Ikwudinma: We need to raise awareness of the benefits of business banking

million. Chinedu Ikwudinma is Managing Director of NOVA Merchant Bank Limited, which commenced operations in the first quarter of this year, with a focus on wholesale banking, investment banking and badet management. 39; badets. In this interview, Ikwudinma talks about opportunities in the sub-sector of the business bank and insists on the need to raise awareness of the activities of the business banks. Obinna Chima provides the following excerpts:

What is your opinion on the measures announced by the Monetary Policy Committee at the end of its meeting last Tuesday to improve the flow of credit to the private sector?

I think it's positive. The central bank acts to support the banking system in terms of providing credit to the private sector. If you note it, the banking system has gone through a period of difficulty over the last few years in terms of nonperforming loans (NPLs) and others. This, and other problems have limited the appetite for credit. However, from the central bank's point of view, they would be interested in certain interventions in certain sectors to achieve certain growth objectives. So, that's why the central bank decided to provide incentives that would accelerate lending to the private sector in particular areas.

Some have argued that, regardless of the movement of the MPC, if there is no support from the tax authorities, the desired objective would not be realized. How true is it?

As a general rule, fiscal and monetary authorities should work together and I believe that is in this case. I do not think there is any divergence within the political circle around the goals. If you look at the budget, there is a lot of focus on the private sector. So, I agree with the prospect that fiscal and monetary policy needs to be aligned for the best results in the country.

What is the future of the business bank?

The business bank has a bright future in this country. on wholesale banking, investment banking and capital market activities. If you notice in recent years, the country has not had enough capital market activity for various reasons. Business bankers are the natural intermediaries of these activities. There is a huge need in this country for things like facilitating debt issuance, stocks, mergers and acquisitions, advisory services in terms of financing. It's just that this need is almost calm because no one is feeding it. In financial services, if people do not know anything, they will not invest. The average person in the village who only knows the savings account, would only invest in a savings account. But, if you become aware of Commercial Paper, Treasury Bills or Eurobond, you would invest in these things. Thus, the business banks have to go to the market and meet the companies that need these services – to raise capital, debt or equity, to arrange an acquisition, and others. This may involve capacity building because if, for example, you are going to attract a European investor into your company for it to invest, baduming you do FMCG activities, your finances must be in order. So some people have good businesses, but they do not have the right structure for financial management. They do not produce good audited accounts to reflect their business. This type of capacity building is part of what we, as business banks, need to encourage in the system because it provides us with a large pool of clients. So this is not only in terms of the future of the business banks, it is also the need of the economy for the business banks. There is a huge need there. Business banks are masters in the organization of long-term finance, excellent for the organization of commercial paper, they are excellent for the intermediation of mergers and acquisitions. You see, for example on this market, some companies have failed in recent years, not because their commercial essence was low for example. But maybe they could not import something they needed to work. Meanwhile, at the same time, there is another company that has had access to these same things. Thus, the business banks create an environment that allows companies to work together. So if you merged these two companies – one company that has a need and one that has a surplus – they will survive and prosper. But under ordinary circumstances, both companies may fail. So, I think that's where the system needs banks like ours to help intermediation of transactions that will have economic value not just for businesses but for the economy.

Before the announcement by the MPC, we noticed an increase in appetite. For commercial papers by companies, what do you think is responsible for them?

Companies issue commercial papers because they are seeking funds and they are seeking more sources for this funding. When you issue CPs, you can access a wide range of investors, including individual investors who can invest in your PCs. It's different from a bank that gives you a bilateral loan and there is a rate on that CP. So, it's not like a bank that can say because its fund cost has gone up, it would increase your rate. In CP, the rate is fixed. So, in the medium term, it is a cheaper way to obtain funds. The renewed interest is due to the fact that companies have experienced a rise in interest rates and that part of the rise in interest rates is due to the rising cost of bank funds. So, they want to have an instrument that gives them access to a broad pool of investors at a rate that they find attractive. Thus, the company may decide to issue the CPs at 18 percent, even though the banks have lend at 23 percent. There are people who are willing to invest 18%. And they invest in these PCs and the company gets the funds for its operations. You should not rely on your relationship with the bank as I said earlier because the rates may vary.

What is the likely impact of the stock market downturn on the business banking business?

Let me give you some clues. As a measure of gross domestic product (GDP), the size of the capital market in Nigeria is about 45 billion dollars. The size of a capital market in South Africa is about 1.1 trillion dollars. Remember that Nigeria's economy is larger than that of South Africa. Meanwhile, the capital market of South Africa is about 25 times the size of the Nigerian Stock Exchange. It tells you a story. It tells you a story of something that should depress us or a story of opportunity. I choose to see it as a story of opportunity. As for what we can do to accelerate activities in this market, what has to happen is that we need more entities listed on the stock exchange. Secondly, we need more efforts to encourage local stock market investors, including pension funds. Once again, pension funds are another part of the ecosystem. This offers tremendous opportunities for our country. Earlier in the year, the badets of the pension fund were valued at about 7.5 trillion naira, or about 25 billion dollars, or about 7.8 percent of Nigeria's GDP. If you still compare that to South Africa, which I would say is a peer country, retirement badets are over $ 300 billion and about 87% of the time. 100 of their own GDP. Retirement companies are major investors in the capital market. So, what needs to happen in Nigeria is that we need to expand the scope of retirement activities in our economy. At present, only a few companies are in this space. We have between 7.5 and eight million employees on tens of millions of workers in Nigeria. South Africa has about 15 million people on its pension funds and it is a country whose population is one-fourth of the population of Nigeria. So, I think if we look at these indices, we focus on them and focus them in a targeted way, they will lead to an increase in our capital market. What we have seen lately, in my opinion, is tied to the electoral cycle. And this is because the main investors in our stock market are foreign portfolio investors. Thus, when a foreign portfolio makes an investment, it thinks about country risks, thinks at the best time to exit the market, it looks for comparative returns in Kenya, Ghana, South Africa. But local investors tend to invest much more in the long run. So, if we find ways to encourage Nigerians to be more active in the Nigerian capital market, we will reduce volatility due to the game of portfolio investors and we will be able to move the market forward. I think if you want something to encourage you, you hear about the fact that MTN is about to be listed on the Nigerian Stock Exchange. It's huge, it's a big company. Banks are good too. Only a few banks are not listed, including ourselves. We will be listed in the future. We must therefore encourage companies to be on the list. If you encourage a better knowledge of the market and more investment by Nigerians, I think it will have dramatic effects on the market.

Nova Merchant Bank recently acquired a new digital banking platform. Can you tell us about it?

I think it's important to inform you that the bank is doing well, that it is profitable. The figures we have published have shown that we have maintained our performance and that our indices in terms of liquidity ratio, capital base and all other ratios are excellent and far exceed industry standards and standards. regulatory requirements. Our clientele is growing and we are happy to say it. And we now have all the compliments of the staff we need to keep the promise we made to our customers. The bank started on a system called IBS in terms of our basic banking system. We have now transited to a system called Intellect Digital Core. I would like to share with you that we are the first bank in the country to use the intellectual banking platform. There was a reason why we chose this platform. But before you talk about that reason, we conducted a very rigorous selection and reflection exercise over several months from last year and talked to different banking solution providers. Our goal was to identify a solution provider looking to the future, because if we look at the current banking systems, we can see many developments in terms of digital banking and customer experience. . You now have a lot of banks trying to transform in this way. The company that produced this banking platform is a 25-year-old company with operations in 40 countries, serving more than 240 clients, including entities such as JP Morgan, Citibank and the Reserve Bank of India. It's actually their system that the Reserve Bank of India uses for its treasury activities and its payments across India. Imagine India with a population of 1.2 billion people and for the central bank of India to choose this entity to provide this type of service. So, we went into a thorough search and identified this entity and we engaged with them having finally considered a broad spectrum. And we are happy to say that today, we went on this system. We therefore adopt the system for all of our banking applications – the core banking application and channels, with respect to customer activities, our treasury activities and our business activities. All this encapsulated, because it's a digital banking platform. The critical difference I'm going to tell you between what you may hear about online banking and the solutions that Intellect provides us with is in terms of flexibility, agility and the ability to expand Services. This is because the Intellect platform is built around the customer experience. It's not just a channel to deliver the services and products of the bank to the market, that's what customers say and the customer's behavior.

If the customer, for example, travels and wants to be able to pay Where they are or want some kind of efficiency in terms of information, you will compel this customer you will find a way to serve this customer. Again, because of the open architecture of this platform, it allows you to lock different solutions. We heard about fintechs offering different ideas on how to provide banking services, this platform allows you to use these solutions very easily and connect with them without worrying too much about the interface and connectivity. It was a challenge with the old platforms. So we aim for a digital solution for our end-to-end customers and try to use both the platform and our capability for things such as data badysis, machine learning, etc., to give an overview to our customers. Thus, we are not only a financial service provider for our clients, we provide solutions around the entire banking ecosystem. So, we are excited about it and we went live. We have increased the bank systematically and we now have the firepower we need for the next stage of the institution in terms of growth. In summary, it is a banking application that was developed with an application of 21 century

How will this digital banking platform support your competitive edge in the sub-sector of the business bank? 19659007] I think the problem is that when you talk about competition, I am sure you have probably heard about the blue ocean strategy where you are trying to get into a space where there are not too many people. By choosing a banking platform that no other bank uses, it is already a trip in that direction. As I said, this allows us to create tailored solutions that fit your business. I think that the fact that we have chosen a different platform puts us at a certain level. Our experience with other platforms and our understanding of this platform therefore give us the benefit of serving our customers. Secondly, it is an open architecture that allows you to bring solutions easily. Banks often struggle to find a new solution because you may have a contract with an existing supplier, which requires you to pay a lot of money, requires you to join, requires you to come to them for any improvement and that can become very expensive and is part of what hampers development. But we have adopted a flexible, scalable, agile solution that allows us to do it quickly. And the entity we have engaged has the first fintech center that focuses on financial services in the world. Thus, they have deliberately created an entire ecosystem where fintech thrives. That's part of why we chose them.