Early last February, Henry Semenitari was barely one month
old on his new position as CEO of Unity Bank plc, when the Central Bank
of Nigeria (CBN) announced another hike in the Cash Reserve Ratio (CRR)
for the second time in less than six months.
The February hike pushed the requirement for CRR from 50
to 75 percent. The last hike was in August of 2013. With Nigeria’s
economy being public- rather than private sector-driven, many banks in
Nigeria have come to depend heavily on public sector deposits for their
liquidity base showing.
The hike has the potential of exposing the true colour of
some Nigerian banks that, because of their access to cheap and easy
money from the public sector, make minimal contributions to the growth
of the real sector and yet continue to declare huge profits every year.
Such increase in CRR is bound to reduce access to such
funds and force banks to become innovative both in mobilising savings
and increasing lending. In addition, it will reduce the inclination for
insider lending which contributed significantly to non-performing loans
of some of the banks in recent years.
Cash Reserve Ratio (CRR) is a specified minimum fraction
of the total deposits of customers, which commercial banks have to hold
as reserves with the Central Bank of Nigeria or whatever country for
that matter. And as is the case with many of Nigeria’s banks, the
largest customer deposits usually come from state governments and their
agencies.
The simple argument of the CBN leadership is that it does
not make economic sense for the government to borrow over N2trn from the
banks, while its agencies have over N1.3trn sitting interest-free in
the same banking industry. To correct the anomaly, the Central Bank
increased the CRR for public deposits to 75 percent hoping that this
will stir the banks to go out and chase deposits, which they will have
to advance as loans if they are to make any profits on such deposits.
It worries the apex bank and industry watchers alike that
while banks had access to cheap public sector funds, they tended to
focus on lending to government, general commerce and importation, paying
less attention to crucial productive sectors such as agriculture,
manufacturing and SMEs.
But this policy did not come to the new CEO of Unity Bank as a surprise. He saw it coming and got prepared.
Asked in a recent newspaper interview about what his
challenges are in the new position, he identified the task of transiting
his bank from a “high public-sector –driven bank to a private-sector
driven”. Truly, Unity Bank, which was a product of the largest merger of
banks in Nigeria’s history, was forged by fusing nine banks into one in
2005 with the biggest bank in that merger being the Bank of the
North—historically the bank of the state governments of the entire
Northern Nigeria.
Bank of the North has enjoyed the patronage of keeping the
huge public deposits of the odd 19 Northern state governments for
several years. It is a legacy that the CBN is now challenging with
stricter regulations, including use of the CRR tool. It is also a legacy
that Semenitari is prepared to face and convert into strength. And his
chief tool for achieving this is robust retail banking service.
He has already convinced himself that massive government
businesses “have become unattractive, both for regulation and for our
balance sheet.” So how does this new CEO of the seventh largest bank by
spread (locations) intend to wean his bank from relying on public sector
deposits?
Retail banking seems to be the gospel Semenitari chooses
to preach. He is bringing to Unity Bank 22 years’ solid experience in
the banking industry with a recognised strengthens in business process
re-engineering and design. His specialisation is in strategic process
enterprise management and integration of business process models with
Information Communication Technology (ICT) to drive business at product
and strategic business unit levels.
Retail banking refers to the division of a bank that deals
directly with retail customers. It is also known as consumer banking or
personal banking. It is the visible face of banking to the general
public, with bank branches located in abundance in most major cities.
And if the strength of retail banking is measured by the abundance of
its branches, then Unity Bank, with excess of 240 branches, has such
strength in abundance.
And this is the strength Semenitari saw in his bank and
wants to leverage on. He has three major strategies to push the retail
banking service offering.
First, the main derivative is leveraging on Unity Bank’s very strong network across the country totalling over 240 branches.
Second is agriculture. With branches in most remote
corners of the country, no bank in the country is better-located and
situated within the agrarian belt of the country than Unity Bank. From
where I came from one can find Unity Bank branch at Chiromawa, amidst
the rural tomato and rice growers of Kura and Garun
Malam Local
Government area councils. Few meters away, Dangote is now setting up a
tomato manufacturing plant.
Thirdly and closely related to agriculture, is the
promotion of the rural economy through SMEs, which provide the gateway
to middle market businesses and in fact the main driver of the large
business in Nigeria.
In short, Semenitari’s vision is to make the Unity
Bank a retail bank of choice in the next five years.
With a vision set on retail banking service excellence and
given the strategies outlined by Unity Bank now under Semenitari and
the supporting human and technological capital he is willing to unlock
and deploy, in few years the bank will be a model for others to emulate
in Nigeria’s banking industry.
And the starting point obviously is raising the bank’s
capital from its current N50 bn base to see to its implementation.
Already, the capital market is awash with discussions on the forthcoming
share capital issue by Unity Bank plc.
Retail and commercial banking services are of critical
importance to the domestic and global economies. Retail banking brings
in the customer deposits that largely enable banks to make loans to
their retail and business customers.
This concept, which Semenitari is preaching like a high
priest, is what will, more sustainably, correct today’s anomaly where
banks in the country are not lending to the most productive sector as
they should, more than using the CRR tool. And identifying agriculture,
specifically targeting rural economy via the empowerment of SMEs as the
focus of Unity Bank’s retail banking strategy means that the bank will
be acting what it preaches.
The concept of retail banking may not be a new one, but it
has not so far produced the expected impact of serving the real sector
of Nigeria’s budding economy. Neither has there been a more committed
driver of its wheel.
Will a bank that perches its corporate vision on striving
to be the most preferred retail bank in Nigeria make the desired impact?
Henry Semenitari, CEO of Unity Bank, has asked to be given just five
years to prove that it will.
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