Business
…. projects massive growth for Nigerian economy
ABBA Bello, managing director of Nigerian Export-Import Bank, NEXIM, with more than 30 years of expertise in corporate, regional and commercial banking, merits thumbing his chest. He has deployed his wealth of experience to turn an insolvent bank into profitability within six years of assuming office. Bello, through dint of hard work and diligence along with his management team, revived NEXIM, which in 2016 had 94 percent non-performing loans with a loss of N8 billion by the 2022 financial statement hit a profit of N6 billion. All the loans were booked at 99% performance despite the disruption of business activities by COVID-19. “When we came to the bank, the whole balance sheet was about N63 billion, which is small as at then for a 26-year-old bank. But as we’re speaking now, we’ve taken that balance sheet to somewhere around N230 billion,” Bello enthused.
Prior to joining NEXIM, Bello had honed his skills as the executive director of Unity Bank Plc, in charge of corporate banking, agriculture, and North Directorate, and was the pioneer managing director of United Bank for Africa Plc’s subsidiaries in the Republic of Chad and Zambia for several years. Bello, who hails from Katsina State, schooled at the prestigious Kings College, Lagos; bagged an Accounting degree from Ahmadu Bello University, Zaria, and a postgraduate degree in Business Administration from the University of Liverpool, United Kingdom, and attended several courses in Nigeria and abroad in leadership, advanced management, and executive management.
A member of the Chartered Institute of Bankers of Nigeria and a fellow of the Institute of Credit Administration, the NEXIM managing director is also a member of the Institute of Directors and an Alumnus of the Advanced Management Programme of the Harvard Business School, USA. Bello spared time out of his busy schedule in his office in Abuja on July 12, to speak with Maureen Chigbo, publisher/editor of Realnews. In this exclusive interview, Abba Bello disclosed to Realnews how he was able to turnaround insolvent NEXIM Bank to record N6bn profit in less than 6 years, boost regional trade and coastal maritime operation; revelations on his chat with IFC on subsidy removal in Nigeria; his happiest moment and legacy for the bank. He concluded that with the removal of the two shocks that were holding down the economy of Nigeria – petrol subsidy and multiple forex windows, the country’s economy is set for massive growth. Enjoy the compelling interview. Excerpts.
REALNEWS: It’s been six years since you assumed office as the chief executive officer of NEXIM. What has the journey been like so far?
Bello: That’s a very deep question. I got appointed to this office in April 2017 to be precise, along with my executive directors. Given that I had in the past, from NEXIM’s inception, engaged with the bank from the outside given that I was in commercial banking, what I met on the ground wasn’t what I expected to see. We found the bank in a situation that is very undesirable. Over the years, the bank has deteriorated considerably and we found it with basically no growth. The bank was in a state of illiquidity. You can call it insolvent. If it wasn’t a government bank, it would have been liquidated. What causes illiquidity in a bank is bad loans.
We found a situation where most of the loans that were given were irrecoverable. They were not performing. So, since I came in, what we did was to try and stabilize the bank first and actually face what the mandate of the bank had intended, which is to finance and promote exports out of Nigeria. Most of the loans we found had actually deviated from the intention of the mandate. So we found loans for hotels and so on. We set up a strong recovery team to try and get back what is recoverable, go through payments, if they’re any liquidation of the loans, that is, if there are any collaterals, many of which were inadequate, and also restructure those we thought could work. So the journey had been great so far and with the support of the central bank, because we needed the liquidity to come back into the system, we needed liquidity quickly and I must tell you that the agreement we had with the central bank is that we’ll manage some of their interventions that have to do with trade directly and over the first two or three years, we were able to significantly bring back the bank into reckoning because prior to that time, everyone had written NEXIM off. That’s the stakeholders, the exporters most especially, the owners of the banks, which are the Central Bank of Nigeria and Ministry of Finance incorporated, and other government stakeholders that were involved in trade. So I must tell you that it wasn’t easy. But somehow we were able to do it and we thank God that today we can say that there is an impact that the bank is making, but even with that, we think we can do more, in terms of supporting non-oil exports out of Nigeria. There is so much more we can do with adequate support of the government because diversification of the economy is paramount, especially now that there’s illiquidity in the system, pushing out export of non-oil products becomes even more important to the country.
Realnews: How many loans did you find that were not recoverable? How many were recoverable and how many were you able to recover?
Bello: If you know how banks work, the situation or condition of your loans is determined by both your internal and external assessment. Now when I say external, it means both the central bank examiners and your auditors will determine the health of your loans. So when we came, the books, as a matter of fact, there were no books because for four years they were no financial statements in the bank. So when we finished our first year here in 2017, we had to do four financial statements, at the end of the day, we had to tell ourselves the truth about what was happening in the bank.
When we came I think the non-performing loans as per the books were somewhere above 14%, but when we did the reassessment of the loans, I must tell you that the non-performing loans of the bank were 94%. The first thing we needed to do was tell ourselves the truth about where we were because the bank was illiquid. There was no money. Customers were not paying and for some, we didn’t even know the owners of the companies the loans were given to. If you check our 2016 financial statement, which was what we had done, the bank took a hit of N8 billion.
There was a loss of N8 billion because we had to classify the loans. But over time, by the next year, we had reduced that loss to about N500 million, and it’s been profitable from 2018 till date. In the 2022 financial statement, the bank made a profit of N6 billion.
Realnews: How did you do it?
Bello: It was a combination of recoveries, new facilities as well as treasury activities. That’s basically our journey. When we came here to the bank, the whole balance sheet was about N63 billion, which is small as at then for a 26-year-old bank. But as we’re speaking now, we’ve taken that balance sheet to somewhere around N230 billion. The intervention of the central bank, other sources of funds that we got into the bank from the NCDMB, whose facilities we’re partly managing; there is AFREXIM BANK, African Development Bank, AFDB, other export credit agencies, ECAs, around the world that we partner with in funding trade between our countries, respectively. So you know very well that banking is a thing of confidence. Despite the fact that our ratios have not been the best up till now because of the legacy issues when you look at our performance, you see consistent improvement on all lines, from the size of the balance sheet to profitability, to the health of the balance sheet itself, to things like non-performing loans and so on. But I must tell you the truth, from 2017 till date, all the loans were booked at 99% performance, that’s despite the fact that during the period we had COVID-19; we had a recession twice. But at the same time, the loans have not degenerated to the level of non-performance and that’s because we put all the levers in place to ensure that even when there’s a failure, there are things we can do with the customers to ensure that the loans did not go bad.
Realnews: For the past six years, how has NEXIM performed in terms of its primary assignment of boosting export trade for the country?
Bello: As a development financing institution, profitability is not our major focus. Yet, we must continue to be profitable because we sustain ourselves. We are measured on development and impact on foreign exchange because that’s our number one development responsibility to boost trade out of Nigeria. Thereby generating foreign exchange for the country. I’ll give you an example. When we came in, we did an analysis to see since NEXIM was set up in 1991, how much foreign exchange it had generated. It was shocking because it has been about 25 or 26 years after NEXIM had been set up. NEXIM had only generated $1.1 billion, and since we came, we’ve actually done as much as that in generating foreign exchange. We were reviewing what the bank had done. We have pinned the beneficiaries of the loans in this bank. You’ll not believe that in the list of top 100 exporters in Nigeria, which is published by the central bank every quarter, they’re only two customers of this bank there, and the bank was set up to finance exports.
In 2018, when we got our first funding, we targeted our reference point to be that top 100 exporters. When I tell you that I had engaged with the bank from the outside in 1991, we were bringing OLAM, which was a small company then to NEXIM to do what was called re-financing and re-discounting facility for OLAM. That was when NEXIM was set up and they were one of the first products NEXIM had. This was from outside in 1991 when I was in commercial banking. By the time we came, they had lost all the exporters. I’ll give you an example. When we started looking at the top 100 exporters as a reference point to whom we were going to finance to strengthen the balance sheet of the bank and also for reputational reasons, rather than going to unknown names to finance, the first thing you need to do is to get the known names into your bank, and when you get the unknown names, you also get their value chain. OLAM and Starlink are some of the biggest exporters out of Nigeria. They don’t gather all the commodities by themselves. They have suppliers and by definition of what an exporter is, being whom we can finance, we can also finance the value chain. So if company X supplies cocoa to Starlink, we can finance them, they’re indirect exporters. So by getting strong names, you’re strengthening your reputation. You’re also getting into the value chain of what they’re doing and along the value chain, you can also find the smaller SMEs that are supplying them. So, our preference is that if we’re going to be serious about NEXIM being a supporter of export, get the ones that are doing the exports and there is already a list from the central bank of all those doing the export; deepen their business by providing funds or replace their funds from those of commercial banks that lend at 26$% or 28%. We lend at 9%. So we reduce their cost of borrowing.
That’s how we have impacted exports and of course, in addition to the creation of foreign exchange and employment, we monitor how much the loans we give has generated employment and I think since 2019, we are somewhere around 12000 jobs created. It’s the report I get all the time.
Realnews: Reducing non-performing loans from 94% to 24% is quite enormous and a big achievement. When do you plan to reduce your 24% nonperforming loans to the globally accepted 5%, or is it going to hang there?
Bello: When you lend out money, you want to recover it. There are loans that a phone call or a threat will get the money. Those are the low-hanging ones. If someone took the money and decided they are not going to pay, that is willful default and when you take them to EFCC, they quickly pay back. Then there are those that the money has gone into something that has refused to come out. Maybe due to a bad decision and so on and the money has already gone. Those are the difficult ones and it becomes even more difficult when your collateral is not marketable or the documentation wasn’t complete. So that 24% that’s left is the most difficult that maybe we don’t have anything. We’ve found a lot of instances where the collaterals were either haphazardly done, they were not complete, and even situations where the collaterals were faked, meaning there is no collateral, or the documentation was not done properly. If I’m lending to you, I need your signatures on some things, and once that is not done, the loan is disbursed and it goes bad. So, those are the more difficult ones. But recovery is not the only way to drop that number. By the time you book more loans that are working, that number drops. Why? Because it’s a relationship of “What is your bad loan in absolute figure” and “What are your performing loans?” So when the denominator changes, it changes the ratio. Now, one of the things that I’ve always said is if you remember we found the balance sheet of the bank at about N63 billion. It’s a small balance sheet that was one of our saviors. So, by booking more loans, even if 94% of N60 billion is huge, you’re dropping that figure. It’s a two-way thing, while you’re recovering you’re also booking good loans and the figure keeps dropping. So, the bigger the balance sheet or our lending happens, that number will be dropping.
Realnews: Have you been able to charge anybody to court?
Bello: We’re in court with several persons.
Realnews: How many?
Bello: I can’t give you the actual figure now.
Realnews: Has there been any successful prosecution? Have you had a lot of that?
Bello: We’re in court. Some cases are civil, some are criminal. Most of the ones in court depend on the collateralization. Loans can be given with a legal mortgage, that’s collateral. Legal mortgage is when everything between us have been signed and there’s a deed of mortgage. By doing it, you have already given me the right to serve you loan and I don’t need any other reason.
Then there’s what is called an equitable mortgage, if I decide to liquidate the asset under an equitable mortgage, we may have to go to court. So where we have a civil case and we’re in court is usually about equitable mortgage or even a legal mortgage where when we put it to market, the owner will go to court to stop us, we’ve had several judgments in our favour and a few in favour of the borrowers, but those are the civil cases. The criminal cases are the ones that funny things were done to get the loans. We have cases of fake C of O; cases of people who’ll even give properties that belong to another person. They were a lot of other things that were done fraudulently, some by the customer, some by the people internally.
Realnews: What will you say having been in office for 6 years is the major and greatest achievements NEXIM have reached to boost the economy of Nigeria?
Bello: NEXIM is an export bank in addition to being an export credit agency, ECA. On the lending side, we’re now almost the lenders for exporters in the country and you can speak to the exporters. They will tell you that our funding is the lowest in the market at a 9% interest rate.
The total for all fees and everything is 9%, and also the foreign exchange it has generated. One of the few things is that while we do not discriminate to say we’re lending to Nigerians, we have empowered Nigerians. When I say that I mean, at some point in this country, the biggest non-oil exporters were either the Indians or the Lebanese. Yes, they’re operating in Nigeria but what happens with Nigerian exporters? So, one of the things we ensured as our strategic intent is that as we’re empowering other companies, also empower companies that are owned by Nigerians.
Today, I’ll tell you names like Starlink that we picked are in the top 100 and they’re the largest exporters of cocoa from Nigeria and it’s a company fully owned by a Nigerian. Today, they’ve bought off the biggest cocoa processing plant in Nigeria.
They have now moved into value addition. Before you came in, I had just sent out approval for a loan to a company called Plantation Industry, also another fully-owned Nigerian company that is processing cocoa in Akure. So, we can take from what we have done, the value we have added to exporters, both Nigerian-owned and non-Nigerian-owned. We have helped in boosting the export numbers out of Nigeria. Then there is also our responsibility of export trade facilitation. It’s not particularly lending but an initiative that will help in making trade out of Nigeria more efficient. Our project in NEXIM is the facilitation of a maritime logistics company that we have been promoting. It’s called Sealink. Of the 15 West African countries, only three of them are not coastal countries, but there is no shipping between us. That’s one of the reasons why there is no real trade between West African countries. If you have anything to supply to Ghana now, it has to trans-ship to Europe. Sealink was conceptualized to be a coastal maritime operation. But as we were doing it, we saw the need to even make it bigger than that because of our inability to move bulk cargo and also solid minerals, which you know are very heavy. We have also started charting and survey of the rivers. We have in-land ports, but we’re not using them. There’s an inland port in Onitsha and so on, but nobody is using them because the river is not charted. But we have now completed that and the World Maritime Authority has already endorsed the charting because no vessel will enter if it’s not charted. So, while that is not something that you can see and we can give you a number, that is one of our achievements. So, Sealink is a partnership between the public sector and the private sector because the private sector will be the one to provide the vessels. As of now, it’s just badges that can navigate the river, but they can transit on the high sea. Just before the former government handed over, that was when the charts were unveiled. It was unveiled by the federal government and was an initiative of NEXIM and with the partnership and collaboration of others, because the Nigerian Navy alone can’t chart and I must give it to them, their corporation was wonderful.
Realnews: That’s interesting. Has that been completed right now?
Bello: The charts are ready.
Realnews: When will vessels start along the charted rivers?
Bello: The coastal is going to be normal vessels that will navigate the route. Later, we need to have road transportation, rail transportation, and maritime transportation because trade without logistics can’t happen. As I said earlier, only three West African countries are not coastal. That is Mali, Burkina Faso and Niger, all others are coastal countries. Sealink is going to connect those ports. So, if we have cocoa, let’s say the Starlink cocoa plant needs cocoa from Ghana, it has to be a vessel that will bring it. You can’t transport it by road. If you transport it by road, by the time it gets here, it won’t be profitable anymore. So, it’s just to connect those ports that Sealink, by conception, started. But we have extended it to inland waters now because, from Kogi, you can evacuate iron ore, which is heavy. From the same Kogi or Anambra using Onitsha port, we have coal. Nigeria’s coal is one of the cleanest in the world.
Realnews: Is coal still being extracted in the country?
Bello: Yes, the only reason why it’s not exported is because of logistics, coal is very heavy, but in Kogi, they’re doing it because, Dangote’s Cement Plant uses coal, a customer of ours supplies coal to them. Ghana because of all their power plants use coal, but we can’t transport it there because there is no logistics. So Sealink is something that will be very useful.
Realnews: What is the gestation plan for the project?
Bello: We’re ready to start voyages on the waters. So, the request is how to do the Ajaokuta port.
The Ministry of Mines and Steel has given Ajaokuta port for that operation, but Ajaokuta River Port has not been maintained so we’re bringing it up to a usable state. We don’t own the company.
We are just promoting, providing infrastructure and navigating of the river. Despite the fact that the creation of Sealink was ours, we’ve brought in a consortium and that consortium is the owner of Burutu Deep Sea port. For instance, there’s the Onitsha Port and the Ajaokuta River Port.
They’re also other things we’re doing with the Nigerian Navy to create a striking area somewhere in Burutu too. In Delta state, that’s on the side of the public sector. On the side of the private sector, they’re also vessel owners, port operators and all come under a consortium that will facilitate the takeoff of the SEALINK project. We already have owners that have vessels waiting. On the side of customers, I’ll tell you that Dangote alone has committed up to two million tonnes of clinker for export to some of their plants in Cameroon, Ghana and Senegal. They export per annum a minimum of two million tonnes of clinker. Now they do it by road. By the time the project starts, it will be transported by vessels to the plants in Cameroon, Senegal and Ghana. There is so much that will happen when this thing comes on ground.
Realnews: When is it going to come on stream?
Bello: Well, if not for normal project delays, we would have even started. But we are hoping that by the end of the third quarter, we would do our first voyage. Now with the survey that has been done, there’s a ceramic company in Kogi State that has done one voyage to Onitsha but that’s their private one. But they used the charts by the Nigerian Navy to navigate.
Realnews: This projects, how much does it cost? Is it a very expensive one?
Bello: NEXIM has spent close a billion Naira on the Sealink project. We have had contributions in terms of grants from AFREXIMBANK, which was $450,000, AfDB initially had given us a grant of $300,000, all of which has gone into that. NEPC has also given us, although there are not directly for Sealink, but for the domestic export warehouses. They gave us N120 million. It’s immaterial how much was spent on it. What is important that has made this thing to happen, is first of all, the corporation between public agencies and the private sector.
Realnews: Congratulations. This is a big task you have achieved and it’s not easy. What has been the most difficult moment you’ve had trying to co-ordinate the affairs of NEXIM in the last six years?
Bello: Raising funding for the bank. That’s the most difficult and I’ll tell you why. Our sources of funding come from majorly government and the central bank. But as a bank, we should also be able to attract funding from other places, multilateral financing institutions and also other development financing institutions. We should be able to raise money from capital markets and so on. But the state of the financial condition of the bank makes that difficult. The financial condition of the bank in terms of getting to the financial criteria that other lenders will consider before lending money, is not in the right state right now. So we come back to the government and say “re-capitalize the bank”. Our contemporary ECA’s around the world, for instance, Saudi Arabia set up their ECA in 2021 with initial capital of $8bn, while NEXIM’s capital is N50 billion. What we did was to make a proposal to our shareholders – the Ministry of Finance and Central Bank Incorporated to take our capital to a $1 billion. So the outgone minister of finance approved it and they’re ready to put their own share of N400 million over a period of time, not immediately. But up till now, we haven’t gotten the approval of the central bank.
The first thing is not the central bank or the Ministry of Finance putting in the money. But the existing shareholders have to agree to raise the capital and our Act allows us to have other shareholders, but the existing shareholders have to allow that. They’re not against it. But we need their formal agreement. So if we know how much both are willing to put as additional equity, we can start exploring going to other finance institutions as new shareholders.
Realnews: What has been your most challenging moment?
Bello: Running a bank is a challenge, but to pick out one event to say that it’s the most challenging is almost impossible. Apart from dealing with some detractors, there’s really nothing out of the ordinary. If I were to single out something, it would be during the pandemic and aftermath of the pandemic, managing the outcome which for every business had been negative, because as it impacted us, it also impacted our own customers. So managing the situation so that business does not really suffer, I would say, was the most challenging moment.
Realnews: What has been your happiest moment since you started?
Bello: I think it was when we got our first funding for the bank. As I told you, the bank was insolvent and during my discussions with the central bank then, they wanted to let the bank just die. So, when we eventually agreed that they’ll do their intervention and we got the first funding, the funding was N50 billion and that meant that we would continue the operation. For me, I think that was my happiest moment.
Realnews: And now you’re making profits?
Bello: Yes, of course.
Realnews: How much profit did NEXIM make last year?
Bello: Just over N6 billion.
Realnews: So, this year, you’re going to make more profit?
Bello: Yes, our hope is that we will take it to at least N8 billion, all things being equal. But this is a year of change of government, a year of the election, and things slowed down. Also, do not forget that as an export-focused business, the floating of the Naira will affect us not negatively. It should affect us positively for both us and our customers. The technical devaluation of the Naira should affect us positively because what we generate in foreign exchange will now become more in Naira. Don’t forget that cost has also gone up, but we believe we are good managers. We should be able to take advantage of that situation.
Realnews: What major legacy do you want to leave for NEXIM?
Bello: I think the legacy I want to leave should be beyond NEXIM
Realnews: What do you mean by “beyond NEXIM”?
Bello: As a development financing institution, what we’re set up for is to impact the economy, not only about NEXIM. As much as we’ve tried to make NEXIM a role model in its contribution as a development financing institution, the legacy I want to leave is a positive impact in the areas where we are supposed to grow, the go-to-place for exporters, and the outcome of our action impacting heavily on the diversification of the economy. I want when 10 years down the line, you say the turnaround of NEXIM and its positive impact on the economy started during the period of this person. I want a situation where in the next 10 years, NEXIM becomes the NNPC of non-oil exports and it started during my tenure.
Realnews: That’s very good. How do you see the whole of Nigeria’s economy as it is now?
Bello: Let’s not talk about the past. Let’s talk about the future.
The elephant in the room regarding what was holding down the economy of Nigeria. We have two issues and I think I must commend the boldness of the President on first of all removing the fuel subsidy. It’s something the economy could not afford anymore. Even in the past we could not afford it. The second, of course, is the floating of the Naira. Let us get the real value of the Naira. I think that was what was holding the development of the Nigerian economy, and the boldness of the current president in dealing with it irrespective of the consequences, but it is for the future.
But I must tell you, even in the last two to three weeks, NEXIM alone can see what the international community is seeing with this action because we are now getting interest from funders.
For instance, International Finance Corporation, IFC, and other multilateral institutions. IFC told me that their target for Nigeria has already been doubled because everybody can see that the economy has been set up now to blossom.
So I know both local and international investors are going to take advantage of the direction that the government is going and after the lull that will happen because of massive changes due to decisions that are taken, for the economy as a whole, it’s going to be positive. But for us, it’s going to be negative for some time. I see it like a v-shaped curve.
When things drop, at the right time, they’ll pick up immediately because that positivity in the economy is going to trickle down to individual businesses and persons. I see potential massive growth in the economy.
Realnews: How is it going to affect the exports? Is it going to make the exports boom or encourage more imports?
Bello: Speaker; It’s going to make the exports boom and don’t think it will encourage more imports.
The general behaviour of Nigeria is that if no intervention is taken, import is not going to change, that’s from behaviour, unless specific things are done to discourage import, and those specific things include import substitution, growing the industrial base of the country and then manning our borders properly.
On the other hand, what order opportunities are there to boost export. Africa has just been opened by the signing of AFCFTA, by the operationalization which is happening now, AFCFTA is going to become an opportunity for a country like Nigeria because of several reasons; strategic location geographically, to be the cluster for West Africa into Central Africa, two is that the industrial development of Nigeria is ahead of the region so more focus on the industrialization of the country is going to put us at even a better position to be the industrial cluster for West Africa, the ease of doing business is going to be very key for us to attract the investments that will bring development of the industrial sector being of West Africa and Central Africa because of our location, because of our market, even for domestic consumption, we have a very huge market, for me I think opening of the economy by floating the naira, by removing subsidy, by making other efforts to make Nigerian business environment conducive for both domestic and international investment.
By estimate, there is already more than around 12 and 18 billion dollars that is trade out of Nigeria that is informal, efforts should be made to formalize that trade, that mean there are trade routes already into Africa, effort should be focused on making those trade routes formal and it will multiply the value that we are getting from exports. I just see opportunities, I just possibilities, I see Nigeria taking its rightful place in its economic growth and activity.
A.
– July 30, 2023 @ 11:05 GMT |
Tags: Abba Bello Afreximbank Maureen Chigbo Nexim Starlink
