With its strategic acquisition of other regional financial entities, Access Bank is positioning to play major roles in the new Africa trade partnership exemplified by the Africa Continental Free Trade Area Agreement, writes Group Business Editor, SIMEON EBULU
Banks and major financial institutions in Africa are looking up to take advantage of the benefits that the Africa Continental Free Trade Area (AfCFTA) agreement, offers.
The strategy is to position the financial entity to take advantage of expected borderless trade and businesses that await those that are prepared to harness the over $3.4trillion Gross Domestic Product (GDP) from 1.3 billion people across 55 countries.
Access Bank, in a strategic move, has recently gone ahead to acquire a third bank in eight months, taking over South Africa’s Grobank. Before the South African acquisition, it took over Kenya’s Transnational Bank in July and Zambia-based Cavmont Bank in January.
It paid about $60 million to purchase a controlling interest in South Africa’s 74-year-old Grobank, its CEO said last week, signalling the culmination of the tier 1 lender’s aspiration to foray into Africa’s most industrialised nation and tap its market.
The move makes it Nigeria’s first bank to do so, with the bank ploughing in both equity and debt in Grobank as part of the grand plan to explore trade banking deals on its way to becoming “Africa’s Gateway to the World”, Managing Director, Herbert Wigwe told CNBC Africa.
He said: “We have a full retail banking licence in South Africa. We will pursue a wholesale banking franchise. We will pursue trade finance,” saying Access Bank hopes to leverage the African Continental Free Trade Area (ACFTA) agreement to enter Morocco, Algeria, Egypt, Ivory Coast, Senegal, Angola, Namibia and Ethiopia – in exploring the opportunities of the AfCTA that came into force January.
Wigwe observed at a virtual investment forum last week, that the lender will utilise the fewer trade restrictions, removal of a couple of regulatory bottlenecks and other trade liberalisation features that the AfCFTA offers in tapping value from some economies of high potential on the continent.
In the same manner, banks in Nigeria are stepping up efforts to create new ways of bolstering earnings beyond its shores as a buffer to an economic downturn that has triggered a fall in government bond yields and accelerated the incidence of restructured loan, helped by the pandemic. In this continental financial services outreach, Access Bank seemed to have jump-started the race.
”We have a full retail banking licence in South Africa. We will pursue a wholesale banking franchise. We will pursue trade finance,” Wigwe said, adding that Access Bank would also accomplish an expansion plan outside Africa by setting up representative offices in China, India and Lebanon, using its London operation as an “anchor for growth”.
He said through this new vision, Access Bank will create new product revenues without taking additional risk for the enterprise, “ensuring diversification of earnings and support outside of Africa expansion”.
The AfCTA bloc aspires to speed up a robust intra-continental trade by removing cross-border tariffs from 90 per cent of goods, ease the movement of capital and people, stimulate investment and ultimately achieve an Africa-wide customs union.
It is projected to record a consolidated gross domestic product of $2.5 trillion when it becomes fully operational in 2030.
Access Bank said in a note to the Nigerian Stock Exchange in September last year, that it planned to venture into the South African market while consolidating its presence in Mozambique.
The bank’s foray into the African continental shelf, is in a sense a continuation and extension of its earlier strategic move with its formal merger with mid-tier rival Diamond Bank Plc in April 2019, following due regulatory approval. It acquired all the assets and liabilities of the defunct banking entity, thus positioning Access Bank to pursue recovery of all outstanding debts by various debtors.
But recovery of Non-Performing Loans (NPLs) has become a headache to the bank somewhat. But given the bank’s stern focus and governance vision, it is going all out to recover such errant loans.
NPLs are defined as borrowed money for which the debtors have not made scheduled payments (principal or interest) for at least 90 days. NPLs are a burden for both the lender and borrower. They trap valuable collateral for borrowers and make it more difficult for them to obtain needed funds for investment.
For lenders, the cost covers time for debt recovery and the need to make greater loan provisioning which reduces profitability and capital resources for lending.
Looking at the big picture, the identification of determinants of Non-Performing Loans (NPLs) and their consequences on the macro-economy is definitely necessary for comparatively small open economies in the global village, such as Nigeria, where banks are the key sources of finance for business activities in the critical sectors.
To carry through with this legitimate move to recover all the outstanding loans, Access Bank has engaged a law firm, Kunle Ogunba & Associates, as the Counsel/Receiver/Manager to recover the loans obtained by some of its debtors.
Clearly, deploying corporate filibustering or subterfuge to frustrate the debt recovery efforts by Access, will negatively impact the critical banking sector and defeat the essence of granting such facilities to aid business growth.
For Access Bank, the lender in this focus, it is a costly project, as it is with other lenders. The cost covers time for debt recovery and the need to make greater loan provisioning, which reduces profitability and capital resources for lending.
It could be recalled that the rested Diamond Bank Plc went under because of the recalcitrance of borrowers, especially a big petroleum sector player. The defunct Diamond Bank considerably aided many businessmen from the Southeast. This particular debt was part of the huge debt overhang that aided the sinking of defunct Diamond Bank.Today, for that region, it is a collective loss.
It is highly unconscionable to borrow depositors’ money from a bank, to, ostensibly, enhance business growth but only to conceive strategies to evade repayment on the terms agreed.
But a fact that many don’t know is that Access Bank that acquired Diamond Bank takes no prisoners. It is a strict, disciplined organisation and top industry player and have deployed all requisite legal means to recover what is due to it while continuing on its bold continental march.
For many lawyers in insolvency practice, these are interesting times. Although there is adequate provisioning for these loans, the rise in NPLs remains a significant drag on effective financial intermediation in Nigeria.
While filibustering maybe a useful strategy used to delay, divert and stifle a measure or process from being brought to conclusion in the political arena – in the feisty world of corporate governance, this nimble species of obfuscation is a forlorn exercise.
The emerging consensus of informed banking sector analysts and gurus is that it is highly unconscionable and immoral to borrow depositors’ money from a bank to ostensibly enhance business growth only to conceive strategies to evade repayment on the terms agreed.
