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Deposit rates should not be zero, it is not good for the economy

Mr. Akinsola Akinfemiwa is the outgoing Managing Director of  SkyeBank PLC. He has seen many days in the banking industry traversing from IMB, Chartered Bank, Barclays, Prudent Bank to Skye Bank climaxing as MD/Chief Executive Officer .


He is affected by the recent directive of the CBN that bank chief executives who have spent ten consecutive years in office should retire July 1, 2010. In this interview, he spoke on the ongoing reforms, the banking industry generally, implication of the policy directive, concluding that because deposit rates have crashed, depositors are moving their deposit out of the banks which does not augur well for saving culture in Nigeria.

Really, it wasn’t expected because it didn’t fall within your normal tenure but how did you feel getting a directive from the CBN that chief executives that have spent ten years in office, including you should step aside?

I’m sure that you know in this place there is nothing that is really secret, we got wind of what was going on about two weeks or so even before the announcement, it was in the papers anyway.

For me, it was a relief of some sort, the industry is quite challenging, it has been quite tough. Sometimes, you want to take a decision and you do not get to do it and then it happens, so you move on and in any way for me also, it is part of everything going to the next levels. I know that one would continue to be a player in the industry and indeed the economy.

It is an opportunity to do something else. When it was announced, we did not have the details, but as things unfolded we realised it was bigger than we had thought.  You know if you have been MD for ten years that is all you have done, change can be tough, for me it is like I have been MD for twenty years, that is if you look at the story of Sola Akinfemiwa and managing banks; the first time I started banking was in a bank called IMB/ First National Bank of Chicago, it was a small bank and had to take on Standard Bank and Barclays, the big banks, it was a race to prove who you were.  Then I left IMB with my boss to start Chartered Bank, it was also about hunting and growing.

And just as we were, settling down to being a big bank, I had to move on to pick up another small bank -Prudent Merchant Bank. Then, the consolidation business and you know, we had to do five banks.  So when you say ten years, to me it has been like twenty years of work, 10 years of growing banks.

It has been a tough journey, but I will also say that it has been a good ride, to have had the opportunity of doing this for so long. Yes, it would have been a little bit nicer if you planned your exit and do it the way you wanted to do it, but then there are very few people in this country that get this kind of opportunity, six months notice for a sack notice! Many times you hear of your sack on the radio and its with immediate effect!  In this case, you know, one has an opportunity to have board meetings and to even  be  part of the process of appointing those who are going to take over, that is wonderful, really nice.

So with the scenario you have painted, how would you assess your ten years stay at the bank?
It has been very challenging, it has been very good, and like I said, I have had a good run, to be involved with these institutions from next to nothing to where we are today is good. Yes, maybe you see the hand of God in some of these things, for instance we had what we called 5-in-5 here: i.e. to become number five bank in five years, and today, as a result of some things that have happened in the industry, if you are counting, Skye Bank would feature in the debate of who is number five, to me this is  big, from being in the last five four years ago to what we are today and still growing is the good ride, we have done fairly well, though we could have done a whole lot better.

Looking at the exit thing, in normal circumstances, is it policy makers who decide when the MD leaves or the shareholders or the board?
Well that is a subject for debate, I mean that is going into the politics-the rules are there: but then, we have got to go and look at the CBN powers, what the CBN can do and cannot do…some of these things you have to get the facts.

The point I am trying to make here is let us look at it: from what the CBN has done, is it good for the country and for the industry and I think that is the way I would like to put it and if you ask me, I would leave out the styles and methods and look at the objective, the intention.

For me, I think it has been generally okay, if it is about trying to sanitise the banking industry asking people to do things properly. Unless some of the things one has heard are exaggerations, I believe, the intervention was necessary. Note that this whole thing is not only Nigeria-if you look at the banking industry worldwide, there has  just been a lot of cry of how to be better banks, and may be better central banks.  Dealing with the problem here has been different, may be tough, may be shocking but it is towards the same global objective, lets focus on the substance.

The worry is that we have private banks that are not owned by government and you find elsewhere that people who have experience, those who have been in the industry ten, fifteen years…the problem we have in Nigeria today is that when people have experience and are suppose to be impacting on the system; that is when they are asked out of the system. Is it the normal thing?

That is another issue, a different issue: there is the question of intervention in what was going on, and then there is the 10_year rule.  I do not think they are the same thing. But you are talking about the 10-year rule, for me, I am involved here, so commenting may be biassed.

Yes I will continue to do what I know how to do and I may not feel particularly happy that I am constrained of doing that. If you are a banker and you are not supposed to be involved with the organisation you helped to build in the next three years or so, that will be disappointing for anybody, and I do know that point has been made over and over and it is still being made. Let us leave this, I am an involved party.

Do you see any major changes coming into the economy as a result of the recent installation of Dr. Goodluck Jonathan as President or what do you think will happen?

In the most recent past, the most critical period in our economic life has been the tenure of General Olusegun Obasanjo, something happened in this economy between 1999 to 2007. It was a growth period for the industry, major things happened. I think one of the things you had was a lot of energy in leadership (agility), you could be wise, you could be smart, you could be intelligent but to be a leader you need energy (agility) to be able to move things. In our industry for instance, the biggest thing is confidence-when there is confidence in the system a lot of things start to happen.

So what we are going to enjoy in the next few months is renewed confidence in the system the fact that there is a new government, a younger person with good health condition is in charge, hopefully he will create the value that we are looking for, and because of what he has done calling everybody, there will be renewed confidence.

I believe we are going to go back to trying to implement some of the things on the Yar’adua agenda, and they are good things. I do not see the president coming with a new agenda of his own.  I think he is going to continue with what is on ground may be reordering things, and you know he has done something, he said Power (electricity) will be a priority, and to me if am asked to advise, it is power number one, Power, number two, and then the third one will be power!!

One major thing for the life of this country again he mentioned, which I like is the need to run a credible election. In the world everywhere, it has been proven that if a government can deal with the issue of governance, you deal with corruption (in elections) you will prosper.

Look at Britain, Ghana, USA, they had free and fair elections, you know it needs to be something you do with ease. When a country gets to that point where it is able to elect its leaders in a free and fair election, then that country will prosper.

The resources that we have in this country is so much that if we have good governance we will join Brazil, India, China and the rest of them to  become the strong economies of the world.

You talked so much about power (electricity) yet there is this cliché that if you dis-empowered people and you build infrastructure, the dis-empowered people will turn round to destroy the infrastructure: we have a pile up of unemployed youths and we have diminishing opportunities within the system. Do you really think we are not sidetracking this issue?

Let me tell you something, if you have electricity, there will be more industries, there will be more production, agric companies would run better and they will employ people, we will have trains, rail roads etc. Today, the lack of electricity is killing these industries.

If you start any business, more than 40_50 per cent of the cost will be in buying diesel. My view is that if we have production, there will be an improvement. Look at Lagos State; we almost forget now that we used to have what we called Area boys. What they did in Lagos was to get them to work. These guys are now making blocks, they are the ones who now plant a lot of these trees that we see, and it created some jobs.

My point is that if we have many more of our industries, I am talking about even micro-industries not even the big ones, you know, hair dressers etc…if you can take that cost away so that the barber can have some profit, meaning that he will make some more money and buy from the man that is selling bread, the economy would turn around; the lack of electricity is taking a lot away from all of us, from  this economy and then tell me anywhere in the world where a nation has done well without electricity.

If you do not have it, you will be in trouble, if we have it that will be the beginning of creating opportunities for people who are leaving school to work.
If we are talking about 6,000 megawatts we are not serious, we should be talking about 100,000 MWs, for crying out loud this is a disaster! I am not sure there is anything that is as bad as this in the country. If we do not deal with this problem no reform will work and it is all about this governance thing, we must deal with it now in every area of our lives.

Banks used to provide a lot of opportunities for the youths because of the growth within the sector; since the CBN reform under Sanusi came, there has been diminishing opportunities in the banks and it appears the idea of consolidation has become a waste. Are you comfortable with this?

If you study the history of civilizations you will see a trend, many times you see a boom and everybody is enjoying and growing, and all that, and then there is a burst. Many times, people, the nations of the world do well and then they forget the basics of life or of what they are doing. If you study the Roman Empire, the Yoruba Kingdom, people that lived along the Nile in Egypt, Sudan etc people started to do crazy things at the peak of success and then they fail.
So it was like that in our industry.

And I believe that just like anywhere in the world, a check became necessary, which is what we are getting. And we have seen the extent of what went wrong, the best of time, the end of an era, the good times are over. Do not also forget, it is not because we are all bad people, things also happened in the global economy which initially we said would not affect us here but you know it eventually did.

So it hit us; oil and gas, stock market, real estate, flight to safety, all of these things. And I believe that, the intervention, if it did not come now, it would have come later. Something would have happened. Do not forget that some of the banks were already on a “list” for quite a while, and in fact, some thing that people should understand is that the first visitation to these banks came from the Soludo CBN leadership. The banks had liquidity problems they were hanging on the discount window.

And then there was the shock and a couple of these banks just could not get out of that shock. Now, what the Central Bank did after, maybe it is the right way, maybe it is not the right way to me is a big debate.  Doctors use the shock therapy on back cases of heart attack. I see this on television, maybe that shock treatment was needed for our industry to sit up. I think we can begin to debate the style, the efficacy of the CBN’s shock therapy, but again I will say what was the objective? Did we have bad loans or not? Did we have corporate governance issues or not? To me that is what I will debate at this point and time will judge the rest.

If you were Sanusi, would you have taken that approach given that confidence constitutes a vital issue in this industry?
Well that it is a very hypothetical question and I am not Sanusi, because as you see, if Sanusi creates a challenge because he is Sanusi, he may know how to deal with the consequences of his approach.

So I cannot begin to debate his approach. My approach may be different, it may be the same, but the issue remains the objective? I say to people, you can succeed in various ways. There are very calm and quite leaders who do not talk at all but there are those who believe that they have got to talk, they have got to debate, they have got to lead in the front, they have got to be seen and take a stand,

if you study history, you will see that there is no law that says this kind of leadership is better than the other one. I think the most important thing we should be looking at is what has happened after the intervention. For me, maybe because my bank is a beneficiary of the clean up, I think banks are a little more realistic now, nobody is shouting I am the biggest bank in Africa, in West Africa and the world anymore; nobody is competing on the basis of “I have the largest capital” etc.  We are all more realistic now -I believe this is good for all of us.

I am saying let us look at what the CBN set out to do and what it has achieved, lets look at substance over form. Also I think it is better to act than not acting at all_it is better to risk than doing nothing and hoping that things will get better, CBN chose to act and that is fine.

..but the banks are not lending to the economy?
Let us be careful about that because banks will lend to the economy if there are good projects that will not put banks into trouble and look at some of the decisions that have been taken recently, N 200 billion is available for agriculture, we are looking at power again and we are looking at manufacturing etc. There has been no time in the last five years that the banks have been as serious in terms of doing business with the real sector as we have today, and it will get better when the AMC takes off.

Banks are being urged to go into serious business of transportation, agriculture, power, and aviation etc. Again, am saying, let us look at the intentions. This is the way to grow the economy.  However, the CBN and Banks can not do it alone, the rest of the system must shape up too.

Skye Bank is involved with transportation projects across the country, we are in real estate. We have financed factories etc, we are going back to the good old days of doing serious banking. You know intermediating allows you to push money around and you declare profits. So what is changing that I see now is that we are creating structures that will allow banks to do things over five years, ten years and more nobody is sitting on your head to say where is the profit. Some of the things that we want to go into, you really need time, you are not being asked to make provisions on real estate project when you are still battling government for approvals.

We are probably the largest investor in cocoa processing business in this country. We have three plants in the country and they are doing very well. You need time to set up the factories, you need time to buy cocoa beans, to process, to export etc. How can you do that within a 12-month period? These are some of the things that are beginning to evolve. And the CBN has gone ahead to say, this fund is available for agric and this one is available for power and I think we should give it a chance, lending will resume but we must also build the capacities to use the funds.

Currently the deposit rate is about one to two per cent while the lending rate is about 22 per cent- as a banker and entrepreneur, are you comfortable with this or is it good for the economy, given the fact that there will be no incentives?

First of all, we must not discourage savings, when the rate of savings is lower than the rate of inflation that is a problem, people will move their money away. Do not also forget that in solving some problems, people are moving from interbank to the capital market today and that is good.

I see what you are saying that we can not have a nation that does not save because if we do not save there will be a problem sooner than later. I believe this will adjust itself after a while, in any event, the money that we have today, if we use it well, it should go into production so that it will not be floating around the banks in a way that we are just keeping money we do not  know what to do with it. We will invest the money.

The other side is lending, I also think our rates would come down and it is coming down. In this bank today we are doing a lot less than the figure you quoted especially where you see a good transaction. . But I see your point, rates on deposit should not be at zero, that is not good. But I believe that with time, when the funds that have been released today go into where they are supposed to go to and are no longer floating around, deposit rates will go up.

Skye Bank has been involved in infrastructure and development projects in the country, can you elaborate on how you have coped using short term funds to finance long term project without a mismatch of funds?

Before all of these challenges in the industry, for some reasons we have always thought that as a bank, we needed to be in these sectors, and it has been quite successful for us, it has been quite useful, that is why I am saying let us be careful because I know this bank is lending, because the sectors that we are involved with have continued to grow.  We know these businesses better than some of our colleagues.

For instance, in oil and gas and I do not mean selling diesel, and petrol and all that, I am talking about people that are producing. We have customers and they are doing very well. So they are there, and we must continue to support those businesses, we can not say because there are these problems in the market therefore stop financing our clients.

But there is money and money is cheaper for us to get, easier for us to get, so we continue to work in the areas you mentioned. We have done well with real estate, in fact, two of our products are in the market today, one in the Lekki axis and another in Abuja, and we have done very well across the country.

We are on gas projects, power projects etc. There are the, big cocoa processing companies they are all doing well.  This is the future. We think if we grow these companies, we would not be looking all over the place for business as we go forward. We are growing with these companies, creating Nigerian enterprises.  We have also been involved with a couple of the state government on power project, and we are working with another on transportation including rails.  We have a thriving Public Private Partnership desk in the bank.  It has been a good experience. Apart from these big projects, we are happy to have been involved with SMEs also e.g. the fast food companies, schools, hotels etc.

There is a transition to macro and niche banking, is this phase of banking in the interest of Nigeria compared to what is happening in South Africa, Ghana and other parts of the world?

Again, I will say, let us be careful because even in America and where you mentioned, they have these kinds of banks. What happened during the meltdown in America was that the smaller banks did better than the bigger banks because they were not involved in all the “bad behaviours”. Now, what we need to watch will be the rules of engagement of these banks that are being created.

My view is that supervision should be better. Always, there is this mistake, micro-finance banks want to be like commercial banks, buying air_conditioners, cars, opening branches everywhere etc. If you study countries where they have done well such as India, Pakistan etc, they are people’s bank, even in Afghanistan_they do banking in small locations, the cost of operation must be low, and it has been shown that in that sector, default rate is usually low because it is community based. They know each other and they borrow small amounts of money, they trade with it and they pay back.

But it is a concept that must be understood and be managed properly by those who are involved in it. You cannot run a micro-finance bank like you run a commercial bank because it is not the same business. I would not know what to do with a micro-finance company. I am not trained to handle micro-finance. There are rules of engagement, you must understand the people. If I am doing micro-finance and the cost of booking the loan is higher than the loan you want to give out, the offices, the computers you are using etc, you have failed before starting.

What in a situation where big banks have micro-finance banks as part of their operations?
It could be a problem, because they (the big banks) will never have time for those companies, that is what is happening. Very few of the banks have the energy and power to supervise these micro-finance outfits, for most bankers it was more fun to do the big things, why would you be spending your time talking to someone who has come to borrow N 100,000, it is more interesting to be talking to the big boys and talk about billions that psychology is strong.

So it is better to remove it completely and put it somewhere for those who want to do that kind of job, I am talking from my own experience, I do not know about the bigger and older banks but it can be quite difficult sitting here and trying to supervise these subsidiaries that do not fit into your everyday kind of work.

Now that you are quitting as the Managing Director of Skye Bank. What is your post service plan?
I will continue to be in the sector (financial sector) that I know, and I have been in there forever.

There are so many things to do, we talked about infrastructure financing, power, we talked about energy: we talked about things that need to happen in our economy, Development finance etc but doing different things, and just like you said, given the experience that one has over time, I am just going to find ways of deploying that in the economy.
I think we are beginning to approach an interesting period in the life of this country.

I think the next few months will be quite exciting for the country: There is going to be renewed confidence, there will be international confidence coming back. And if you look at the capital market things are beginning to look up again-peace in the Niger Delta, that is important; we need the oil price to be stable, we need the volume to make money,  politics should be reasonably fair and good so it does not disrupt things,.

So, there will be much for me to do, I will like to continue for instance to teach, I like to spend more time to give back to the society working on community based project, do more of the talk stuff on motivation, and push to give to the younger ones my experience, help to build skills and industries especially SMEs, push good works in the area that I know.

What would you want to be remembered for?
I was made MD in 1999, and I gave it my best shot: I am happy with the result, and for me that is just cool, I will rather leave the rest for other people to judge. I have done my bit, and it is time to move on.


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