Promote financial inclusion across Nigeria
Author: Urum Kalu Eke, Group Managing Director, FBN Holdings
July 13, 2021
Along with the bumpy ride of the global economy throughout the pandemic, Nigeria recently emerged from a recession with 0.11% GDP growth recorded in the fourth quarter of 2020. In its preface to the Global Economic Outlook of January 2021, World Bank Group President David Malpass said: âMaking the right investments It is now vital both to support recovery when it is urgent and to foster resilience. Our response to the pandemic crisis today will shape our common future for years to come. We must seize the opportunity to lay the foundations for a sustainable, equitable and sustainable world economy. “
To get the economy back on track, the Central Bank of Nigeria continues to make efforts to achieve its goals of price stability, lower unemployment and stable exchange rate. It has deployed various policies to this end. The country’s return to a budget cycle from January to December with the 2020 finance law, a new finance law and amending the production sharing contract for the deep offshore and the inland basin contribute to improving the business environment of the Nigeria, while contributing to better performance in the World Bank’s Doing Business 2020 Ranking.
Nigeria climbed to 131st place, a jump from 146th place in 2019. Based on this positive record, the country is on track to meet its goal of climbing to 70th place by 2023.
Short and medium term outlook
The International Finance Corporation (IFC) reports that in response to the impact of COVID-19, the government approved the one-year N2.3 billion ($ 5.9 billion) economic sustainability plan in Nigeria in June 2020 to stimulate the country’s economy, encourage the supply of goods and services and protect the most vulnerable.
We are intimately linked to the fabric of the country and actively support the development of the nation
âIf you look at Nigeria in the short term, you might see the challenges rather than the opportunities,â said Eme Essien, country director of IFC’s Nigeria office. âBut if you have the courage to see past the short-term bumps, Nigeria looks very interesting. All the fundamentals come into play: size, momentum and opportunity. There are a lot of investors who see this. in Nigeria, but not enough. â
FBN Holdings has implemented various strategies to counter the fallout from the pandemic and the recent recession. She continued to assess not only the impact on her immediate income but also the medium to long term impact on her clients and their ability to meet their commitments.
In addition, in line with our commitment to support our clients and to provide leadership in the financial services industry, we will continue to provide unlimited access to financial services to our clients and meet their needs. We are working under guidance from regulators – including the Central Bank of Nigeria (CBN) – to provide access to finance as we seek to revive the economy and stimulate growth. The impact on our business was broadly in line with our expectations, and our resilience, the scope of our offerings and our investments in alternative channels allowed the group to cushion the effect and prosper.
A change in regulations
A number of financial services institutions have recently acquired the holding company license. However, FBNH was ahead of the curve seeing its advantages. In 2010, the CBN revised the regulations covering the scope of banking activities of Nigerian banks. The universal banking model was abandoned and banks were forced to withdraw from non-core banking activities or adopt a holding company structure.
In what some might call a gesture of foresight, FirstBank chose to form a holding company, FBN Holdings plc, to capture the synergies between its already established banking and non-banking businesses. The new structure made it possible to strengthen the platform to support the group’s ambitions for future growth. FBN Holdings was subsequently incorporated as a 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 plan 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 parent company to all group members including FirstBank, FBN Capital and FBN Insurance, among other legal entities. This decision enabled the group to maintain its asset management, investment banking, insurance underwriting and insurance brokerage activities. We started our operations in September 2012. The shares of the company were listed on November 26, 2012 after the delisting of the shares of First Bank of Nigeria plc on November 23, 2012.
Following the divestiture of FBN Insurance in June 2020, the Board of Directors approved the adoption of the following as new reportable business groups of FBN Holdings plc. These are the commercial banking business group, the merchant banking and asset management business group and other businesses (which includes FBN Holdings plc the parent company, FBN Insurance Brokers and a company SPV.
Through its subsidiaries, FBN Holdings offers innovative and competitive financial solutions. In addition, the structure now offers an opportunity to face emerging competition from a better position and create greater flexibility for the diversification of the group’s income.
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 the disciplined implementation of its various strategic initiatives derived from the programs. strategic planning (SPP) of the group.
The group has accumulated significant mileage from a quantitative perspective as measured by improved financial performance. In addition, he benefited from areas such as depth of governance for all operating companies of the group, general management, as well as the overall strength of the bench, market perception and the strength of its processes. While these areas represent significant achievements for the group, he continued to implement initiatives to address critical areas such as capital, costs and overall portfolio optimization.
FBNH is leading the Central Bank of Nigeria’s financial inclusion program through various efforts, including a network of over 100,000 agents. We do this in several other ways. FBNH currently has 818 branches and manages 31 million clients and has done so regularly for 127 years in Nigeria. We are intimately linked to the fabric of the country and actively support the development of the nation, empowering Nigerians throughout this journey.
The agent banking network is a testament to this, as many Nigerians trust the brand and are ready to do business with any agent designated by FirstBank. To maintain our support for Nigerians across the country, we must also continue to focus on improving our own financial performance. Electronic channels and containment of asset quality have been key in this regard. At the end of 2020, FBN Holdings generated 48.8 billion naira ($ 118 million) in e-commerce revenue, or about 29% of total unfunded revenue for the year.
This strong performance in e-commerce underlines the significant investments the group has made over the years in developing next-generation capabilities in the technological space to stay ahead of the competition. On the quality of assets, the group, through its flagship subsidiary FirstBank of Nigeria, has made significant improvements in the consolidation of its portfolio of risky assets. By reorganizing the group’s risk management framework and aggressive recovery efforts, the group reduced its NPL ratio from double digits in 2018 to single digits at the end of 2019 and 2020 – 9.7% and 7.9% respectively.
There is growing 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 to support our strategy of building next generation capabilities. In addition, innovation and the associated performance indicators are integrated into the evaluation of each staff member and control a significant part of it. Some of the initiatives implemented to support the exploits we have achieved in this space include; the establishment of a dedicated technological laboratory that facilitates the development and deployment of personalized solutions for the group and its operational entities. There has been a creation of business innovation units across the group to champion the actualization of the next big thing in the financial services space. And also the Innov8 platform, which allows each staff member to share innovative ideas that could help the group achieve next-generation capabilities and stay ahead of the competition. We believe these initiatives will allow us to remain at the forefront of financial services innovation for the foreseeable future.