Unegbu: Banks Must Return to Rural Banking for Survival

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Mr. Okechukwu Unegbu is the Managing Director/CEO of Maxifund Investments and Securities Plc. In this interview with Obinna Chima, he spoke on a wide range of issues on the economy including strategies that banks can adopt to survive in an earnings-constraining environment. Excerpts:

What is your assessment of the performance of the Nigerian economy under President Muhammadu Buhari?

So far, my assessment is that the economy has been in the doldrums. In other words, it is static. Instead of the economy growing, we are noticing negative factors such as increasing rate of inflation, unstable exchange rate, interest rate is on the upswing, a lot of people are losing their jobs, small scale businesses are not functioning and a lot of them have closed down and a lot of their workers now jobless. Finally, there is no economic direction at the moment, even though I am aware that they are working to bring a blueprint for the movement of the economy. As at now, the economy is comme ci, comme ca, that is, it is rather not growing, but static.

The Minister of Budget and National Planning disclosed that in the next few days, about N350 billion would be pumped into the economy, which they intend to continue for some months. Don’t you think such cash injection would help revive economic activities and address some of these issues you have identified?

Yes, but one of the things I have noticed from all the ministers is that they appear not to know where to go. The statements they make are more like mere wishes. They make these wishes and at the end of the day we are disappointed. Unless this is going to be a different one, what he has said may never happen soon. Remember when the budget was passed, and even before the budget was passed, the Minister of Finance, Kemi Adeosun said they were going to release the N350 billion capital expenditure. You and I know that nothing has happened in that direction.

So, I will not want to believe what the Minister of Budget has said until it happens. But if it does happen, one of the things we need to think about is where would it be deployed to? We are still in the quagmire of not knowing how to deploy the resources we have. In fact, I was very happy when I heard the Senate President telling Mr. President not to depend on the All Progressive Congress alone for solution. But that he should try and see how he can get support from people outside the party also in the direction of the economy. That is what we need to imbibe here. Remember that Barack Obama and Hilary Clinton contested election, opposing each other, but at the end of the day they came together for the benefit of the nation.

But over here, we talk about the benefit of the party, which is different from the benefit of the nation. That is a disastrous way of running and economy. Obama came to power as a democrat, but he had to bring in some hard core republicans into his party. Our nation is not yet a country in the sense that instead of picking people from all divides, all parties and tribes, you now use a quota system that gives you an opportunity to bring in those that could be described as political laggards and bootlicking fellows. They would just be making wishful thinking. If I am to assess the ministers under this government, I would say so far, so bad.

But the list of ambassadorial nominees that was sent to the National Assembly for clearance by the presidency showed a complete shift towards engaging more of technocrats than politicians?

In fact, when someone called me about that, I said, if they can do that, this country would change. I don’t know what informed the president to do that, maybe he is now listening. When I looked at that list that was same thing I said. There are some of them that I know that are very good. I am still surprised in the case of Minister of Budget and Planning. Udoma has not been what he was before he took up that position.

He is supposed to be a very good technocrat, but so far, unless there are some lethargy that holds them back when they get into government, he has not shown that drive that he is known for. I am however proud and happy that Ben Akabueze has been appointed the Director General of Budget and Planning, which is showing that the president is listening by putting people in the area they can perform. But all the same, the advice of the Senate President should be taken seriously so that the economy can be revived.

As a former bank Chief Executive Officer, do you think commercial banks in the country are carrying out their responsibilities effectively and what do you think is the future of banking in Nigeria?

Honestly, most of the bankers don’t like my comments so far, but having been a CEO of a bank before, I think I should be taken seriously. I see the banks as not doing what they ought to do. We have all been living on free monies all these years. Monies that you get through rent collection without actually planning and carrying out appropriate research. I don’t know how many of the banks have proper research department that looks into the economy to come up with products that they can use. As a bank CEO, I took over two banks that almost died and they came back to life.

For instance, when we took over Citizen Bank, it was almost dead. When I took it over, I had to spend some weeks and even months trying to know how to change its situation. I got my bank to approve most of the policies and eventually we went to the capital market. Even though we were the last bank to go to the market then, we were able to get sufficient funds because we knew our target market. I keep telling people that they don’t need to come in and start making noise or bribe governments in order to get deposits. I refused to do all that. Deposits are in the market place and with the market women in Isale Eko, Oke arin, and other markets in Lagos.

These are where the monies are! But the banks don’t want to start small, they are all chasing high net worth individuals. But the funds coming from high net worth individuals are not stable funds. If you get 20 small scale savers from Isale Eko or Oke Arin, these people don’t always come for their money, they leave it with you. These are funds we call hard core deposits. But nobody wants to target those ones. But the other soft funds that come in, over night, they would harass you that if you don’t pay them so much interest, they would take the fund away. You go to government to collect deposits and you bribe the Permanent Secretary or whoever with a house or a car and in another three months, that money goes away. That is not how to do banking.

Banks should go back to proper banking. Banks should devise products that are attractive to the banking public. They are not doing that. I was also worried when the Minister of Labour and Productivity was telling the banks not to sack. Even though labour would support what he said, the government should be realistic enough to know that these are private businesses. You can’t continue to ask banks to keep people when they (banks) know that they are not making enough money to pay them. That is because of the problems I noted about the banks. They don’t go for the right kind of deposits that can make them continue to keep their staff. Also, when I was in Citizen Bank, I was told to sack workers in order to survive, but I refused. I decided to re-energise them and those that couldn’t perform left on their own.

I was talking to some bankers and they said how can the federal government be giving them directive when same federal government took away the funds in the system by introducing the Treasury Single Accounts (TSA) and I told them they were blackmailing the government by allowing them to be using free money to run their business all these years. I told them that the TSA is a beautiful arrangement that will help us checkmate corruption in the system, just like the Bank Verification Number. So the banking industry has a very beautiful future in this country.

One of the areas lacking in this country is the issue of micro finance banks. There is a very good policy on micro finance banking from the Central Bank of Nigeria. But these policies are not implemented. Micro finance banks are the people that are with the rural population. Being the Chairman of one of the micro finance banks that has been in operation for 25 years, what I have noticed is that rural borrowers are never defaulters, they want to pay back what they have borrowed. But they have been infiltrated by those who don’t understand that it is better to borrow and repay. Those artisans in the village borrow, use the money to do their work and pay back, same as the market women and traders. Government should look at small scale businesses.

They were shouting that banks were sacking people, but they forgot that capital market operators sacked so many people, much more than the banks sacked and nobody said anything. Why are they now complaining? The stockbroking are bleeding. They have sacked so many people, but are still not out of the woods and nobody is doing anything. And they are shouting because one bank sacked 200 people. The number of people sacked by almost 500 stockbroking firms is much more than the banks have sacked and nobody raised an eyebrow. So we need to look at the financial system in totality. There is a future for us in the financial system, but we are not doing what we ought to be doing.

But do you think the monetary policies we have in place currently supports banking to thrive because just like the TSA, banks believe there are lots of other earnings-constraining policies in the system?

Remember the central bank has its major goals and objectives. But remember I said earlier that there is no research going on in the banks. I am saying what the banks need to do is to look at the economy in which they are operating. Environmental assessment is very important for any business. And the banks are fond of the herd mentality. You know once one sheep crosses the road, the rest would want to cross at same time, even when they know they would be knocked down by a vehicle. Banks also have same mentality. If one bank is heading to the oil industry, everybody goes there. Nobody is thinking about lending to the cobbler on the street and make some money.

When they hear others are lending to telecommunication companies, everybody goes there too, neglecting certain vital aspects of the economy. That is why they have very high non- performing loans with the oil industry and they can’t recover them till today. But the small scale businesses and agriculture are not being developed. For instance, from some of the studies we did on agriculture, I discovered that there are in banks, almost 15-20 per cent of savings that have gone dormant. Some of these money have lasted for over 20 years and in some old generation banks almost, almost 50 years. These are funds that can be deployed to the agriculture sector or even to mortgage lending.

When I was contesting for the governorship of Imo state, I did a paper showing that mortgage is easy to run. If you look at bricks, most people don’t know it is easy to build houses. So, I said you can do a mortgage using bricks and build a bungalow of three bedrooms with N3 million. And as long as someone is working, the bank can sell the house to that person who would be paying gradually. But nobody is thinking about that. The banks are lazy, the governors are also lazy because we are all used to free money from oil revenue. Thank God for the decline of crude oil price.

What is your take on the proposed flexible exchange rate system everyone is awaiting?

You know we have tried so many types of exchange rate system in this country. From the Wholesale Dutch Auction, Retail Dutch Auction, and several others. From my understanding, the flexible exchange rate system means that our foreign exchange policy would be in tandem with developments in the economy. If the economy is strong, the central bank would want the exchange rate to be in tandem with the state of the economy at that time and if the economy is weak, they would want to adjust it.

But the central bank is very right by not following the International Monetary Fund and World Bank advice to devalue our currency. There are reasons for devaluation and one of it is that you want to have more volume in your export, but here we don’t have anything to export. IMF and World Bank policies do not suit our environment. So, let us watch what they want to come up with and by then we can know whether it is good for us or not.