Ecobank: Continuing along the path to growth

 DSC0242Ecobank’s Global Chief Executive, Ade Ayeyemi. (Image source: Stephen Williams)In a wide-ranging interview, Ecobank’s Global Chief Executive, Ade Ayeyemi talks to African Review about the bank’s ambitious strategy. Stephen Williams posed the questions

AR: You have now been at the head of Ecobank for two years. Could you summarise what have been the major challenges facing the bank during this period?

AA: The way I look at banking is that the economy of the environment in which we operate creates challenges. But in those challenges we also see opportunities as a firm. 

So the first thing is the economy. Some of our countries, especially in Nigeria, went into a tailspin because commodity prices fell and production declined. That created a lot of issues in terms international trade areas and domestic trade areas. That forced movements in the currency that then had a spill-over effect on the region and all the other countries around the region.  

Then we had challenges around the Boko Haram situation that led to a loss of economic activity, especially in Nigeria, in Chad and Cameroon, that again created a set of challenges. We also had other issues here and there, but they are not of sufficient position to threaten the firm. Each time there is an election in our countries there is a reduction in economic activity because elections create uncertainty, both in terms of outcome but also in terms of the reaction to the outcome. So we have to deal with all of those terms. 

But the most important challenge has been the economic consequences of a reduction in the price of commodities and the consequent foreign policy liquidity issue in Nigeria, the reduction, the devaluation and the spill-over effects and contagion effects around the countries.

From our point of view we also focus on opportunities that a firm can take advantage of. Those challenges will have been difficult to cope with, but the fact that we have diversified business across 33 markets in Africa and we have banking licences, and opportunities in three other markets where we have representative offices across. The fact that we have connectivity to OECD countries through Paris, those things then present diversified revenue opportunities for the firm. 

AR: Comments are often made about Ecobank’s exposure to systemic risk given the bank’s pan-African presence. Do you have a view on this? 

AA: Well when you say we have exposure to systemic risk, whether because we are systemically an important bank in some of the countries where we are present. Yes, that is true but it’s not that we have exposure to systemic risk, it’s that sometimes because we are present in a large number of places and this creates a systemic risk in terms having an impact on the economy of other countries.

We’ve tried to run this organisation with the best of governance and with the best standards making sure we follow the best practices of how a multi-national institution should be run.  That limits the consequences of the firm creating risk on the environment. But we need to then look at what the firm can do because of our presence in multiple countries across Africa. We are in a position to facilitate trade, we are in a position to facilitate payments that allow those things to happen pretty quickly rather than they way they could have happened before. 

From our point of view, we are not just focusing on challenges alone but we are also focusing on the opportunities that our pan-African presence enables to happen in terms of people being able to make payments across Africa and trade with their neighbours. We can facilitate that because of our multiple presence in many countries.

AR: Ecobank took US$800mn impairment charge in 2016. The received wisdom was that this was necessary due to the NPLs and the Nigerian operations, which is your largest market. Do you agree? Given that the Nigerian economy is still exhibiting very slow growth, what is your strategy going forward? 

AA: Well it’s in our numbers, I mean the whole of it is not Nigeria but what the component that is Nigeria are in the numbers we publish for 2016. We’ve dealt substantially with the issues. Yes, the economy of Nigeria is still exhibiting slow growth but it is not in recession in terms of contraction as it was before. Before 2016 there was actually no liquidity in the system because people couldn’t get foreign currency to be able to transact and that has subsided substantially this year.

So we think that what we have done to reposition the franchise, is done. We still have some level of impairments, which we are dealing with through 2017. We don’t think we will need to take that level of impairment again, we have signalled to the market that that was a big one-off. But we are working with our clients to continue to make sure that they can continue to honour their obligation. Nigeria is a big market for us but our strategy is to do more cash management, more transaction services, more trade; rather than big lending given that there is low capital formation happening in the countries.

Our strategy, if you look at payment proposition to companies, to commercial enterprises, if you look at our trade proposition, our payment proposition to individuals, the launch of our Ecobank Mobile app, that allows instant payments across all of our networks. These are things that allow us to have a commanding height of payments both at the individual level and at the corporate level.

AR: You are on record saying that Ecobank would like to achieve 100 million customers by 2020. The digital offering is a key part of this. Could you please give us an update on progress? 

AA: Yes, it’s an ambitious target we have stated. We know it’s audacious. But we believe that once we create the right strategy and product, we will be able to take the product quickly to the market place. 

We’ve got approvals from regulators across Africa, 25 of them, that people can open an account with us digitally. We are one of the only entities that you can open an account digitally end to end. We have applications that are now in place that people can actually use the credit or debit card of other banks and transact with us that way. That allows the people that are not only our customers to be able to transact, other people can also transact. 

We can also use that for the purpose of remittances across the places where there are Africans living, in those countries where people want to send remittances home. So those assets have now been put in place and our view is that those assets are attracting customers. 

So once we get to a critical mass then we believe that we will reach a point of excellence, so to speak. So we have created the assets now and we are putting those assets into place. Once we get to that critical mass, we think that we will be able to get to a take-off point. Once we cross that take-off point then the race to 100 million becomes easy. 

Now we are not going to get there by ourselves. We are working with a lot of partners whether Visa, MasterCard, Microsoft; many important partners. Some fintech companies are partnering with us as well, and we are working with a lot of distributors so we feel very comfortable that this is do-able.

AR: The global economy is uncertain at best and Africa’s prospects remain open to questions giving the continuing commodity price downturn and evidence of increasing protectionism in world markets. How likely is it in your view that we will see a return to appreciable growth in the continent’s economies? 

AA: You are right in terms of the global economy, it is uncertain. But our participation is at a very low level. So when you are at a very low level it is easy to actually grow. What we need are positive policy choices. If we make the right policy choices, if we open up our economies, if we free people up to do things, if we improve the productivity of civil service to allow greater economic activity. We have seen a lot of positive moves in some of our big markets like Nigeria, trying to open up the ease of doing business. For example, we’ve seen Togo and Ghana now opening their borders for 24 hours which has stimulated greater trade flows.

Now, we have also seen places where they are using technology to allow the collection of produce and reduce the time that things wait at the ports. So there are a lot of small things that our countries need to do that can actually enable growth to happen … we are very far from our reaching our full potential.

AR: The vision of pan-African banking has been largely achieved. But although you have first-mover advantage it is noticeable that many other African banks are following the same path. Can you retain your lead? 

AA: I think what is important is yes, we have blazed a trail, but it is not just about competition but it also about collaboration. Despite what we have done, so many Africans still remain unbanked. So many opportunities have not been translated into something that is bankable. 

Our role is to convert people’s ambition into reality using financial products, so we need to work with a lot of people, a lot of our colleagues, to make that happen. For me it is not about maintaining the lead, it’s but about bringing everybody now to bear on the situation, so that we can all as a continent move forward. 

AR: Ecobank’s problems over the last four years have included: former Ecobank chairman Kolapo Lawson clashing with the Nigerian Central Bank over unpaid debts; allegation of fraud by senior managers; and a lawsuit over the firing of ex-chief executive Thierry Tanoh. Would you say that these problems are now consigned to history? 

AA: Yes, they are consigned to history. 

AR: Ecobank’s alliance with South African bank, Nedbank, formed in 2008 received a jolt when Nedbank profits were down because of losses at Ecobank in Q4 2016. Will this have long-term implications? 

AA: I think we are all disappointed with the situation that led to the losses but also the devaluation of the Naira in the currency in which the stock is quoted, created part of the challenges we met. Having said that, the long-term – and you can hear this in all of Nedbank’s presentations, they have been very supportive throughout this period – and the logic of the relationship will continue to be strong. They have been very supportive in also trying to find business opportunities, working with customers on both sides to be able to create economic advantages as well as a relationship. 

AR: You entered into a US$500mn trade and investment promotion agreement with Afreximbank earlier this year. What have been the results of that agreement to date?

AA: We are making good progress and we will send commentaries as part of our audited, half-year financial statement, which reflects the progress we are making there. You will see that when we do that. For now I don’t want to comment on financials as we have not announced these as yet. 

AR: In Kigali at Afreximbank’s 2017 AGM you held the Ecobank Africa-Africa Forum alongside Afreximbank’s President Dr. Benedict Oramah and Rwanda’s Minister of Finance Claver Gatete. What were the results of this forum and what did it achieve? 

AA: It allowed us to have conversations with people in the continent to say, ok, what are the banding constraints to creating an economy that works that we all can solve? So we are not just having discussions every year. 

We agreed on two things. That we are going to work on payments, to ensure that payments across Africa are instant. For that we have a responsibility to work with Dr Oramah, and we believe that we will get that done before the next meeting. 

The second thing is that we are going to include women and youth in terms of having access to finance. Those are the two things that we said we want to work on.

AR: Going forward what are your aspirations for Ecobank?  What would you like your legacy to be? 

AA: We want to achieve the reasons our founding fathers created the firm. To be a leading institution in the continent, not only in terms of profitability but in terms of our conduct. People need to see that you’re doing things in the best possible way; we need to be an example to all other African institutions. We want to be a good force for our society to make a large difference. That is what I intend to focus on. 

During the period that I have been here we’ve had a big focus on technology and we are going to have a big focus on people, on entrepreneurs and financial inclusion. We launched the fintech challenge and we are working with the people in the fellowship now to make sure that they can become better citizens. Our view, our hope and aspirations, are that with all of this work we are doing we will be able to make a material change to the lives of our people and to also be able to take the agenda forward so that we solve a lot of challenges and we create a lot of opportunities. 

AR: Do you have any other comments you would like to make? 

AA: Yes and no. The point I would like to just make is that African countries, we have our own challenges. So does every other person. But we have got a lot of opportunity. 

Our role as leaders within the continent is to work together and take advantages of the opportunities so that we don’t have to repeat the same talk every year. That is why when we met in Kigali we said ok, we want to solve the payment problem and the issue of access to finance for women and girls.