Division Manager, Export and Agricultural Business, Fidelity Bank Plc., Isaac Ndukwe, in this interview, explained how export investment has increased the bank’s profitability. HELEN OJI was there.
WHY does Fidelity Bank invest heavily in the non-oil export sector?
Fidelity Bank is getting into non-oil exports for two strategic reasons. The first reason is to help drive the growth of the Nigerian economy and in doing so expand our market share in the banking business landscape.
It’s quite logical. When you help bake a bigger economic pie, the ripple effect results in more transactions for you as a bank in the midst of transformation. As you know, there are two growth models.
One is the import substitution growth model and the other is the export led growth model. The most sustainable growth model, or the most suitable strategy for the Nigerian economy, is the export-led growth model, although the more laborious of the two as it requires a lot of hard work.
It simply makes the economy more competitive over time, for example, by improving business processes, product design and quality. China is a perfect example of an economy that has leveraged the export-led growth model to become a global manufacturing powerhouse.
The second reason is that our export banking activity is a strategic axis to improve the competitiveness of our company in the industry. Oil price shocks create fiscal and exchange rate problems for Nigeria.
For example, the reduction in public expenditure and obviously, because oil represents more than 60% of our national income, a reduction in what you and I spend, in addition to the effects of macroeconomic elements and finally negative changes in the balance commercial washing at the exchange rate.
The pass-through effects of everything I’ve pointed out have a negative impact on banking. For example, this leads to a limited supply of dollars to cover the foreign currency obligations of import customers. Our non-oil export business helps us create an alternative source of foreign exchange to serve our import customers.
In what specific ways does your company support exporters?
While it is tempting to lead by example with our financing offerings, I would say that the most critical way we support exporters is in the area of developing export business management capabilities. This is what differentiates us from other banks.
From a business operations perspective, non-oil export trade requires a total mindset shift. It’s a very competitive business landscape, especially if you operate in value-added exports. Therefore, human capital development, especially around export readiness of companies, is a fundamental element in positioning Nigerian exporters to become more competitive in the global market.
The World Market is a brutal ‘free market’ arena similar to the Roman colosseums of ‘deathmatch’. It takes no prisoners and will punish you if you are unprepared or lack competitive and comparative advantages.
If you are exporting something from Nigeria to the UK, for example, you are competing with companies from other countries who are exporting to that same market. So, if you don’t offer your product at a cheaper price or higher quality to beat out the competition, you will be pushed out of the market. The global market does not care about your feelings or the macro and micro issues of product origin/country. The primary consideration is the end consumer value of your product. We help fill these business management capacity gaps through export business management capacity development programs, the flagship offering being our Export Management Program (EMP), a capabilities that we have co-created with the Lagos Business School (LBS), and the Nigerian Export Promotion Council (NEPC).
Here we teach aspiring and existing exporters how to become better at what they do. Some of the areas we cover include, but are not limited to, product or raw material sourcing and effective supply chain management; quality control and assurance processes; global standards and best practices; packaging, contract negotiation and advertisements, export documentation, shipping, financial management and governance. We then create well-tailored, competitively priced financing packages to help exporters scale their business operations. We also provide free consulting services to exporters to help them optimize their business.
We also support exporters in the area of market access development. For example, we brought over 10 of our clients to the Durban Intra-African Trade Fair (IATF), and most of them secured product purchase contracts and partnership agreements. We also support export trade documentation and consulting services.
Did the IATF meet your expectations?
Absoutely. The only quick win for us is developing market access for our export customers. We were at the inaugural IATF in Cairo, Egypt, and the connections were an eye opener. We took several of our clients with us and also gave them platforms to display and showcase their products. They have all obtained product removal contracts and partnership agreements. The total size of the transaction concluded in Cairo exceeded 75 million dollars.
The same thing happened on this release with a total transaction amount over $100 million. Another advantage is the opportunity it presents for partnerships, collaborations and knowledge transfer. I strongly believe that if we can work to improve the general ease of doing business and business competitiveness, Nigeria can be the biggest winner from the African Continental Free Trade Area (AfCFTA).
As you know, the IATF is one of the main levers of the AfCFTA to stimulate regional trade integration in Africa. The take-off is that the AfCFTA will help connect Nigerian businesses to the continental and global manufacturing value chain.
This is why it is so important to us and why we are taking proactive steps to improve the preparation and positioning of our clients to take advantage of the growth opportunities that the IATF and AfCFTA present for their companies. These opportunities are not only limited to market share expansion, but also include knowledge and technology transfer gains to drive optimizations.
How much did the bank’s non-oil export business contribute to the bottom line?
As I said earlier, our export business is strategic in that it helps improve the competitiveness of our banking business. You’ve seen our half-year figures, in which pre-tax profit grew from N12b in H1 2020 to N20.6b in H1 2021, a growth of 72.4%.
The growth of our export customers’ businesses and our increased share of that portfolio, coupled with the expansion of our new customers and the footprint of our export business, are part of what is driving the bottom line. This is one of the main pillars of our growth initiative, as it spills over into other critical areas of our banking business. To further reinforce the importance of our export business segment to the overall banking business, our Managing Director, Mrs. Nneka Onyeali-Ikpe, was present at the IATF and was actively involved in facilitating some of the transactions. that we have concluded for our clients.