World Finance interviews Godwin Emefiele, CEO of Zenith Bank, on the Central Bank of Nigeria’s cashless policy, and its impact on banking in Nigeria
With its headquarters in Nigeria and subsidiaries in four other African states and the UK, Zenith Bank is a leader in African financial services. CEO Godwin Emefiele discusses the Central Bank of Nigeria’s recent changes, including its drive to improve the use of electronic channels in the banking sector; as well as Zenith’s own profile for innovation and community engagement.
World Finance: Godwin, Zenith is said to be the most respected bank in Nigeria; why is this?
Godwin Emefiele: Zenith is the most respected bank in Nigeria because it’s one of the biggest banks in Africa today. It’s the biggest in West Africa in terms of shareholders’ funds, and it ranks in one of the top six, top seven banks in Africa today.
Zenith Bank was the most productive bank in Nigeria in 2012, with profitability of over $600m. In terms of market capitalisation as well, it’s one of the biggest companies listed on the Nigerian Stock Exchange today.
“Zenith Bank was the most productive bank in Nigeria in 2012, with profitability of over $600m”
World Finance: Well you also have a very strong corporate social responsibility profile; why is this important?
Godwin Emefiele: Because we believe that we should give to any environment that has given us, afforded us, an opportunity to conduct banking services in that community. And what we do from time to time, is ensure we look at the community, we determine the needs of those communities, and based on the needs that we determine the community desires, we go ahead and improve some of those needs for them.
World Finance: Well, how is the banking industry in Nigeria developing?
Godwin Emefiele: The Nigerian banking industry is coming of age. If you consider the fact that we have strengthened corporate governance in Nigeria; risk management practices have become very strong. And before the financial crisis, you’ll find that if you rank a Nigerian bank you may think that they’re not well capitalised. But with the financial crisis we find that the Nigerian banks, indeed some African banks, are some of the best regulated institutions in the world today. Because if consider the fact that banks are expected to keep a minimum of 30 percent of their assets in liquid assets, or 12 percent in Nigeria in cash reserve ratios. Or that Nigerian banks also have to maintain minimum 15 percent in capital adequacy ratios, then you’ll see that the Nigerian banking industry has indeed come of age.
World Finance: Due to the increased levy paid to the assets management company of Nigeria and the poor state of infrastructure in the country, Nigerian banks have the highest cost base among their peers, so how are you addressing this?
“The Nigerian banking industry has come of age”
Godwin Emefiele: The level of infrastructure development is below average right now. For instance, you find that banks have to provide power for themselves; banks have to run around collecting cash from their customers to ensure their customers are properly served.
But of course the level of infrastructure development is improving now. With government divesting power and then allowing private sector institutions to come in. We’re expecting that power will improve, and the level of power generation will improve, and then Nigerian banks can begin to focus on their banking businesses, instead of focusing on power. And with that, costs will suddenly come down.
Also, in the Nigerian banking industry today, the Central Bank of Nigeria recently put in place a cashless policy, where we’re trying to say, let’s reduce the level of cash in the economy, let’s improve on the use of electronic channels in conducting banking businesses in Nigeria. This will certainly help to reduce the cost of doing business in Nigeria.
World Finance: The second part of this year has been quite challenging, with the revised bank tariffs on products and services, but Zenith has managed to maintain its growth. So what would you say your key to success is?
Godwin Emefiele: The Central Bank of Nigeria put in place a policy to say for instance, commission on turnover have to reduce from about five per thousand to about three per thousand in 2013, and hopefully by about 2016 it will become about zero.
No doubt this will have some impact on the revenue base of the banks, but of course what we are doing is to ensure that we continue to look to other areas where we can improve our revenues, ensuring also that we set up offices in areas where we can mop up cheap deposits with which we can do business. And that’s where, for instance, if you take a look at Zenith Bank’s third quarter results, you’ll find that out of most other banks, Zenith Bank’s net interest margins have continued to move up.
“A mobile banking licence ensures we can reach customers in the nooks and crannies of Nigeria”
World Finance: Zenith is known for its state of the art technologies, so what’s your latest innovation?
Godwin Emefiele: When we started the bank, we said we would not open any branch of the bank without ensuring we could provide good technology to support our services, we want to ensure that we provide excellent services to our customers.
That we have done for 23 years. And what we continue to do is embrace any opportunity to provide excellent services, and what we are doing at this time is to ensure that we embrace the electronic channels where we are using point of sale terminals to drive business for our customers.
Recently Zenith Bank was given a mobile banking licence, and we’re also using that to ensure that we’re able to reach some of our customers that are in some of the nooks and crannies of Nigeria.
World Finance: Finally, what’s next for Zenith?
Godwin Emefiele: We’re working hard to ensure that we remain one of the global players. Zenith Bank has to maintain the leading position in Africa, and we are very optimistic that we will achieve this.
World Finance: Godwin, thank you.
Godwin Emefiele: Thank you very much.