Financial inclusion being furthered across Nigeria

Alongside the global economy’s bumpy ride throughout the pandemic, Nigeria recently emerged from a recession with 0.11 percent GDP growth recorded in Q4 2020. In his foreword to the January 2021 Global Economic Prospects, World Bank group president David Malpass said: “Making the right investments now is vital both to support the recovery when it is urgently needed and foster resilience. Our response to the pandemic crisis today will shape our common future for years to come. We should seize the opportunity to lay the foundations for a durable, equitable, and sustainable global economy.”

To get the economy back on track, the Central Bank of Nigeria continues to make efforts to meet its targets of price stability, reduced unemployment and a stable exchange rate. It has rolled out various policies to this end. Returning the country to a January-to-December budget cycle with the 2020 appropriation bill, a new finance act and amending the deep offshore and inland basin production sharing contract help to improve Nigeria’s business environment, all while contributing to a better performance in the World Bank’s Doing Business 2020 ranking.

Nigeria climbed to 131st, a jump up from 146th place in 2019. Based on this positive track record, the country is well on its way to achieving its goal of climbing to 70th position by 2023.

 

Short-to-medium-term outlook
The International Finance Corporation (IFC) reports that, in response to the impact of COVID-19, the government approved the one-year, Naira 2.3trn ($5.9bn) Nigeria economic sustainability plan in June 2020 to boost the country’s economy, encourage local sourcing for goods and services, and protect the most vulnerable.

We are intricately woven into the fabric of the country and actively support the development of the nation

“If you look at Nigeria in the short term, you might see the challenges rather than the opportunities,” said Eme Essien, country manager for IFC’s Nigeria office. “But if you have the fortitude to see past the short-term bumpiness, Nigeria looks very interesting. All of the fundamentals come into play: the size, the dynamism and the opportunities. There are a lot of investors who see that in Nigeria, but not nearly enough.”

FBN Holdings has been putting various strategies in place to counter the fallout from the pandemic and the recent recession. It has continued to assess not only the impact on its income in the immediate term but also the impact in the medium-to-long-term on its customers and their ability to meet obligations.

Furthermore, in line with the commitment to supporting our customers and providing leadership in the financial services industry, we will continue to provide unfettered access to financial services for our customers and address their needs. We are working in line with the guidance of the regulators – including the Central Bank of Nigeria (CBN) – in providing access to funding as we seek to kick-start the economy and drive growth. The impact on our business has been broadly in line with our expectations, and our resilience, breadth of offerings, and investment in alternative channels have ensured that the group is able to cushion the effect and thrive.

 

A change in regulation
A number of financial services institutions have recently acquired the holding company licence. However, FBNH were way ahead of the curve in seeing its benefits. In 2010, the CBN revised the regulation covering the scope of banking activities for Nigerian banks. The universal banking model was discontinued, and banks were required to divest from non-core banking businesses or adopt a holding company structure.

In what some might call a clairvoyant move, FirstBank opted to form a holding company, FBN Holdings plc, to capture synergies across its already established banking and non-banking businesses. The new structure resulted in a stronger platform to support the group’s future growth ambitions. FBN Holdings was subsequently incorporated as a private limited liability company in Nigeria in October 2010 and was converted to a public company in August 2012.

On September 24, 2012, the shareholders of FirstBank sanctioned the scheme of arrangement, which, among other resolutions, approved the restructuring of the group through a holding company and the incorporation of FBN Holdings plc (FBN Holdings, FBNH, Holdco) as the parent company to all members of the group, including FirstBank, FBN Capital, and FBN Insurance among other legal entities. This decision ensured that the group retained its businesses in asset management, investment banking, insurance underwriting, and insurance brokerage. We commenced operations in September 2012. The company’s shares were listed on November 26, 2012 after the shares of First Bank of Nigeria plc were delisted on November 23, 2012.

Following the divestment from FBN Insurance in June 2020, the board of directors approved that the following be adopted as the new reportable business groups of FBN Holdings plc. These are the commercial banking business group, merchant banking and asset management business group and other businesses (which is comprised of FBN Holdings plc the parent company, FBN Insurance Brokers and a business SPV.

Through its subsidiaries, FBN Holdings offers innovative and competitive financial solutions. In addition, the structure now provides an opportunity to deal with emerging competition from a better position and create greater flexibility for diversification of the group revenues.

Over the past eight years, FBN Holdings has embarked on a journey to reposition the group, reclaim its market leadership, and restore shareholder value through disciplined implementation of its various strategic initiatives that are derived from the group’s strategic planning programmes (SPP).

The group has accrued significant mileage from the quantitative standpoint as measured by the improvement in financial performance. Additionally it has benefitted from areas such as depth of governance for all operating companies within the group, executive management, as well as the overall bench strength, market perception and the strength of its processes. While these areas represent significant achievements for the group, it has continued to implement initiatives to address critical areas such as capital, cost, and overall optimisation of the portfolio.

 

Financial inclusion
FBNH is leading the Central Bank of Nigeria agenda on financial inclusion through various efforts, including a network of more than 100,000 agents. We are doing this in several other ways. FBNH currently has 818 branches and manages 31 million customers and has been doing this consistently for 127 years in Nigeria. We are intricately woven into the fabric of the country and actively support the development of the nation, empowering Nigerians throughout this journey.

The agent banking network is testament to this, as many Nigerians trust the brand and are willing to do business with any FirstBank designated agent. To maintain our support for Nigerians throughout the country, we also need to maintain a focus on improving our own financial performance. E-channels and stemming the tide of asset quality have been key in this regard. As at year-end 2020, FBN Holdings generated Naira 48.8bn ($118m) in e-business revenues, circa 29 percent of total non-funded revenues for the year.

This strong performance in e-business underscores the significant investments the group has made over the years in developing next-generation capabilities in the technology space to stay ahead of competition. On asset quality, the group, through its flagship subsidiary FirstBank of Nigeria, has made significant improvements in cleaning up its risk assets portfolio. By revamping the group’s risk management framework and aggressive recovery efforts, the group reduced its non-performing loans ratio from double digits in 2018 to single digits by year end 2019 and 2020 – 9.7 percent and 7.9 percent respectively.

 

Leading innovation
There is increasing competition for innovation in the financial services industry. At FBN Holdings we have embedded a culture of innovation through the implementation of a number of initiatives aimed at supporting our next-generation capabilities development strategy. In addition, innovation and associated performance indicators are embedded in each member of staff’s appraisal and controls a significant chunk thereof. Some of the initiatives implemented to support the feats we have achieved in this space include; the establishment of a dedicated technology lab that facilitates the development and deployment of customised solutions for the group and its operating entities. There has been an establishment of enterprise innovation units across the group to champion the actualisation of the next big thing within the financial services space. And also the Innov8 platform, which allows every member of staff to share innovative ideas that could help the group achieve next-generation capabilities and stay ahead of the competition. We envisage these initiatives will keep us at the forefront of financial services innovation for the foreseeable future.