Roosevelt Ogbonna, the chief executive officer (CEO) of Access Bank, says the Nigerian market is not as profitable as other African countries due to the naira devaluation.
Ogbonna spoke during a media parley on Monday, where he
reiterated Access Bank’s five-year strategy, which includes an investment
phase, which holds from 2023 to 2025, a consolidation phase that runs from 2025
to 2026, and an optimisation phase, which starts in 2027.
Speaking on the company’s investment drive, Ogbonna said
Nigeria ranks low in terms of strong return on equity, as more money can be
made in Southern Africa, East Africa, and North Africa.
The CEO said the money made in Nigeria if taken to South
Africa, “we make three times the money we’re making here”.
He said Access Bank is expanding to other African markets
where the return on equity is strong.
“Now, if you take Africa as a continent and you split it
into five zones, Nigeria and West Africa is number four out of five from the
retailers’ perspective,” Ogbonna said.
“As a business, I’m making more money in Southern Africa,
East Africa, North Africa, before Nigeria. We need markets where we have
stronger returns. And even that, we have to test it, given what the evaluation
has done for Central Africa.
“In today’s terms, I
suspect Central Africa might have a richer banking pool than West Africa. So
when you hear there’s a lot of noise in the public around banks making money,
if we take that same capital and go to South Africa, we make three times the
money we’re making here.
“I guess to put it in perspective, in 2008, one South
African bank was bigger and more profitable than the entire Nigerian banking
industry.
“And at that time, Nigeria was the second largest economy in
the continent. So something around that conversation doesn’t add up. So we’re
going to invest in markets.”
Ogbonna questioned if investors will rather invest $100 in
Access Bank United Kingdom (UK) and get a 25 percent return in dollars or
invest in Nigeria and get a return on equity of over 20 percent in naira and
face devaluation.
“If I have capital,
$100 of capital to spend, should I put it in Nigeria and get a return on equity
of 20-something percent in Naira and face devaluation? Or do I take $100, put
it in Access UK and get 25 percent return in dollars? I think it’s a no-brainer,”
he said.
“Or do I go to Botswana, where the currency has been stable
for at least 10 years, and any return I get is in real terms? Or do I go to
Cameroon, where inflation rate is about 4 percent and has been for many years?
Or do I go to markets like Cote d’Ivoire, where because of their heads to the
euro, it’s made that there’s significant stability in the market.”
Ogbonna said Access Bank is also aiming for markets where
the cost of regulation is cheaper
“We’re going to markets where we know the return is strong.
Just cost of regulation is cheaper. And the structural issues around how
balance sheets is managed, cash reserve ratio and AMCON charges, don’t exist in
those markets,” the CEO said.
‘COST OF RAISING CAPITAL IN INTERNATIONAL MARKET
NEEDS TO DROP’
Ogbonna raised concern over the cost of raising capital in
the international market.
He said the interest on capital raised by African companies
in the international market is more than what is demanded from their foreign
counterparts — even when there is no history of default.
“And we also want to ensure that the delta between how much
you raise capital internationally drops. So let me give you the argument we’ve
made with the rating agencies time and time over,” he said.
“JP Morgan goes to
the market — now forget the disruption we have, dislocations we have in the
market today — in settled times, they’ll go to the market and raise $2 million
and they’ll raise it at 3 or 4 percent.
“I go to the market and I’m raising $500 million, I raise it
at 9 percent. The question is, that delta of almost 600 basis points, what’s
the justification? I’ve never defaulted. I’m a repeat issuer in the market.
“I’m an issuing paper
in the international market from 2007. So it’s a 17-year track record of zero
defaults. Why should I have to pay 600 basis points premium? I can understand.
“You did a good job of changing the narrative in terms of
how the continent is viewed, from the risk perspective. Being in those global
markets, having an operation and presence in those global markets, earning
income in those global markets enables us to force the issue.
“We can reduce the cost of doing business and the benefit
ultimately, we pass on to the market.”
Also, Ogbonna said there is no cause for concern if foreign
banks exit Africa, as it produces an opportunity for African financial
institutions to take over the vacant market.
The CEO said Access Bank plans to ensure the continent is
never financially disintegrated.
“So Citi, Standard Chartered, BNP, SG, say they’re leaving
the continent, we suffer nothing because life just goes on,” he said.
“You now have an African banking in those global markets
understanding how the continent works and is able to support the continent to
deliver.”
He said by 2025, Access Bank will be in the top 10 banks
across its markets in Africa, excluding Kenya and South Africa.
However, Ogbonna said Access Bank will try to break into the
top 10 in Kenya but the South African market might be impossible except the
acceptance level of the Nigerian business changes in the country.