The NEXIM Bank I Met – Robert Orya

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Robert Orya, managing director, Nigeria Export Import, NEXIM, Bank, believes that he is the most troubled chief executive in Nigeria because of the relentless battle he has waged to rescue the soul of NEXIM from bad debts and transformed it from a loss to a profited oriented organisation. NEXIM Bank now pays dividends to shareholders after about six years. In the interview with Maureen Chigbo, recently in Morocco, Marrakech, Orya speaks about his vision to make NEXIM the leading export development bank in Africa if he gets the required level of capitalisation, and how Nigeria can overcomes the problems associated with the menace of crude oil theft in the country, illicit mining activities and Nigeria’s inability to manage its success among other things. Excerpts: 

Realnews: What has been happening to NEXIM since you became the overall boss?
Orya:  Basically, you want to know what has happened to NEXIM for the past four years. When I came in 2009, the bank was not in a very good state at all. When I got in, the bank had high non performing accounts. The bank had no re-capitalisation scheme. The capital that we had was seriously impaired. We had a staff strength that was over bloated. We had lost our relationship with most of the export credit agencies because of poor performance. Let me say that the operational and financial performance of the bank had detorirated to very alarming levels. And what we needed to do was how to chart a five-year strategic plan for the bank. The primary mandate of NEXIM is to diversify the economy of Nigeria and move away from oil. So we have now focused on what kind of intervention do we do on non-oil that can generate jobs for Nigerians  for a change and can support  exports? Looking at the paucity of funds we had, it was not possible for us to intervene in all sectors. So, we decided to look at those sectors that have more potentials in terms of job creation, generation for foreign exchange for Nigeria,  creating wealth, alleviating poverty  and unlocking some of the potentials. So we basically looked at manufacturing, agro processing because we believe that gone are those days when Africans were exporting raw commodities. A time has come when we need to add value. In the process of value addition, we create jobs for our people. We are also looking at mining, you know that mining is an area that has huge potentials that nobody has been able to even look at. Like we are saying at the conference, we have 34 solid minerals in commercial quantities. And yet as we are speaking now, the solid minerals are contributing less than one percent to our GDP. Then we also look at the services and in the services sub-sector, we are looking at financing hospitality/tourism because it is a huge industry. We are looking at financing transportation both air, road and sea. We are looking at financing the creative/entertainment industry. We also tried to look at the markets that Nigerian exporters are serving. Were they serving the right markets? Were we in markets that we have competitive advantage? No, we didn’t have that. Of course, you know that when it comes to the export of non-oil, our major market is Europe but gradually we are moving away from there.

Realnews: Moving away from there to where?
Robert OryaOrya: We are moving away from Europe to Asian countries because the demand there have shrunk because of the debt crisis, financial crisis that are going on.  Of course, the market is still there but the level of demand that we expect is no longer there. And then we also need to do a lot of intra-African trade. That is another area that we need to pay attention to. Let’s trade among ourselves. What I discovered when I got into  NEXIM was that in most of the regions or developed economies  – whether you are talking about America, Europe, Malaysia, China – they will first deepen  the regional trade. And they segregated the regional trade into two. The regional trade was their traditional market and anything outside that was their none traditional market. But they will make conscious effort to ensure that they trade amongst  themselves. The exporters among the region understand the technicalities of regional trade, that their important potentials are unlocked so that when they are venturing out of their traditional market, that is out of their region, they now expect the countries that make up the region  to follow the exporters with trade dedicated instruments like credit insurance to mitigate them against political risks, none payment and all that so that they can create easy access for them. But what we find in Nigeria was the reverse. You find out that Nigerians left the West African region or even the African continent and were competing in markets that they do not have any competitive advantage. We did not have the new technology or the modern technology that will make us to produce goods that will make us very competitive in this market. So, you find a lot of people were making efforts but these efforts will not have the capacity to meet the export order. So they had a lot of trade dispute here and there. So, at the end of the day, even though we are making effort  our volume of trade was not increasing. So, we were just dancing around. So, when I got in, I said because export is a bit technical, we needed to pull back most of the exporters to West Africa. Why don’t we begin to trade amongst ourselves? And for you to do that, you know the mentality of the average Nigerian, he wants imported or foreign things. I needed to come up with a sweetener to find ways of asking them to come back and trade within the sub region. One of the things I did was to develop a product. Apart from bring them back, there were two other things that we needed to do. There is a lot of informal trade in Nigeria. If you get to Kano, Seme border, Calabar, Maiduguri, there is a lot of trade going on but this trade is not captured. When you talk about the most industrialised country in Africa, you are talking about South Africa because the level of informal trade in South African economy is very insignificant. In Nigeria, it is almost 50 – 50. It is only when you have data that you can rate anything. If you don’t have data on which basis are you going to rate, plan? One of the things I saw was that for us to move and have better planning to understand what I am doing, I needed to develop a product because most of the people that are trading with the neighbouring countries are small and medium scale enterprises. You find somebody that has been trading at between Seme border and Benin Republic for the past 20 years does not have a sheet of paper. So, the number one thing was to formalize the trade.  These people go to the border, sell their goods, put their cash in their pockets and went back. The second one was to deepen the payment system. We need to encourage this people to use international accepted methods of payment because in the Nigerian economy, we have got to a level that we should be able to begin to give the buyer credit facilities to other countries so that we can make our exports more competitive. For instance,  if you are producing a product and you want to sell to somebody in Ghana, you have other competing suppliers. But because you have a credit policy brand that can back you up, the person that wants to buy your goods in Ghana does not have money, we should be able to give that person in Ghana money to buy your product.  That is what all the export credit agencies must do. And the only way you can do that is for you to do it through the banking channel so, we need to build that framework from day one because by 2015, we are expecting that given additional capitalisation, we should begin to make our export more competitive by giving this buyer credit facilities. Even if it is $2 million, $3 million, we should begin to give them at least within the ECOWAS sub region. So we launched that product. I was less than six months old when I developed that. It was launched sometime in March/April 2010. We are massively lending through that, encouraging people to come back to the West African sub-region.

Realnews: In effect, you have succeeded in bringing people in the informal sector into the formal sector
Orya:  Yes. Again, I have been able to bring back people, some people that all their effort was geared towards exporting outside the continent. But because of the bottlenecks they encountered, they couldn’t do that. But why we are fighting to export to Europe, America, all the other economies were coming down to West Africa, coming down to Africa because this is where the demand is. And if you have to recall the global financial crisis that we had in 2007/2008, you know it is only Africa and some part of Asia that is stimulating the demand for the world economy to recover. There is no demand in Europe, America. So why do we leave all the opportunities that we have here and go to places that the market is already saturated. That was the kind of thing we were doing on the basis of creating the market. On the basis of financial performance, we just said look, we don’t get any money from the federation account. The money we get is equity. We have two shareholders – Central Bank and federal ministry of finance. The money they give us is equity. So, we have an obligation to make a return on this money. Before I got in there the bank was not making any profit at all.

Realnews: Really. And now?
Orya: The first 12 months, I made an audited profit of N189 million that is for 2010. I have paid dividends to the Central Bank and the federal ministry of finance. The last time that dividends were paid in that bank was 2002. We have just finished our accounts for 2011 and we are going to pay dividends. For 2012, we have gotten a provisional figure which I will not mention but it is extremely attractive.

Realnews: How much was the dividend you paid to the Central Bank and federal ministry of finance? And how did you make the money to pay the dividends when the bank last paid dividends in 2002?
Orya: What happened was that when I came in all the leakages that were there I blocked them.

Realnews: What are these leakages?
Orya: As a bank, we talk of operational leakages. The people there did not have a very good internal control measures. Either it was deliberate or lack of knowledge, I didn’t know. But what I wanted to do was to ensure that all internal control measures were put in place. If there were leakages, they were blocked. And then, we went on aggressively to recover the bad debts. These are debts that were provisioned 100 percent in line with the prudential guideline, and you know that such debts, if you recover them, they go straight to your bottomline. So, we went out very aggressively to recover these debts. And we did recover enough of them, and then some of the leakages, if you are not making profit, then cut your losses.  Some of the losses that were there, we cut them and also restructured the former resources base that I met. Because they had significant skill gaps I needed to bring in people that were very experienced, highly professional, pay them a little higher but with small number that can deliver. So we were able to do that.

Realnews: How much debt was the bank owed and how much did you recover?
Orya: What I met at that time was a total non-performing portfolio of  N14.6 billion, N10.03 billion was classified lost in line with the prudential guidelines. Upto this point, we were able to recover close to  N2 billion because it is a lot of challenge. Recovery or an accelerated recovery of a debt is  dependent on the way it was packaged.

Realnews: For you to have made the kind of changes and progress you have recorded, you must have gotten rid of a lot of entrenched interest groups. How did you survive it?
Orya: In any transformation, it has not been easy. I think I am the most troubled chief executive in Nigeria.  (laughter)

Realnews:  (laughing) Your own didn’t make the print like the Arumah Oteh (SEC DG) …
Robert OryaOrya: Wait now, because the National Assembly was not involved. And because it did not make the print but I believe that I am the most truamatised chief executive in Nigeria. There is no where I have not gone to. But you know these are some of the hazards you have to face when you are transforming, when you want to be a change agent. But it is normal because some people have been in their comfort zone and they don’t want to disturb that zone. Because we are doing something completely different from what they know and, may be, they have been profiting from that particular system and they believe that everything about that place is normalcy. Any change will be resisted. But I am happy that we have been able to do that now. For three years, I have been there, it has been consistent profitability. We have been able to support Nigerian exporters (I don’t have the figures here). We have given over N20 billion. We have been able to give risk bearing facilities that is guaranteed for close to $30 million. We have been able to open up communication, correspondence with a lot of export credit agencies that did not even want to hear whether Nigeria has a trade policy bank. It is not just establishing some form of collaboration, but we have been able to make our balance sheet very attractive even though it is small. We are leveraging on our balance sheet to attract commercial lines of credit from some of these EXIM banks. We have a line of credit from EXIM, India, AFRIEXIM, ECOWAS Bank of Investment and Development and we are negotiating other ones not on the back of a sovereign guarantee. This is purely on our own balance sheet. It is very small but attractive and that is the only way we can make ourselves relevant if we are not getting enough capitalization the way it should be, we should be able to attract investment capital so that we can use that to create a lot of jobs.  So, in terms of working with other export credit agencies, we are working closely with the US EXIM bank. Of course, they are very desirous of doing a lot things in Nigeria. You know, the chairman and some of the top management staff of US EXIM Bank were in Nigeria in 2011, and we discussed and what we agreed was that the balance of trade between Nigeria and the US is tilted to oil and we are emphasising non-oil because as at that time, it was just two percent of the total trade that we have with the US. Only two percent was non-oil, the rest was in oil. So, we felt that we needed to enhance the volume of non-oil export to them. They too are desirous of doing that and we have sent a lot of partner projects to them and we are still negotiating. In terms of re-engineering of processes, we had to re-engineer the whole processes, the credit policies. One of the things that we discovered which gave rise to this high level of non performing accounts that we inherited, was that there are two key pillars that you find in any modern organization and they were lacking in NEXIM. That is, there was no robust risk management framework. And also, adherence to corporate governance was also an issue. If you don’t have these two key pillars, it will be very difficult for you, more so, for a bank to operate very efficiently. So we ensured that these two key pillars are firmly entrenched. We have a robust risk management framework now, a good corporate governance and then the asset creation process has been tightened. You cannot be 100 percent sure of the loans you are going to give. A loan can go bad not by the way it was processed but by environmental or sometimes you call “force majeure.” But the credit creation processes has been strengthened in NEXIM bank, as much as possible, in a very professional approach. We try to make the required customer documentation as short as possible. When I came in I tried to set up a business  advisory service because a lot of people, most of them, are SMEs. They don’t even know how to put their application in a bankable form that will be acceptable. And because they are getting into export, even if they are not getting money from NEXIM, assist them to know how to do their papers properly. If they are able to get money from a commercial bank or any other bank, it is still to my own credit because my own mandate is to see how you can enhance the volume of export whether it comes from NEXIM or any other bank, the inflow will come to the balance sheet of Nigeria. So we set up a business advisory unit to help people to put up the papers properly. And then capacity is also an issue because if give somebody money and he does not have the capacity, there is no way he can manage that money. So we try to enhance the capacity of some of these SMEs because largely that is what we are financing.

Realnews: You talked about the manufacturing sector which is also part of your mandate.  In Nigeria, the sector is suffering because of high cost of production. They are also suffering from dumping of cheap manufactured product into the country.  How have you been able to help them to overcome some of the challenges?
Orya: Financing manufacturing in Nigeria for now is a challenge. But it is a gradual process because of the infrastructural bottlenecks that we have. We have issues of power which is on the front burner. We have issues of road. I think basically power is number one. Labour is relatively cheap. So, when you look at the factors of production, power comes first, it has actually not been easy. Like you rightly mentioned, there are some products that, because we have costs that are beyond us, some of the imported products are even cheaper, their selling price is even lower than our cost of production. It is a challenge. But we are happy that the government is trying to address the issue of power and roads. We are focusing on manufacturing but the rate at which people are accessing funding is retarded because of this high cost. You have a lot of SME promoters that are very desirous, very enthusiastic but by the time you sit down with them and you give them your own projections, this is the way we look at it. Of course, while will you be making effort but at the end have nothing to show for it. But we are not giving up. It is a gradual process. What the government is doing is highly commendable.

Realnews: The non-oil sector is also part of your mandate.
Orya: That is a major mandate

Realnews: It is a major mandate.  What is happening to the sector especially with regards to solid minerals and all the illegal mining going on in the North?
Orya: I told you that there are four sectors we are focusing on – manufacturing, solid minerals, agro processing and services. What we have discovered in solid minerals is that it is an area that has huge potentials. It dots everywhere not only in the North. In almost all the states of the federation, you have solid minerals except that you have concentration in the Northern part of the country. And because of the activities of the illegal miners which we call the artisans, we decided that despite the fact that we don’t have so much money, because that is a highly capital intensive industry. So looking at the core level of capitalisation, we cannot intervene meaningfully but we said look, we must start something. We must begin to engage the promoters in that sector. What we decided was to bring in the miners’ association of Nigeria because we have small, small association. So we said that the only way to deal with the artisan miners is to deal with their group to encourage them to come into cooperatives, associations, so that you can have a more structured way of talking to them. We started doing that. The miners’ association has been working with us and we have started funding projects. As we speak now, we have given over N2 billion to the mining sector. The association is for us to sit down with them and let them understand that there is a structured way of getting money. If you believe that you are alone and you cannot meet the bank requirement, come as a cooperative. Let’s begin to talk to you because most of them do not understand what they are doing.  So, you need to create that platform for them to come, sit down with them, let them understand what they are doing, the implication and how to achieve their potentials. Let them understand that if I do this in a very structured manner and not somebody coming and giving me money and stealing something that is mine and giving somebody who is outside consciously. That has been done. The miners’ association, we have been able to create a lot of awareness with them. We are working closely now. They are bringing their members together. We didn’t stop there. We have a lot of partnering projects in the mining sector which we have financed and we are still processing.

Realnews:  Can you talk about the Chinese that are doing illegal mining in Nigeria. Is NEXIM supposed to do anything thing to check them?
Robert OryaOrya: No, that is not actually the mandate of NEXIM. What NEXIM will do is the structuring of the industry. For now, the industry is not structured. By the time we structure it gradually this people will go. But I think the ministry in charge of that is doing a great work. I remember about three months ago, the minister was distributing some four wheel drives, vehicles basically to checkmate the activities of illegal miners throughout the country. I Think he too understands that these people are enemies of the economy and they need to be checked. But what we (NEXIM) should be doing is to continuously finance those projects that are within our own capability to finance. You know a lot has happened in that industry both in terms of the regulatory framework which has been done. I think the minister is serious and he knows what he is doing. If the ministry is tackling it at their own end and we are tackling it at our own end trying to structure and finance projects  that are coming from that industry, I believe that at the end of the day, we will be able to clean up the artisans.

Realnews: How do you see the environmental impact of the illegal mining?
Orya: One of the things that we do is to ensure that in any project we are financing, you must come up with environmental impact analysis. How do you want to handle it? We are beginning to witness high rate of deaths. You know the issue of lead poisoning in Zamfara. It is because they don’t even know. But if somebody has come in a very structured way, the person would have understood the implication  of what he was doing and would have taken  measures. What we have done is that for us to intervene, you must come up with an environment assessment report as our credit  appraisal process before we give the money. We must be convinced that it is not something that will cause environmental harzard.

Realnews: Nigeria is losing a lot of revenue through crude oil theft. Is it a concern to you as the NEXIM boss?
Orya: Of course, it is a concern to everybody including you. That is the golden egg in Nigeria. That is one of the issues we are trying to do in NEXIM to diversify so that we don’t put all our hopes on one product. I think the government is doing something. The government set up a committee recently to look at how this crude oil theft can be curbed, It is a concern both for the government and the citizen. Measures are being taken to address that.

Realnews: It appears the problem is now intractable and increasing. Why?
Orya: You know, an activity that has so much money. When people are profiting from an illicit trade for that matter and you want to stop it and you want to stop because they have accumulated so much money. It is not a one-day thing. It has to be gradual. As we keep saying, if you fight corruption in Nigeria corruption will fight you. Sometimes, it will fight you and bring you down because the people have the money and they are prepared to go the extra mile. So, it is something that has to be handled carefully and very tactically. It is not a one day fight.

Realnews: Do you think Nigeria will win the fight against crude oil theft?
Orya: Nigeria will win the fight. I don’t think that the thieves are up to 200. And I believe that there is no way they can defeat a 160 million people. They are powerful and that is why I said it is just a matter of time and it will be a thing of the past.

Realnews: Do you think that the IOCs are part of this crude oil theft?
Orya: I wouldn’t know. But what would be there reason for stealing our oil?

Realnews: Because over time, we don’t even know how much oil we are producing in the country. There is the belief that they take out more oil that is reportedly produced. And those they have been using to siphon our oil have now turned round to be engaged in the business for themselves?
Orya: I am not very knowledgeable in what happens there. But I believe that if you know that somebody is stealing your own thing and you are aware of it, you take measures to block it.

Realnews: Where do you want to take NEXIM to?
Orya: I have a very big vision for NEXIM looking at the huge potentials that we have and given the necessary support that is in terms of giving me the required capitalisation. I want NEXIM to be the leading export development Bank in Africa. I have set  myself a target of 2015 so that I will be the leader but the other banks too, they are not waiting for me. They are also moving. But we will get there. We are talking to our shareholders. They have been very, very supportive. We are talking to them looking at the prospect of trade growth in Africa and looking at some other things we are doing especially in West Africa. The volume of trade has not been increasing because we have a lot of non-tariff barriers and we needed to do these and that. I think they are listening. Once we are able to get more re-capitalisation, every other thing is on the ground for us to move. And in the next three – four years, NEXIM should be the leading export development bank in Africa?

Realnews: The informal sector is said to be the engine of Nigeria’s economy and the reason why the economy of the country has not collapsed. Do you agree with the view that the informal sector is what is holding the Nigerian economy together?
Orya: I have spoken about the informal sector. What will make the economy collapse if the trade is formalised if I may ask? Because that is the time that you need data, you can plan better and appreciate what you are doing. But if you are just groping in the dark, you don’t have the data, on the basis of that, you cannot plan properly. It is more difficult for you to succeed as a nation. So I don’t quite agree with that notion. Of course, the formal sector is there and the potentials that we have in the economy are huge. The problem with us in Nigeria is how to manage success. We are too successful and our problem is how do we manage success? If you discount oil, just go and sleep and say that Nigeria does not have oil, are we not going to survive as a nation? We will survive. People have forgotten about agriculture. Agriculture is the major driver of our GDP. Oil is not even number two as the driver of our GDP. Oil is number three. Number one is agriculture, number two is wholesale and retail. Oil is even number three. How many people are being employed in the oil sector? What is the contribution of oil to our GDP? What has happened in Nigeria is that we are so successful and we don’t know how to manage success. Because if you live only agriculture, it alone can sustain Nigeria. You get to Israel where they have rains for about three or six months but you have food throughout the year. And they even have surplus to export. You get to the North, they have so many dams. But everybody is looking for oil. If yu get to Benue, the food basket, you have so much commodities (mango, orange, tomato) rotting away. We have small efficient processing plants either from Asia, India or from some of these countries that you can bring for about N20 million  – N40 million. Most Nigerians are not interested in being an entrepreneur and find a way of processing these huge commodities that are wasting away. We should be able to get ourselves out of that mentality and know that this oil will finish one day. Or we have that oil and there will be no market. We Nigerians should begin to think of how do we rely less on oil. We must diversify, use the money from hydrocarbon to invest in secondary industries – agro processing, mining, tourism (a hotel employs more people than any company you can think off. Some economies in the world rely on service. There are other ways we can make money and the market is there. Our market domestically is enough to absorb whatever thing we produce.

Realnews: Do you have any gender programme because most women entrepreneurs do not have access to funding from banks?
Orya: We don’t have any specific programme to address them because of the market that we are serving. But we understand that women need to be empowered, engaged in policy making and business. Promoters that are women who come to us we give them so much attention. We go the extra mile to ensure that their desire comes to fruition. But because of the nature of the market we are serving, we don’t go down to the micro level because at the end of the day, we are looking for people that have knowledge to be able to export because that is our primary mandate. You have other DFIs that are concerned with getting into local communities and coming up with programmes that can affect the rural women. As to whether we are gender sensitive, yes, in NEXIM we are. We have about 16 departments in NEXIM and women head about nine. We have more women heads of departments. That is to say that we recognize the importance and integration of women into policy and decision-making and we are taking it very seriously because we believe that once you have integrated a woman, you have integrated a family which is the fabric of the society.

— Aug. 19, 2013 @ 01:00 GMT

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