Subsidy removal, other govt monetary policies, are positive decisions –Alawuba, GMD UBA
How has the monetary policy environment affected UBA in the last five years?
I can tell you the financial situation is not just a Nigerian issue. The whole world, of course, knows the history, going from the COVID-19 situation and several geopolitical tensions around the world that have affected the world economy, and Nigeria and African countries where we ply are no exceptions. But what I can tell you is that within the monetary policy frameworks that we have in various countries, what the UBA tries to do is first of all compliance. We run a highly regulated business, so we comply 100 per cent with all the policies and frameworks that the central banks come in the various countries where we are present. However, we also work with the central banks in various countries we are present to come up with ideas that can help improve the financial performance of those economies. I can tell you, for example, that we work with some countries in Africa to improve digital banking pledges in their countries. UBA is the first bank in Nigeria to introduce an ATM, you will not do that without the support of the Central Bank of Nigeria. In some countries, we are the first to introduce digital platforms – ATMs, PoS in those countries and it is a lot of work and collaboration with the central banks. So, our attitude to this is that of collaboration; when you collaborate with the monetary policy authorities, you can continue improving the economic landscape where we play.
How is UBA planning to celebrate the 75th anniversary with its customers and engage the communities they come from?
For this 75th anniversary, we will continue to celebrate with the customer, and I think we will continue to ensure, we will come up with several policies, and several products you are going to see a lot coming through on how the customers can continue to benefit from UBA. In UBA financial inclusivity is very important and we will continue to come out with how we can make sure we increase the number of Africans that have banking relationships. When we landed in Ghana in 2005 that was one of the first things UBA did. We removed the initial deposit that is required for banks so that we can drive financial inclusivity. Today too, we are using digital means to ensure that we get to everyone in Africa. Everyone in Africa must have a banking account and that will support the management of the economy in a better way. So, UBA is at the forefront of driving financial inclusivity in Africa and all the countries where we play.
Nigeria is currently going through a phase of economic downturn, what is the UBA doing and how would you say the downturn is responsible for the naira-dollar fluctuation?
I would like to tell you that so far the government of Nigeria has taken very positive decisions. Decisions about subsidy removal, the decision about harmonisation, and free of reds- these decisions are very positive for the economy. Now, of course, there are short-term hiccups, but I can tell you over time this will go away and the economy will do better, if those decisions are not taken, it could even lead to more serious implications for the country. Now, we will continue to celebrate with our customers. The customers are the basis of why we come to work. The essence of UBA is the customer.
What are the contributions of your subsidiaries or branches outside Nigeria to the bottom line of the UBA Group?
The contributions of the subsidiaries in Africa to the UBA bottom line, I would like to give you positive news that all the subsidiaries in Africa are profit-making and all of them are contributing more than 50 per cent of the gross income of UBA and this trend will continue. So, the vision of going into these countries is paying off, and we will continue to invest in Africa; indeed, is United Bank for Africa and will continue to invest in Africa, we will continue to deepen our market. Our market shares in those countries are improving. If you go to some of the countries, UBA is the number one, number two, number three bank in those countries, and some of them appreciate the contributions of UBA to the very impactful economy.
What are the long-term visions of the UBA Group over the next 25 years, and are you leveraging technology, such as AI and block chain to enhance operations?
We want to be a role model for African businesses. Africa is our home; Africa is the centre of our businesses. Our primary focus is to be that bank that unites Africa that bank that moves businesses between Africa and the rest of the world and the rest of the world and Africa, in terms of counter flow, in terms of trade, in terms of settlement. We need a bank that will support intra-Africa trade and that bank is UBA, and that is our vision in the next 25 years. Africans are doing less with each other and more with others and you need a bank that will continue to encourage intra-Africa trade, so it could be easier for you a manufacturer in Nigeria to find a market in Ghana or a Ghana manufacturer find market in Senegal and you need a bank that will put these together and that what UBA is doing and working with various partners to ensure intra-Africa trade is given a boost in the next few years to come.
In your FY of 2023, your NPL (non-performing loan) was above the CBN’s threshold of 5.8 per cent as against 2.9 per cent in 2022. In Q1 2024, you probably have one of the highest in the industry of N210bn as against N107bn in Q1 2023, what you are doing to address this, and also now that the apex bank has raised recapitalisation to N500bn, how would you fulfil your obligation of $6bn you pledged to SME funding?
Yes, the NPL ratio rose to 5.8 per cent in 2023, but that was largely a result of the fact that we saw some weaknesses in some of the credit in the portfolio and we had to do the responsible thing of actually classifying them as such. The good news is the collateral level for this loan is quite high and we are currently in the process of realising that, we should see the ratio coming well below the five per cent threshold. But 5.8 per cent relative to several peers remains one of the lowest around the industry. In Q1, the NPL was said to be one of the highest in the industry and I think that’s largely related to the inflation rate we have seen across the jurisdiction and there is a relativity when you look at operative expenses. The absolute size of the operating expenses of UBA to the absolute size of operating expenses of another operation is probably about half in terms of scale and size, but what is important is that you compare the revenue as well as the net returns from all of those and I think at that point UBA is reasonably comparable to relative peers. On the $6bn commitment for SMEs, so, first of all, let me try to give some context around your question and why we did that support. We went to discussions with AfCFTA (African Continental Free Trade Area) and I’m sure you know what AfCFTA is, which is to unity the entire Africa to grow and develop it and we look at a few that we could do to support intra-Africa Trade and businesses in across Africa. I’m sure you will agree with me, that SME presents the engine room for development and growth for Africa. Now we identified four largely import-dependent sectors namely- the automotive industry; pharmaceutical; logistics, as well as transport businesses. They rely a lot more on imports and we worked with AfCFTA after a thorough research to see how we substitute the imports for Africans to be able to produce and manufacture those items locally and also trade among it selves. Intra-Africa Trade today is less than 15 per cent, in Europe is 60 per cent in America is over 75 per cent and we stepped out to give a commitment of $6bn to be disbursed to SMEs to improve their capacity to substitute the imports of these items on these four sectors.
Where is the deposit coming from?
Now this UBA today has more than enough deposit to find this. As part of our SME strategy this is not just only to Nigeria, is across the 20 countries where we operate in the first phase and non-present countries in the second phase. So, we are going to fund it largely from our deposit, that’s one side. It has nothing to do with the recapitulation, is about the business that we do and SME being an important area of our business is a key focus for us to grow and impact lives and businesses in Africa. Now, outside of this, we have also gone into partnership with various DFIs, Afremix being one of them, African Growth Fund, so several DFIs are also coming by way of financing some of those schemes as well as providing mitigates to the risk that may be in those areas. So, largely the funding is not a major issue and has no relationship to our capitalisation programme in Nigeria. Mind you is not only for Nigeria, is for across Africa.
How much support are you giving beyond trade to countries in Africa that are going through some of these very tough times, not just to support trade but to ensure that during this difficult time, they can stay on top of their businesses, as far as the private sector is concerned and as far as government institutions are also concerned?
About the infrastructure funding gap in Africa, and I can tell you is a lot- from agriculture to roads, to ports, to telecoms, power, is a lot. The infrastructure gap in Africa is a lot but that lies the opportunity that we have in Africa. See UBA strategy has been in countries where we are present. We support key sectors that are driving the economies of these countries. Yes, in some of the countries we have done a lot in terms of road infrastructure support, building of ports, and improving the capacity of ports to take in goods. In some of the countries, we have even done as much as dealing with stadia. Yes some of the stadiums where the matches of AFCON were played, were supported by UBA. In some, we have built their capacity for revenue generation in terms of technology to ensure that the government has enough funds to support the business of the day. So, our support to African economies is across sectors, depending on what is the critical sector that is driving those economies. Today we are supporting mining in several countries in Africa. We are supporting cotton, we are supporting cocoa, we are supporting cashews in several countries, depending on what the country is built on. So, we are committed to developing Africa. We are committed to supporting the key sectors that are pushing African economies wide and showing, even in our performances, even in our businesses. If you look at our accounts you will see that our performance has continued to improve, reflecting clearly what we are doing. Today, the deposit position of UBA is about N18trn, our shareholders’ funding is N2trn, and you will see that our customer base is moving up to 45 million customers across Africa and these are growing daily based on the businesses, and we just don’t support these businesses, we support all the value chain that are tied to these businesses so that these same SME businesses will continue to strive because we recognise that SME is the future of Africa and we will continue to provide support for SME businesses in Africa.
How are you handling the risks that come with more of your customers going digital and also how are you trying to adapt that technology to over 20 countries in Africa and outside where you have your operations, do you have something that looks like connectivity across all those units and within your bank?
You will agree with me that servicing 45 million customers means that you have enhanced technology and at the same time have the technology that can also prevent fraud. Today what UBA has done in terms of technology to empower customers on self-service, we have over 20 of our services on self-service, and in terms of our technology too, you will agree with me that UBA stability and customers know what to use at the right time is one of our core deliverables in UBA. So, what we have done across Africa is to ensure that we have that technology that connects one country to another. With UBA technology you can transfer money from Togo to Ghana, from Ghana to Kenya without not coming into the banking hall. So, we have done that with technology, and in terms of fraud too, one of the things we have also done is that as we empower customers, we also show that we have that underlying technology that will prevent customers from losing funds. Today, UBA is a haven for customers’ purses.
Please react to the recapitalisation of banks that has been instituted by the CBN, what do you think this means for the banking institutions, and the banking industry entirely, moving forward?
Yes, the CBN has said that every bank must have N500bn in pure share capital and that was not necessarily related to the existing shareholders funds of the banks. The whole objective, according to CBN was that we wanted to support the $1trn economy at a certain time. So, we have looked at that. It’s going to strengthen the banking system as expected and the banks in Nigeria will be able to do a lot more in terms of growing the economy. The CBN gave a couple of options – you could achieve this by raising additional funds, you could achieve this by mergers and acquisitions and you can choose not to raise more funds and step down your licence to a level where your current capital can support. So, for UBA we operate with highest licence available which is an international licence. We have operations, very strong vibrant operations across Africa in several centres in the world, so we have chosen to go by this route. We are looking at the options, we are engaging financial advisers, and indeed have set a motion, the requisite approval from the shareholders.
