an enabling environment that will then attract investors to the country in various sectors, we will be back.

We believe an important aspect of achieving this is to ensure that the financial markets are transparent, liquid and the prices at which goods and services are obtained are done at an optimal level. So, whether you are selling your foreign exchange or it’s the money market or the equity market, it is at your market rate and on the back of a properly functioning financial markets.

How would you describe the current operations of the fiscal and monetary policies in regards to the Made in Nigeria project?
It is very important that there is alignment between fiscal and monetary policies and given where our inflation rate is now- above 17 per cent, inflation has to be tamed. That has to be the priority and in the short-term, it does mean that interest rates will still remain fairly high, but strategically, the longer-term direction when inflation starts coming down is for interest rates to also come down. For now, there are a number of other things that can be done to support the overall objective of stimulating growth in the economy.

The four main drivers that impact our economy as articulated by experts are the global trend, which we don’t control; international trade- commodity prices, which we also don’t control; and our expectations in the short to medium term, which are that oil prices is not going to rise significantly. The fourth aspect is our own policies that we implement. Of the four things, the only thing that we can control is our policies. Therefore, it’s very important that we put in place the right policies and that we are consistent in implementing them.

What investors look for is policy consistency. They are very nervous when policies change because it means they can’t manage that risk. They can manage the risk of a drop in oil price. So, our policy response, what we do, making sure that essentially we regain the confidence of investors in this market has to be the priority.

What is your bank doing with regards to youth employment, which is the “next big thing” in the country?
We are doing a number of things, which includes capacity building. You would agree with me that up-skilling the young people is very important. Developing their capacity enables the younger entrepreneurs to get a better understanding of how to manage their businesses and ultimately, if you lend to those businesses, they have a better chance of surviving and paying you back. So, capacity building is a critical aspect of it.

Also we find that the big companies help the smaller companies to survive. We need everybody in that value chain because everybody has a role to play. And we find that as lenders, if you have a big company that is utilising the goods and services of smaller companies around them, it guarantees the smaller companies buyers, so they have a market, they get support and they have a working capital cycle that is more manageable. That whole ecosystem of both the big and small players is much easier to lend to, rather than lending to one small person that is isolated and with the slightest problem he just goes under. Those are the kind of things we encourage.

We encourage small companies to try and get into an ecosystem of a larger one. We provide them with capacity building and we give the appropriate kind of financing. You know it’s very important that when you are looking for a loan, depending on what that loan is for, you must make sure you get the right type of financing for that loan.

Banks’ conditions to the small investors are very scary. Do you have a different arrangement?
We have tried a lot of things over the years because we are committed to the Small and Medium Enterprises sector and we think that the sector is the heartbeat of any economy and needed to drive growth in our own. The bulk of Nigerians are involved in that sector. We have tried several things. At a point we had unsecured loans that we give out, but that didn’t work as well. Beneficiaries don’t pay back since it’s an unsecured loan. It’s best to put in place a structure that provides the support and also hold them accountable.

That ecosystem principle is very important for cooperatives where you have a group of people who come together, so one person can’t just decide I am not doing it again. You are also able to review the risk of the whole and typically, cooperatives have a better bargaining power than even larger entities. So, those are some of the ways by which we try and address the challenges the SMEs face.

What support is available for manufacturing, which is the major part of the real sector?
If you look at the GDP of this country, Nigeria has over 40 economic sectors. Manufacturing currently comprises less than 15 per cent of the total GDP. Agriculture is about 22 per cent. Then you have the Services, ICT and Energy under 10 per cent. In terms of the sectors that we focus on, it’s those sectors that we believe will help to improve the productive base of the economy. And those sectors are infrastructure, agriculture, oil and gas and power. We are also very active with the Fast Moving Consumer Goods

We provide a whole range of services to them- financing, short, medium, and long term. We are also very active in raising capital, whether equity capital or debt capital. We have strong links with investors, both domestic and foreign investors. We have a very strong advisory team that helps in terms of restructuring businesses or investors who are looking at acquiring companies locally or if companies are coming to merge together, we provide a lot of support in that area. We see ourselves to be financial solution providers. We are not just bankers that come and give you money. We want to understand what it is you are doing, strategically where are you trying to take your company to and then, make sure that we find the right solution for your company’s needs and then we help you achieve your goals.

Now that agriculture is gaining attention, what do agriculturists and other agro-allied operators need to secure your support?
Agriculture is a sector that has faced lots of challenges, especially in terms of financing, but a lot of progress has been made over the past five years. Essentially, with the introduction of Nigeria Incentive-Based Risk Sharing Model for Agricultural Financing, which is a risk-sharing model for lending to the agriculture sector. Of course, banks are now more prepared to lend.

But a single subsistence farmer operating on his own is going to find it very difficult to get financing. That farmer has to get into a group, a cluster group of cooperatives or an out-grower scheme. It’s then easier to support that farmer and we have done that.

It’s across the country that we work with these cooperatives and across all the main crops- rice, millet and cassava. Also, we believe that focusing on the export products as well in terms on cashew, and cocoa, is important. Exports particularly, because of the positive impact it has on generating foreign currency. Agriculture grew by 4.5 per cent in the last quarter and we believe that that growth is sustainable.

In terms of infrastructure, how much involvement in power sector development would put rate Stanbic IBTC?
We are involved in two of the assets in the distribution space during the past privatisation exercise. It’s a very challenging sector given some of the changes in the tariffs. For instance, a party has taken the government to court on whether there should be a tariff increase and those tariffs were the basis by which investors came in. But despite these challenges, I believe that there’s still hope to the extent that it’s a sector that is very much needed, everybody wants power.

The fact that those power sector assets are now owned by the private sector gives them the capacity to raise capital, should they require, bring in new investors, and borrow so that they can buy the much needed equipment. It’s a long term game, but the expectation will be that in 10-15 years, if the right investments are done in this sector, we will see that translate to an improved power supply.

We partnered with General Electric to run an embedded distributed power solution across the country, where together, Stanbic IBTC and GE in Nigeria and Standard Bank and GE across Africa will basically help to put up embedded power plants across the country. We continue to work on that project and we believe that it will also support the efforts of our country to improve power supply.

What about the intensive and competitive environment among banks?
We are very unique in a number of respects. First of all, we are a financial services organisation that runs across asset management, wealth creation, trustees business, stockbroking business and we help raise capital, both debt and equity capital. We are the largest pension funds administrators in the country with over a trillion naira in pension assets. So, that makes us unique in that we provide a full range of financial services, including insurance.