For more than 10 years now, Nigeria’s economy has benefitted greatly from sustained levels of growth, with annual real GDP rising to 6.3 percent in 2014 (see Fig 1). This is expected to continue on a positive trajectory into 2015 and beyond.
Overall, the Nigerian economy is becoming more modern, resembling western developed economies, with the services industry providing the bulk of the country’s economic output. It is responsible for more than 50 percent of total economic growth, while manufacturing and agriculture contributed around nine and 21 percent respectively, according to data compiled by African Economic Outlook (see Fig 2).
The country has managed to diversify its economy away from oil – which is no simple feat. Other industry sectors – including the service industry – have grown to become the main drivers of growth in the country. Its population of around 178 million means that the retail consumer market is enormous and crammed with stirring opportunities. In Africa, the country is at the forefront of utilising electronic banking products, with its huge telecommunications backbone, world-class banking applications and burgeoning biometric projects.
Nigeria’s growing population, millions
Source: Trading Economics
The past year has been good for Nigeria so far, but its growth has suffered, slowing slightly as a consequence of reduced economic recovery in other parts of the world. Meanwhile, the price of oil is yet to bounce back from its recent lows. Cheap oil has made a considerable dent in fiscal revenues, but due to the success of economic diversification, the country has managed to weather the storm rather effectively and helped mitigate the impact of the commodity’s low price. In order to combat the dip in revenue, the government has chosen to cut spending so that it doesn’t take on excessive levels of debt. It has also embarked on a strategy that involves shoring up non-oil revenues in a bid to compensate for declining oil revenues.
In a recent report by the World Bank, which attempts to measure how effectively government regulation has assisted business activity in various countries, the international organisation ranked Nigeria’s overall performance favourably, increasing its rank from 175 out of 189 to 170.
The positive ranking by the World Bank was due to the Nigerian Government making it easier for individuals to do two things: set up a business, and receive credit from financial institutions. Overall, the government has worked hard to increase the efficiency of its business environment and legal institutions in an effort to improve the performance of its economy.
The All Progressives Congress (APC) has continued to ease restraints on businesses, focusing on long-term judicial reforms that aim to bolster legal entities for contract enforcement. It is also eager to address issues like corruption and national security, both of which dramatically impact investor confidence and have the capability of reducing foreign direct investment into the country. But these issues are not serious enough to dissuade all investors.
According to Peter Amangbo, CEO of Zenith Bank: “I don’t find it surprising that investors want to take part in Nigeria’s economy when you consider the exciting potential of our economy, our very high population – which means we have very substantial consumer markets – and our excellent infrastructures that make investment easy and ensure a good flow of information to investors themselves.
“At Zenith Bank, helping domestic and foreign investors is one of our strongest areas of activity. We think our devotion to customer service, our passionate enthusiasm for making sure that the services we offer are exactly what customers want, and our ability to bring new services and new facilities to customers makes us the bank of choice for investors – both within Nigeria and beyond our borders – who want to maximise their knowledge of the investment potential of Nigeria and also maximise their returns.”
In order to make credit more readily available for those looking to start a business, the government has had to implement a number of financial reforms. These have helped alter the financial environment, creating stronger banking institutions that possess efficient payments systems. It has also helped to greatly improve the financial infrastructure of the country.
The enormous success of e-banking in Nigeria, and the fact that it is not only seen in Africa but globally as a successful economy, is partly explained by the Central Bank of Nigeria (CBN) encouraging cashless transactions in order to engender flexibility, speed and accountability. E-banking in Nigeria is also partly explained by the rapid transformation of the economy, which is increasing demands for banking services in general and e-banking in particular.
And yet, there is another key factor: the success of e-banking in Africa’s most populous nation is also due to the sheer energy of Nigeria’s most influential and far-sighted bankers, who ultimately know that the people who most want e-banking and all its associated advantages – including banking services from their desktops, laptops, tablets and mobile phones – are the customers.
This makes banking easier with no need to find time to visit a physical branch. It also makes banking available on the move. A lot has changed for Nigeria’s financial services industry over the years, and in light of this, World Finance spoke to Jim Ovia, Founder and Chairman of Zenith Bank, to discuss Nigeria’s economic history and how the bank has diversified with the country’s changing economy.
Ovia came into the industry to make a difference. He begun his career banking in Nigeria as an operator, redefining the way banking was done. He brought forward innovations in management, service delivery, customer service and the deployment of technology in banking operations.
With its head office based in Nigeria and franchises located in major financial centres around the world, Zenith Bank provides an assortment of services and products in areas that include corporate and investment banking, commercial and consumer banking, personal banking, private banking and trade services.
The bank has more than 500 branches and offices, spread across all states of the federation and the Federal Capital Territory (FCT), Abuja. Coupled with a presence in London, Ghana, Sierra Leone, the Gambia and representative offices in South Africa, Dubai and Beijing, Zenith Bank leverages its robust IT infrastructure to provide secure and fast electronic channels and solutions to meet the dynamic needs of customers.
The extremely low turnover rate of the bank’s highest administration allows for consistency, continuity, focus and authorship. CEO Amangbo, along with the other executive directors, have been influential in propelling Zenith Bank to its current market leading position. Working with Ovia has put Amangbo in good stead to continue delivering the bank’s growth trajectory, of which he has been a prominent contributor.
What values have helped Zenith Bank achieve its success to date?
Zenith Bank is simply built on three core values: people, technology and service. These values have been the backbone of Zenith from inception to date. The bank thrives by putting the right people in the right places. The staff receive the best training available, which has helped build a strong corporate culture of goal-oriented activities. Our people are empowered to be creative, innovative and, at the same time, execute the highest level of efficiency. All these have contributed to a stable and highly motivated workforce in Zenith.
As a result of the training and exposure we give to our staff, we have been able to innovate, create and lead the banking revolution in Nigeria through the power of cutting-edge technology. Our practice in Zenith is to continually seek ways of improving existing banking practices, using top global banks as our yardstick. The combination of highly motivated staff and state-of-the-art technology has led to excellent customer service, which has been our distinction within the Nigerian banking industry. Our ability to meet and exceed the expectations of our customers over the years has made Zenith attractive to major businesses home and abroad.
How do you think the new administration can sustain economic growth?
As a bank that believes in putting the right people in the right place, Zenith has attracted and retained seasoned professionals in the area of risk management, compliance and legal services. This has helped it to build a reputation as being a compliance-conscious bank, which has made it easier for us to work with governments at all tiers and the several regulatory agencies in Nigeria and other countries. With such an international footprint, we have and will continue to support the programmes and policies of the government in jurisdictions in which we operate.
As a reward to our conscious efforts on compliance with laws and regulations – and the support of government programmes – we have received significant support from the government in Nigeria, and beyond. We will continue to work cordially for more support.
After the government consolidation, larger Nigerian banks have been able to compete comfortably with other banks in the world. As players in the banking industry, we expect the new administration to continue to support the growth of Nigerian banks, as this helps to create jobs, wealth and expansion into other countries.
What is your strategy for expansion?
Zenith is continually seeking opportunities to expand and tap into profitable business ventures at home and abroad. It has a UK subsidiary, and this year opened a branch in Dubai. Despite the global economic downturn, there are numerous untapped business opportunities, especially in Africa and Asia, which the bank is watching closely.
How do you plan to integrate payment systems into the Zenith’s model?
As a technology-driven bank, Zenith has been at the forefront of process automation, and has championed several projects that resulted in the adoption of electronic banking. Zenith has deployed several platforms that have made banking services seamless and more efficient for customers. Using technology to facilitate payments has always been an integral part of Zenith’s banking model, and with the CBN’s drive for a cashless Nigeria, Zenith will continue to work with other stakeholders for a more efficient and secured payment system. The CBN has tightened monetary policy in 2015 by imposing forex restrictions on certain imports.
How have new environment conditions affected Zenith’s business, and what is needed to stabilise the market?
The Nigerian economy is overtly import-dependent, and this today has led to a significant loss of foreign exchange. Therefore, the imposition of foreign exchange restrictions on certain imports would in fact not only help in foreign exchange management by saving the country a forex haemorrhage, but it would also help to promote the local industries with its attendant spill-over effect on creating jobs and increasing wealth.
The current monetary condition is a fallout of dwindling oil prices and drop in government receipts. The implication is that the CBN is not able to meet all of the forex needs of every customer. However, Zenith is coping very well with the current situation by forex rationing to meet the needs of its customers, while ensuring compliance with relevant laws and regulations. The banking system is a key piece of Nigeria’s future, but SMEs have difficulty finding capital.
How has access to financial services throughout the Nigerian economy changed?
Access to finance is no doubt challenging but improving (see Fig 3), especially for SMEs, because of high interest rates due to high cost of sourcing deposits.
However, that circumstance is gradually changing since the introduction of various intervention schemes, particularly the Micro Small and Medium Enterprise Development Fund (MSMEDF) with single-digit interest rate by the CBN. It is expected that funding for SMEs will be more accessible than it used to be.
Technology features greatly at Zenith Bank. How has this being implemented?
Technology is integral to the bank’s business strategy. We deploy cutting-edge technology platforms to enable seamless transaction for our customers.
What are your expectations for 2016?
The outlook for the remaining part of the year is bright given the public confidence in the current government, since policies affect businesses to a reasonable extent. As the biggest economy in Africa, Nigeria is the preferred investment destination for everyone looking to maximise their return on investment as we go into 2016.