Interview Jim Ovia Managing Director and CEO of Zenith Bank and Transcorp board member
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enith Bank is one of the largest, most profitable banks in Nigeria. Last year it was declared ‘Banker of the Year 2005’ by the FT’s The Banker Magazine. Its MD, Jim Ovia, recently won the Pearl Award as the most outstanding CEO of the year.
Investors have responded enthusiastically to Zenith’s recent public offer of three billion ordinary shares – the largest ever made by a Nigerian company – through which the bank aims to raise N50 billion (£2.3 billion).
You have a background of over 23 years banking experience, including tenures at IMB, from 1980 to 1987 and at the Merchant Bank of Africa where you headed the corporate finance department from 1987 to 1990 before you founded Zenith Bank in 1990. Could you tell us how this background has prepared you for your present position as Managing Director of Zenith Bank?
It is great to have you guys here today to hear our success story in the banking sector in Nigeria and how we have been able to achieve what we have achieved thus far. First and foremost, Zenith Bank is the third most profitable bank in Nigeria as at June 30, 2005 and it remains the fourth largest bank in Nigeria for the same period. We have a total asset base of N370 billion which is a little over $3 billion. In terms of total deposit base, we have well above N210 billion, which is slightly below $2 billion. That is a huge amount of money if you look at the Nigerian financial environment. That is what makes Zenith Bank the fourth largest in the country today.
In terms of our expansion and our channels of distribution, we are located in all the major cities in the country. Today we have about 140 business offices and branches. We are looking at a situation where in the next couple of weeks, we would have about 150 business offices and branches in Nigeria.
Recently, we completed what we called a High Profile IPO (Initial Public Offering) in July last year. The Zenith Bank IPO was recorded to be the highest ever achieved in terms of proceeds that were generated. We were able to sell our IPO to the tune of N48 billion, whereas the minimum you needed to satisfy the Central Bank of Nigeria minimum capital requirement was N25 billion. Before then, we already had about N16 billion on our own from organic growth. So when we raised an IPO of N48 billion, and you add that figure to N16 billion, that gives you N64 billion. But we could not keep all of these proceeds because there is also a regulatory requirement that you needed to keep proceeds of your IPO within certain authorised capital limits. Which means, if you had set out at day 1 to suggest to the public that you needed to raise N10 billion and if you go ahead and raise N50 billion, you cannot apply those N50 billion because you had told the public that you needed N10 billion. That is the law of the land, but in other developed economies of the world, it does not matter what you told the public that you wanted to raise. As long as the market could have confidence in you to be able to raise N50 billion even when you said you wanted N10 billion, then you keep all the N50 billion, because that shows a remarkable confidence in your business, in your management, in your shareholders, in your directors and in the company and its' product and services. What happened with the IPO of Zenith bank was a mass endorsement, a referendum on the bank in which people were rating our bank to have performed so well; the public had confidence in the bank. Between then and now, no bank in the country has ever raised any proceeds as much as we did. We raised N48 billion. No bank has ever done that, big, medium or small. No bank has ever done that. So, on its own that was history made by us.
As you would also observe, the IPO share price of Zenith bank was N10. 90k but the price today is about N16. 50k. so you are looking at a situation where you have a rise of about 60% from the initial public offer one year later. That is also recognition of our brand. Today I will probably say we have the strongest brand in the banking industry and one of the strongest brands in the entire Nigerian economy. That has also been tested by a recent research carried out by PriceWaterHouseCoopers in conjunction with Business Day Newspapers. What that simply means is that PriceWaterHouseCoopers sent out questionnaires to CEOs of different companies in Nigeria, and let them do the rating of which banks they would respect the most. We were the number one most respected bank in Nigeria, and ranked number four most respected company in Nigeria, which means they have compared us with such companies as Nigerian Breweries, Nigerian Bottling, Lever Brothers, Cadbury and so on. In the report, Cadbury was number one, MTN was number two, Nigerian Breweries was number three, and Zenith Bank was number four, which meant if the financial or banking industry were to be extracted from the economy alone, we would be number one in Nigeria.
More recently, you are aware that we won the Bank of the Year Award, which was issued by The Banker's Magazine of the Financial Times of London. That was well publicised by Financial Times and Banker's Magazines themselves. Having said that, there are so many other awards that we have won over the years that it would be too monotonous to be mentioning them here. Now you have a situation recently where we won the Best Website Award in Nigeria. It is the best website in Nigeria and it has remained the best website in the country for two consecutive years now.
What are other ratings agencies saying about us? We have Augosto & company, the foremost rating agency in Nigeria. They have rated us AAA for the past seven years consecutively, and there is no other bank that has been rated AAA for seven consecutive years in Nigeria. Actually, there are about two other banks that had been rated AAA maybe for three years, but none for seven years non-stop. That again should put us under severe pressure to make us protect our brand name consistently and to ensure that from time to time, we are able to innovate, introduce new ideas, new products and do the right things at all times. That is the success story of Zenith bank so far.
In terms of territorial expansion and expanding into new economies, two months ago, we commenced operations in Accra, Ghana, a friendly nation, 45 minutes flight from Lagos. We have now carried our brand name to that economy and we also intend to grow our franchise and expand rapidly very soon. We also have plans and strategies to go to other African countries such that we would be able to play significant roles in the emancipation of the African economy. Thereafter we will be able to go beyond the African continent into America and Europe. We take the steps one after the other, and we do this as and when the need arise. We do it as and when our customers want us to.
Now let us look at consolidation. I will say consolidation is the best thing to have happened to the Nigerian banking industry in particular, and also the Nigerian economy. I will tell you why: Before now, we had about 90 financial institutions operating as banks in Nigeria, but after the consolidation, you would probably have about 30. I am judging by what the newspapers have been publishing. By implication, the number of banks operating in the country would have shrunk. These remaining 30 would then be very reliable and people would have absolute confidence in these banks. Before then that was not the story. Before consolidation, customers and consumers would be worried or scared about their money. But after the consolidation, each bank will have a minimum of N25 billion capital base, which is a huge amount of money. N25 billion would give you about $180 million. Even in the UK, the minimum capital base for banks is not up to N25 billion. In the UK, what you need to own a bank is about £20 million, which is about $30 million, and the minimum requirement in Nigeria is by far greater than that of the UK, any African country and any European country. It is good because it makes the Nigerian banking industry very strong, to be respected and to stand the test of time. Hopefully it would make us attractive to foreign investors. International financial institutions would then come to partner with us.
More recently as you mentioned before the interview, we received financing from FMO to the tune of about $70 million, the largest amount ever offered to any financial institution in Nigeria. We signed the agreement which was well publicised. It was the largest financing ever done within the Nigerian financial industry. We also partner with the International Financial Corporation (IFC), which is a private arm of the World Bank. We also partner with a number of international financial institutions that offer financial facilities of lending for specific projects.
We are also beginning to explore new opportunities, new territories, new partnerships and new orientations with International financial circles to form collaboration partnerships in jointly financing various projects in Nigeria. Basically, that is the summary of the financial institutions in the Nigerian economy. With the role banks are playing, they are also beginning to attract foreign direct investment. For example, when we did our IPO, a lot of Nigerians in the Diaspora invested a lot in our IPO. Again that is foreign direct investment. It might not be a huge amount of money, but that is a good sign of things to come. I am also sure that when some other banks did their IPOs, there were some receipts of foreign direct investment and Nigerians in the Diaspora.
Let me also say a few things about the Nigerian economy. The economy is beginning to open up compared to the military era. Now dividends of democracy are beginning to show to the fact that there is law and order, there is rule of law. The investment climate is very conducive. Some five years back, there were no GSM licenses. Then our teledensity was one of the lowest in the world, with regard to the fact that there was only one telephone line to 250 people, which is about the worst you can think of in any economy as large as Nigeria. However right now, we have about 10 million GSM lines and if you look at our population today which is estimated at about 130 million and divide, it gives about 1.3. Conservatively, the teledensity gives you about an average of 10 persons to a telephone line, which is the requirement of International Telecommunications Union (ITU) which says to have meaningful economic development you must have a teledensity of 1 to 10. The research has been done to that effect. We are likely going to improve upon that in the next couple of years ahead as more lines are being issued everyday. Nigeria's economy is the fastest growing telecommunications industry in the world.
| Zenith Heights, the sleek new head office of Zenith Bank in Victoria Island, Lagos |
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In other areas, privatisation is on going. The government is privatizing almost everything: the unbundling of the power sector and NITEL is going to be privatised very soon as the process is on. NICON Hotel is being sold to Transcorp. The Oil and gas Industry is also not left out. Eleme Petrochemical is also on offer and is bidded for. Port Harcourt refinery is also on the verge of being sold. So the government is virtually signing out because government has no business in business. They are offering these to core investors in the private sector. If we look at the Airlines now, Nigerian Airways has not only been privatised, it has been sold and we have Virgin Nigeria partnering with us. Before the Obasanjo administration, this kind of thing would not have happened. Now we have a new brand name and a world-class economy as well. Those are the good signs that we are beginning to see in the Nigerian economy and I think other foreign investors would take advantage of this tremendous opportunity to come up now and invest.
Now, let's talk about the risk in Nigeria. You have the risk and you have the return. Interestingly, Nigeria's economy is not as risky as some people think. It is a matter of perception. Yes I do know that our roads and streets are not as clean as roads in New York or Manhattan or Paris or London. We know that the garbage is not as clean as it is expected. We know that. But investments here are doing great. If you can tolerate the streets that are not too clean, you surely will get very good returns on your investments. We are aware that runways at our airports are broken down sometimes, and aircraft get diverted; yet they get fixed up as and when due. Things are getting better now. You are likely to be confronted with some of these problems but tremendous efforts are being put in place to normalise them. That is why Mr. President is working hard to make sure that we have the right persons handling the jobs they are best at handling. Round the clock he is working daily to make sure that the economy is on the right path. Of course, you are aware of his economic team consisting of well knowledgeable individuals who are doing great work to turn around the nation's economy.
I would not stop talking about the Nigerian economy without mentioning the debt relief achieved this year. With the effort of Mr President and his economic team, we were able to have about 60% of Nigeria's debt cancelled, where about $18 billion has been forgiven. That relieves us of the monthly burden of debt servicing. So these funds that have been forgiven are now available to run the economy. That is a great one too. With regards to economic crimes, we have the Economic and Financial Crimes Commission (EFCC) headed by Nuhu Ribadu. He is a very serious, hardworking gentleman trying to sanitise the country. He is one of the most hardworking gentlemen that I have ever seen to work for the Nigerian public sector. He works as if he is in the private sector. He handles his job very tenaciously. As a result there are credible results coming from that angle. Some stolen money of the past that was siphoned by government officials are being taken back and returned to where they belong. Only recently, about $70 million was recovered from some fraudsters who had perpetrated fraud on some people. So Ribadu recovered it and that amount has been returned back to their owners. That is a big plus. That is what we all have to applaud, encourage and maintain. That would also give a sign to foreign investors that their money is safe. If there is any crime that is perpetrated on your investment, there is someone like Ribadu who would help repatriate the money back.
Maybe I should also talk about Transnational Corporation here. Transnational Corporation is the vision of Mr. President. He had a vision to build a mega corporation for the Nigerian people where the shares would be sold to all Nigerians, not to a few people. Somehow some of us are lucky to have been selected to play a role to put the thing together. Some of us have been selected to be in the pioneer team to put it together, as part of the technical team. I am now on the board of Transnational Corporation. It is now fully running. We have got our first project in NICON Hilton Hotel. Transcorp is supposed to be one of the mega corporations that you would see in other parts of the world. We would be involved in Oil and Gas, telecommunications, power and so forth. Transcorp would transcend all parts of the Nigerian economy and it would be owned by all Nigerians. When we do this IPO very soon, maybe by next year, all Nigerians would be able to buy shares in the Transnational Corporation. Even foreigners are also welcome to buy shares in it. So Transnational Corporation is growing very fast and quickly becoming strong and it would dominate most aspects of the economy in the near future.
When the time comes to step down from your role as Managing Director and also at the same time as a key board member of Transcorp, what would your legacy be?
These are always interesting questions. Well, I have some NGOs, which I have set up already. There are two and they are very serious projects. One of them is called Mankind United to Support Total Education. It is an educational programme which I set up about seven years ago with proper funding of scholarships to students who are unable to finance their educational career. Some of them gain admissions to colleges and universities but without finance to pursue their careers. So my NGO takes care of their school fees. We have already trained some medical doctors in this scheme. Another project I am also currently backing is the construction and creation of a university called the University of Information and Communication Technology. It is being structured now and we are processing its application. I hope before the end of this year, the Nigerian Universities Commission would license it as the first and only university that would focus mainly on Information and Communication Technology. It would be located in Delta state.
Basically through these channels, I would be able to reach out to people and I would be able to empower the youth. Also yearly I organise what I call Digital Revolution, trying to empower the youth. It is a youth empowerment scheme through digital operations. So every year I organise a conference for Nigerian youths where I speak to them. We used to have up to 2,000 young Nigerian people, between the ages of 12 and 20. We invite them to a large auditorium where I lecture them on IT and ICT, and how to be empowered using ICT. I called that Youth Empowerment through Digital Revolution. It has been a success story. So through these channels I intend to leave a kind of legacy where I would have touched a lot of people's lives, and make their lives better than they were. It would give me happiness that I have been able to change the lives of people especially the youth. In my lifetime I want to play a role that would touch the lives of Nigerians and humanity generally. That would be the legacy that I would want to leave behind.
Mr. Ovia, thank you for you time.
Thank you.
Consolidation lies ahead for insurance industry
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FOR many of Nigeria’s insurance companies this will be a make or break year. New capital requirements issued by the National Insurance Commission (Naicom), the industry regulator, are forcing the insurers to raise huge funds in order to remain in the market.
The exercise is certain to prompt a wave of mergers and acquisitions among the more than 100 insurance firms currently operating in the country. Commissioner for Insurance Emmanuel Chukwulozie expects to see the emergence of “a few mega insurance companies who would control a sizeable share of the market.”
The charge to the capital market for funds was led in March by Aiico Insurance, seeking to raise 7.2 billion naira (£33.5 million) through an offer for subscription of 2.2 billion ordinary shares and a rights issue of 14 billion ordinary shares.
A major player in the industry, Aiico is Nigeria’s largest life insurer with a general insurance portfolio that includes multinationals and leading indigenous companies. It also benefits from a substantial and deepening partnership with AIG, the world’s largest insurance group.
Oladele Fajemirokun, Aiico’s chairman, says the company has embarked on a journey that will not only ensure that it meets the new capital targets but will also position it as the leader in the industry. Proceeds for the fund-raising exercise will be used for further investment in information technology, updating and expanding the branch network and working capital. “The company is poised for vibrant growth,” says Mr Fajemirokun.
In an increasingly competitive environment, and one in which insurers suffer from a somewhat negative public image, Aiico has the advantage of a long and solid pedigree. Established in 1963 as a collection centre and incorporated in 1970, it converted to a public liability company in 1989 and was listed on the NSE in 1990.
In February, Aiico announced a 254 per cent increase in pre-tax profits for the nine months up to the end of September 2005 – 250 million naira (£1.1 million) compared to 70.5 million naira (£330,000) for the same period the previous year.
Repositioning West Africa’s largest mint
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There is a new atmosphere in and around the large Abuja offices of the Nigerian Security Printing and Minting Company (NSPMC) and much of it has to do with its incredible transformation.
Like many other public companies, the mint has been through some turbulent times and earlier this year, the Governor of the Central Bank of Nigeria (CBN), which owns 77 per cent of the company, took action. Professor Charles Soludo introduced a new management team led by managing director Ehi Okoyomon, and their impact was immediate, improving the mint’s output by some 40 per cent in just four months.
| Fast-paced reforms and leading ambitions at West Africa’s premier mint |
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In recent years the mint has been producing only 50 per cent of the country’s requirement of currency notes, with the balance being sourced internationally. However, the ‘new’ mint aims to print 100 per cent locally by the end of 2006 – a deadline brought forward by 12 months because of the current fast-paced reforms.
Dr. Okoyomon is already talking about further goals, such as capturing the West African sub-region market, explaining: ”NSPMC is the only secure printing company in the whole of West Africa, so every country is a potential customer.”
It seems success is just around the corner and one he believes many Nigerians will be proud of. “People will see that there is a company you can rely on for security, efficiency and quality.”
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