Leveraging non-oil export business to create alternative foreign currency supply source
Divisional Head, Export and Agric Business, Fidelity Bank Plc., Isaac Ndukwe, in this interview, spoke on how investment in export has increased the bank’s profitability. HELEN OJI was there.
WHY is Fidelity Bank investing heavily in the non-oil export business space?
Fidelity Bank is delving into the non-oil export business space for two strategic reasons. The first reason is to help stimulate the growth of the Nigerian economy, and by doing that, expand our market share in the banking business landscape.
It is quite logical. When you help in baking a bigger economic pie, the trickle-down effect translates to more transactions for you as the bank in the middle of the transformation. As you know, there are two growth models.
One is import substitution growth model, and the other is export-led growth model. The more sustainable growth model, or the strategy that is more suited to the Nigerian economy is export-led growth model, albeit, the more painstaking of the two as it requires a lot of heavy lift.
It just makes the economy more competitive over time, for instance, improvements in business processes, product design and quality. China is a perfect example of an economy that has leveraged the export-led growth model to become a global manufacturing powerhouse.
The second reason is that our export banking business is a strategic thrust to enhance the competitiveness of our business in the industry. Oil price shocks create fiscal and exchange rate problems for Nigeria.
For instance, the reduction in government spending and obviously, because oil accounts for over 60 per cent of our national income, a reduction in what you and I spend, in addition to the effects of the macro elements and finally negative shifts in balance of trade wash down to the exchange rate.
The transmission effects of all I highlighted impacts negatively on banking operations. For instance, it leads to limited dollar supply to cover import customers’ foreign currency obligations. Our non-oil export business helps us to create an alternative foreign currency supply source to service our import customers.
In what specific ways does your outfit support exporters?
While it is tempting to lead with our financing offerings, I would say that the most critical way that we support exporters is in the area of export business management capacity development. This is what differentiates us from the other banks.
From a business operations perspective, non-oil export trade requires a total mindset shift. It is a very competitive business landscape especially if you operate in the realms of value-added exports. Hence, human capital development especially around readiness of businesses for exports is a critical foundation block to positioning Nigerian exporters to become more competitive in the global marketplace.
The global marketplace is a brutal ‘free-market’ arena akin to the Roman ‘death-fight’ colosseums. It takes no prisoners and will punish you if you neither come prepared, nor have competitive and comparative advantages.
If you are exporting something from Nigeria to the United Kingdom, for instance, you are competing with businesses from other countries that are exporting into that same market. So, if you do not land your product at a cheaper pricing or higher quality to outweigh competition, you will be priced out of the market. The global marketplace does not care about your sentiments or product origin/country macro and micro problems. The overriding consideration is value to the final consumer of your product. The way we help to bridge these business management capacity gaps is through export business management capacity development programmes, the flagship offering being our Export Management Programme (EMP), a capacity development programme that we co-created with the Lagos Business School (LBS), and the Nigerian Export Promotion Council (NEPC).
Here, we teach aspiring and existing exporters how to become better at what they do. Some of the areas that we cover include but are not limited to product or raw material sourcing and effective supply-chain management; quality control and assurance processes; standards and global best practices; packaging, contract negotiation and commercials, export documentation, forwarding, financial management and governance. We then create well tailored and competitively priced financing offerings to help exporters scale their business operations. We also provide free advisory services to exporters to help drive business optimisations.
Another way that we support exporters is in the area of market access development. For example, we brought over 10 of our customers to the Durban Intra-African Trade Fair (IATF), and most have secured product off-take contracts and partnership deals. We also support in export trade documentation services and advisory.
Has the IATF lived up to your expectations?
Absolutely. The one quick win for us is the development of market access for our export customers. We were at the inaugural IATF in Cairo, Egypt, and the connections were quite an eye opener. We took several of our customers with us and also gave them platforms to exhibit and showcase their products. They all secured product off-take contract and partnership deals. Total deal size closed in Cairo was in excess of $75 million.
The same happened during this outing with total deal size in excess of $100m. Another upside is the opportunity it presents for partnerships, collaborations and knowledge transfer. I strongly believe that if we can work on improving general ease of doing business and enterprise competitiveness, Nigeria can be the biggest winner of the African Continental Free Trade Area (AfCFTA).
As you are aware, the IATF is one of the key levers of the AfCFTA in driving regional trade integration in Africa. On takeoff is that the AfCFTA will help to connect Nigerian businesses to the continental and global manufacturing value chain.
This is why it is such a big deal to us and the reason we are taking proactive steps to enhance the readiness and positioning of our customers to take advantage of the growth opportunities that the IATF and the AfCFTA present to their businesses. These opportunities are not only limited to market share expansion but also includes knowledge and technology transfer gains to drive optimisations.
To what extent has the bank’s non-oil export business contributed to the bottom-line?
Like I said earlier, our export business segment is strategic in the sense that it helps to enhance the competitiveness of our banking business. You have seen our half-year numbers, in which the profit before tax jumped from N12b in first half (H1) of 2020, to N20.6b in H1 2021, which is a growth of 72.4 per cent.
The growth of our export customers’ businesses and our increased share of that wallet, couple with the expansion of our new customer and export business footprints are partly what is feeding into the bottom line. It is one of the key pillars of our growth initiative as it washes down to other critical areas of our banking business. To further buttress the importance of our export business segment to the over all banking business, our Managing Director, Mrs. Nneka Onyeali-Ikpe was present at the IATF and participated actively in facilitating some of the deals we have sourced for our customers.