New Skye Bank Chief Executive Officer and Managing Director, Timothy Oguntayo, is making a case for the Nigerian Agricultural Insurance Corporation (NAIC) to match the risk of lending to the agricultural sector.
Oguntayo assumes office next month. He said the bank is working with the regulators to boost lending to the agricultural sector and also consolidate in other sectors of the economy to increase earnings.
He has over two decades of experience in corporate finance and investment banking, business development, credit and marketing, as well as operations. He is worried about heavy credit advance to an agricultural sector that is not adequately covered by insurance.
Oguntayo, who was appointed to the bank’s board and its subsidiary companies in 2009, stressed that agriculture lending is important to the economy as well as to Skye Bank, which is why the bank is involved in the sector through responsible lending and borrowing practices.
Below are more excerpts of his chat with financial journalists in Lagos, where Assistant Business Editor, Kelechi Mbgoji, was present.
Lending to agriculture requires securities
Timothy Oguntayo
We are not excluding any sector, we are still in maritime and agriculture as we have facilities like the Agriculture Commercial Credit Fund of the Central Bank of Nigeria (CBN). We have facilitated about N15 billion credit to our customers. The Nigerian Agricultural Insurance Corporation (NAIC) should bear some of the risk in this sector. It needs to be repositioned by the government.
Banks bear the risk. There was a CBN initiative called NIRSAL that was supposed to provide 75 per cent risk for agriculture lending but at the middle of the road the CBN changed its stance.
Lending to agriculture has no securities; your fate is in the farm. If the farm fails you lose your fund. So, if the farm fails the bank fails also. We are in agriculture but in very cautious phases.
Lending to real sector
The CBN and deposit money banks (DMBs) have been coordinating efforts to ensure that agriculture and its value chains are de-risked, to ensure that lending to the sector remains on the rise. The decision was taken jointly with the CBN and the banks and we cannot just lend to the sector simply because the infrastructure and value chain have not been put in place.
It is not the kind of guarantee where people come and take money and it becomes a national cake. Though the banks have had some challenges in lending to the sector in the past, such experiences are now consigned to history. We can’t go back to that.
The banks as well as the CBN are working together to ensure that lending to these sectors is sustained and that the value chain is sustained and those that borrow for agreed purposes should be sustained.
Commitment to boosting SMEs
Skye Bank will continue to leverage its support to the Small and Medium Enterprises (SMEs) to launch the economy on the path of sustainable growth and development.
The bank has a good track record and pedigree in SMEs’ development and financing, having taken some small scale enterprises from zero level to public liability status.
The commitment of this bank to develop and fund the SMEs aligns with the agenda of the CBN new leadership which has identified small businesses as the engine of national growth.
Skye Bank would also support worthy micro finance banks to help fund micro businesses which help power economic activities among the poor.
Skye Bank has helped many oil companies to grow, especially indigenous ones, which are doing very well and contributing to national growth and development.
Strategies for growing savings deposit
Savings mobilisation is an area we have focused on deliberately. The branches are been isolated to go into deposit. The target for this year is to grow our savings to about 15 per cent of total deposit fund. The resources required to achieve that are already put in place. We are very optimistic that the anticipated growth will be achieved.
We are a retail bank and aggressive in terms of savings mobilisation, going by the 260 branches. What we can grow from those branches is in retail and commercial deposit mobilisation; savings is at the heart of it.
We are also involved in the CBN drive for financial inclusion and what you find is that a lot of products that will promote savings are coming out. We are also involved in promoting savings’ culture in schools and all these contribute to growing our figures.
Agent banking
Skye Bank is the first to launch agent banking in the country. It is a financial institution with an enviable track record and pedigree in money transfer business. Our performance record as a franchisee in the money transfer sector has been greatly acknowledged and applauded as we strive to provide unrivalled and satisfactory services at all times.
Through our established and well imbibed culture of quality and superior service as a work ethic, we have made remittance and collection easy, safe and convenient for both senders and recipients alike.
We have officially put a seal of approval on our business partnership with RIA Money, the third largest money transfer outfit in the world.
Skye Bank has presence in the 36 states of the federation through which we offer direct and personalised services to customers. This business partnership that we are unveiling today will be fully and properly nurtured to growth and shall be the reference service in money transfer business in the short to the medium term.
Expectations over the next few years
We have grown our size to where we are today and focusing on corporate and high earning commercial business. We think we can come down to commercial and retail space, to enable us finance the real sector of the economy.
We have done our branch categorisation exercise, about 53 branches have been designated retail branches that will service savings customers and also help to lend to SMEs.
But our target is to focus on commercial banking space and I think we have done enough as much as we will like to do in the high earning corporate. Hence we need to go down to the lower end of the segment, which is commercial; mostly SMEs and individuals.
In terms of expectation on return-on-earnings (RoE), we are ROE of about 17 per cent. We are targeting 20 per cent in the immediate term and about 22 per cent in the next three years.
Advice to new CBN governor
Godwin Emefiele should take a look at the good things his predecessors did. Before Lamido Sanusi came on board, there were sharp practices in the system. But he introduced sound risk management and practices and some sort of discipline. Emefiele should reinforce that.
We saw what happened between 2007 and 2008 because of the lack of risk management we operated in, but Lamido came in to instil some discipline in this aspect.
Emefiele should introduce some sense of stability into the system. We have seen a lot of policy somersaults. He should make things stabilise a bit before introducing other changes.
Core areas of competence for Skye Bank
Skye Bank is known for its leadership in e-channels and businesses, which it has demonstrated over the years with one of the most efficient ATMs in this country. Internet ranking is of superior ranking in the industry, backed by data from Interswitch and NIBSS.
Skye Bank has distinguished itself in real estate and oil and gas. We are number one in real estate development financing and oil and gas in Nigeria. We are known for good relationship management; we partnered with our customers by going the extra mile to know their businesses and give them the financial advisory services required.
We have partnered with SMEs to grow them from the micro stage into big commercial institutions. Companies like Tantalizers, taking them from the beginning to being listed on the Nigeria Stock Exchange (NSE). We have Multi Trex Food and Beverages and we have financed cocoa-based companies.
We have also been very prominent in financing schools, right from primary to secondary. We have financed more schools in this country than any other bank. We do not exclude any sector. Skye Bank is one of four banks lending to maritime agents.
We have a sizeable portfolio of maritime access. On the Cabotage Vessel Finance Fund (CVFF), we have applications that are outstanding with NIMASA for close to 24 months and have passed through all the stages of approval. Today, it is hanging with the Minister of Transportation, tomorrow it is in the presidency. The funds have not been disbursed to help our customers. The little we have been able to do was funded from Skye Bank funds and at the same time we are been compelled to lend at single digit rate.
It is a difficult situation in which we are expected to promote national assets but the funds put together are not released. Although this is not peculiar to Skye Bank and we are doing the bit we can. It has not deterred us from servicing out clients in the sector.
