European CEO interviews Godwin Emefiele, CEO of Zenith Bank, on developing a successful bank in Africa
Zenith Bank is a leading financial institution in Africa. At the helm is Godwin Emefiele, who discusses the bank’s key achievements, the financial sector in Africa as a whole, and what Nigeria specifically needs to do in order to achieve double-digit growth, and become a hub for foreign investors in the continent.
European CEO: Godwin, you’ve been with Zenith since its inception in 1990, so what would you say have been the bank’s key achievements in that time?
Godwin Emefiele: If you consider the fact that in 1990, when we opened shop, we opened shop with just $120,000 as seed capital. And today the bank’s shareholders fund is over $3.5bn: we have done very well.
During the first year, the bank’s profitability was well below $50,000, and as of 2012, the bank had a profitability of almost $600m, so we have come a long way.
Those are some of the achievements that I think we have had in the last 23 years, and we are working hard to sustain this level of profitability.
European CEO: Those are fantastic results, but how did you achieve them? What would you say are the key strategies to developing a bank in Africa?
Godwin Emefiele: First of all, you have to ensure that you are a well capitalised institution. Two, you have to ensure that a level of risk management practises in that institution is very high, to ensure that as you create risk assets particularly, that you do so in a very prudent manner, such that your non-performing loans ratio becomes very low.
You have to also ensure that you are a very liquid institution. Once you are a liquid institution, you are well-capitalised, your risk management practices are strong; you will naturally be profitable and a successful bank in Africa.
European CEO: Let’s talk about Nigeria specifically then; you’ve got the largest population in Africa, the third-largest economy, and you’ve been achieving growth results of about seven percent for the last 10 years. What needs to happen for Nigeria to become a hub for international investors?
Once you are a liquid institution, you are well-capitalised, your risk management practices are strong, you will naturally be profitable
Godwin Emefiele: We need to focus more on non-oil areas of generating revenues. Improve on our investments in agriculture, and luckily we’ve seen the government divesting from power, we’ve seen the government divesting from telecommunications.
We need to also see how the government can divest from even areas of infrastructure, because what you find is that when government removes its hand from some of these core areas of the economy, what you find is that private sector institutions will come and invest in them. Nigerian banks feel more comfortable lending to those private sector institutions. Cash flows become properly ring-fenced. And as banks lend to private sector institutions, naturally it will lead to improved productivity, price levels will be stable, and of course general unemployment levels will be improved upon. And what you find is you achieve double digit growth in the economy.
European CEO: Is the same true for the rest of Africa? What has to happen across the continent for it to unlock its full potential?
Godwin Emefiele: If you compare Africa to the rest of the world; for instance take inflation. In America, in China, in Japan, inflation levels are very low. And I think what we need to do, I think the monetary and fiscal authorities need to take a look at how they will ensure that we keep inflation low. To keep inflation low, what policies can be put in place to ensure that we achieve price stability? And what are we doing to ensure we improve the level of employment in our environment? How are we improving the level of security? Even though security is a major challenge in any part of the world, not just in Africa. Once we are able to put some of these policies in place, then you will begin to see improved growth in Africa than you’ve seen in the past.
European CEO: And what about the banking sector? What do you have to do to support that growth?
Godwin Emefiele: You will find out that banks are more comfortable lending money to private sector people. Private sector people who have their own equity, bringing their own equity into their business. And once banks begin to find that yes, there is equity, and there are private sector people that they can deal with directly, of course they will be able to lend money to these institutions, and once you lend money to these institutions, you begin to see growth. You can see employment levels, you can see productivity improving in the economy.
Nigerian banks feel more comfortable lending to those private sector institutions
European CEO: Zenith’s vision is to build a reputable international financial services network. How are you going about this?
Godwin Emefiele: Well, I will say that we are doing this gradually. If you consider that outside of Nigeria, we have office subsidiaries in Ghana, in Sierra Leone, in Gambia, and also in London. And of course we also have rep offices in South Africa and China. I would say we are doing this, but we will continue to do so.
We will try and see how we can grow our franchise in some other countries in Africa, and also in more countries in Asia.
But of course, our strategy has always been that we will only go to environments or into countries where we think we’ve done our studies very well, and then those propositions are viable. So that is basically our focus.
But of course, there are still a lot of strong opportunities in Nigeria. If you consider the fact that Nigeria is an emerging market; today we believe that a lot of infrastructure gaps that we think that banks like Zenith focus on them, we still can grow a franchise and a level of profitability.
European CEO: On that note then, what are the plans for the future?
Godwin Emefiele: The plans for the future of the bank are to see how we can focus more on providing excellent customer services to our customers. What we’ve done in the last 23 years is to ensure that we employ the best hands, support them with technology, ensure that we provide excellent customer services to our customers. And we are very optimistic that as long as we are able to provide excellent customer services to our customers, profitability will be taken for granted.
European CEO: Godwin, thank you very much.
Godwin Emefiele: Thank you very much.