Banks, customers must approach 2023 with partnership mindset- Adeduntan

The Managing Director/Chief Executive Officer of First Bank Nigeria Limited, Dr. Adesola
Adeduntan, in this interview with THISDAY reviewed the performance of the global economy in
2022 and advised businesses and their bankers to approach 2023 with a partnership mindset to
ensure that a win-win outcome is achieved despite the anticipated macroeconomic challenges.
Excerpts:

What are your forecasts and anticipations for the global economy in 2023?

I would like to start by noting that 2022 was indeed a turbulent year for the global economy. In
2022, the global economy witnessed record high inflation rates with the attendant high cost of
living across several economies. The elevated inflationary rates were attributed to the
aftereffects of the Covid-19 pandemic as well as the Russian-Ukraine crisis. In its last World
Economic Outlook report, the IMF projected a 2.7 per cent global growth rate in 2023, lower
than the 3.2 per cent in 2022. The 2023 projection will be the weakest global growth profile
since 2001 except for the global financial crisis year and the acute phase of the Covid-19
pandemic in 2020. In my view, in 2023, we will likely witness slower growth across several
global economies due to lingering trade tensions as the impact of the Russia-Ukraine crisis will
still weigh heavily on global trade flows. However, we may witness a decline in commodity
prices as more import-dependent countries explore alternative sourcing options for these
commodities. Inflationary pressures will however reduce as the impact of rising monetary policy
rates continues to yield expected outcomes. The removal of COVID-19 restrictions in China
should lead to a boost in global economic output. Oil prices are expected to remain largely
elevated as tensions between Russia and Ukraine lingers, so energy prices will remain high.
The transition to other sustainable forms of energy may also be accelerated by the prolonged
crisis.

Given the tepid growth associated with the global economy in 2022, developing countries have
been having difficulties in refinancing their foreign debt, do you see a gloomy impact on the
economies of the developing countries in 2023 as a result?

With slowing growth and elevated inflation rates, the sustainability of foreign debts, especially
for developing nations, is likely to call for a re-evaluation by lenders given the increased
likelihood of default. When this is juxtaposed with the higher interest rate environment at which
these debts are likely to be refinanced, you will observe a scenario where further strain is
exerted on the debt repayment capacity of these economies. However, this situation does not
necessarily translate to an automatic economic doom for developing nations. The actual impact

on each developing economy will depend on the economy’s level of fiscal discipline and
revenue generating capacity. Developing nations who are able, in the short term, to increase
revenues either from taxes or sale/refinancing of idle/sub-optimal assets will be able to
negotiate reasonable refinancing terms from lenders and prevent further economic turmoil.
Nonetheless, all concerned nations need to take the issue of debt sustainability more seriously
by limiting fiscal wastages, reducing inefficiencies, growing revenues, and aggressively working
down unsustainable debt-to-GDP levels that may worsen the impacts of external shocks.

Do you think that the corporate default and NPL would increase in 2023 due to the current
economic headwinds?

Expectedly, rising cost of debt and contracting demand will exacerbate the challenges that
businesses will face in 2023, particularly for players operating in small-margins sectors of the
economy. Locally, the surging inflation rate is sure to reduce disposable income of most
consumers and demand for non-essential goods and services may dip. To prevent rising non-
performing loans (NPLs), businesses and their bankers will have to collaborate more and
ensure timely flow of information to prevent surprises. Banks on their part will have to improve
monitoring of their loan portfolio to quickly identify early warning signals for attention before a
full-scale loan deterioration. Overall, businesses and their bankers must approach 2023 with a
partnership mindset to ensure that a win-win outcome is achieved despite the anticipated
macroeconomic challenges.

With the tightening financial conditions which has partly led to slow global economic growth,
what opportunities do you think exist in 2023 for players in the financial services industry?

Despite the expected macroeconomic challenges in 2023, there are also emerging business
and revenue opportunities that can be exploited by discerning players in the financial services
industry. Specifically, the following areas will provide significant opportunity to players in the
financial services industry:

Payments: The Central Bank of Nigeria’s renewed drive on cashless policy has provided an
opportunity for players in the financial services industry to enhance existing digital product
offerings and create more attractive product offerings that will further reduce frictions in the
payment process. This will help to reduce the financial exclusion gap, increase fees and
commissions revenues, and improve overall viability and stability of the financial system.

Digital Security: Increasing adoption of digital payments platforms will necessitate increased
requirement for the security of payment channels. Thus, opportunities exist for players in the

financial services industry to leverage robotics and artificial intelligence to improve security
protocols on digital payment channels.

M & A Opportunities: with the anticipated pressures on earnings, opportunities exist for big and
liquid players to gain additional scale and market share through outright acquisition of fringe
players with the right strategic fit. There is also an opportunity for two or more small and/or
medium size players to merge their operations/businesses to obtain scale advantage.

Partnerships across Segments: The growing number of Fintechs and licensed Payment Service
Banks also presents an opportunity for improved partnerships across various categories of
players in the financial services industry for both mutual and industry-wide benefits.

Consumer Lending: Tightening financial conditions of the average household will create
opportunities for consumer loans in several variants such as buy-now-pay-later (BNPL), salary
advance, consumer asset finance, etc. The industry is already witnessing a rising trend in the
creation of digital consumer loan product offerings. This is likely to intensify in 2023.

What are the key events that will shape 2023 domestic economic outlook and how strategically
positioned is FirstBank to manage the challenges and opportunities?

Three key events will shape the 2023 macroeconomic outlook of Nigeria: The outcome of the
2023 general elections and peaceful political power transition; government’s ability to curb crude
oil theft and increase production to meet OPEC quota; and successful removal of petrol subsidy.
For us at FirstBank, we are strategically positioned to take advantage of and harness the
opportunities that the three key events will bring as well as successfully ride the waves of any
challenges that may arise. For over 128 years, FirstBank has built the capabilities and
competencies required to succeed and thrive in any macroeconomic situation. As a Bank, our
belief and commitment to the domestic economy is unwavering – FirstBank is truly woven into
the fabric of the society.

How will you define the trends we saw in the banking sector landscape in 2022?

2022 was quite an eventful year and some visible trends emerged. I would like to classify the
trends as follows:

Financial System Trends: The Monetary Policy Committee (MPC) raised the monetary policy
rate and the cash reserve ratio, cumulatively, by 500 basis points to 16.5 per cent and 32.5 per
cent, respectively as a way of enforcing liquidity tightening measures to curb rising inflation. In
the same vein, the interest rate on savings accounts was restored to the pre-pandemic levels of
30% of MPR within the year thereby increasing the interest expense profile of banks. In
addition, the paucity of foreign exchange exerted considerable pressure on banks’ foreign
currency (FCY) trade lines in the course of the year, forcing banks to explore alternative ways to
meet customers’ foreign currency needs, including deliberate focus on supporting and
promoting non-oil export businesses and transactions.

Technological Trends: The banking sector witnessed an increase in technological innovations,
as the industry strived to meet the ever-evolving customer needs. In Nigeria, FirstBank was at
the forefront of the technological trend, as we successfully launched a Digital Experience
Center, a fully automated branch to meet our customer needs, while providing a unique and
wholesome experience. FirstBank also launched robotics process automation initiative,
FirstRobotics, that uses artificial intelligence and machine learning to handle high volume
transactions The industry also witnessed increasing collaboration of banks and fintechs in 2022;
enhanced digital product offerings, especially the rise in digital loans and advances; and an
overall increase in acceptance of digital product offerings by banks and other financial services
players.

Customer Trends: In 2022, we witnessed an increasing shift in emphasis from consumer
banking to lifestyle banking in a bid to capture more of the customers’ journey. This shift has
been hugely supported by technology as customer trends can now be easily identified, and new
product offerings developed to meet customer needs. The emigration trend witnessed in the
past year also led to a boost in the industry’s diaspora customer base, leading to increased
focus on meeting the needs of this peculiar customer segment.

Employee Trends: The banking industry, probably like any other industry in Nigeria, has seen
significant attrition in the number of employees due to increased relocation to other countries
(popularly known as Japa) in 2022. This has impacted the industry’s skill base and execution
capabilities especially in critical areas of the industry. While this may be a national challenge,
more creative ways must be explored to retain scarce talents for national development.

The Central Bank of Nigeria and the Federal Government have set a target of 95 per cent
financial inclusion by 2024, how realistic is this target and what role will First Bank be playing to
support the government achieve this target?

Financial inclusion is usually seen as the gateway to economic prosperity as it signals the first
step in the journey to financial freedom. In 2012, the Central Bank of Nigeria (CBN) had
unveiled its National Financial Inclusion Strategy with the principal goal of reducing the nation’s
financial exclusion rate to 20 per cent of the adult population by 2020. Although this goal was
not achieved (as financial exclusion rate stood at 35.9 per cent at the end of that period), the
nation had nonetheless made giant strides in raising financial inclusion levels from that take-off
point. As such, while the CBN’s revised target of 95 per cent financial inclusion rate by 2024
may be audacious, it is achievable given the level of financial awareness that has already been
created in previous years which has raised financial literacy among the average citizenry. In
addition, in view of the additional investments and infrastructural base that is available in the
country, more mileage can be made now than ever before. It should also be noted that the
Central Bank of Nigeria has been deliberate in pursuing its financial inclusion agenda through
the licensing of several players/operators in the financial services industry, including fintechs,
mobile money operators, Payment Service Banks (PSBs), Microfinance Banks/institutions, new
deposit money banks (DMBs), etc. As such, several players are making various attempts at
solving the same problem which will significantly increase the likelihood of success. As the
foremost financial institution in Nigeria, FirstBank has always collaborated with the Central Bank
and the Nigerian government to push several national initiatives, particularly as it relates to the
financial services industry. Specifically, FirstBank’s Firstmonie Agent Network is fully aligned
with improving financial inclusion in Nigeria. With over 196,000 agents spread across 772 Local
Government Areas (LGAs) in Nigeria and many of the agents operating from 512 LGAs without
a FirstBank branch, the Bank has been a clear partner to the Central Bank of Nigeria in
improving financial inclusion in the country. FirstBank’s USSD (*894#) product, which is
demographically positioned for the unbanked, has over 14 million users with more than 261
million unique transactions, worth over NGN1.1 trillion processed on the platform. FirstBank has
been at the forefront of increasing financial inclusion in Nigeria and will continue to play its part
until every adult in Nigeria is adequately banked.

What is your take on two recent policies of the CBN – the naira redesign and the cash
withdrawal limits?

The CBN as the apex regulator of the financial services industry has overall responsibility to
ensure the soundness of the nation’s financial systems. In discharging this responsibility, it
develops policies that are meant to strengthen the monetary environment and stimulate further
economic development of the country – the recent naira redesign and cash withdrawal limits
policies are part of its core mandate. As noted by the CBN, the naira redesign will improve both
the integrity of the local legal tender and the efficiency of its supply, thus addressing a situation
where 80 per cent of currency in circulation is outside the banking system. To aid its
implementation, the CBN has also suspended charges on cash deposits to encourage everyone
to deposit old naira notes in the Banks. The new N200, N500 & N1000 notes which came into
circulation on 15th December 2022 will co-exist with the old notes until 31st January 2023 when
the old notes will cease to be legal tender in Nigeria.

Similarly, the cash withdrawal policy which will limit weekly cash withdrawals by individuals and
companies to N500,000.00 and N5,000,000.00 respectively, is expected to accelerate Nigeria’s
transition to a digital economy. The policy which comes into effect from January 9, 2023, will
present the added advantage of bringing more people into the banking system thus improving
financial inclusion. At FirstBank, we view both policies as business enablers with bright
prospects and we are poised to take maximum advantage of the opportunities they bring to
improve our service offerings and the overall experience of our customers.

FirstBank has a lot of Firstmonie agents scattered around the country, how will the cash
withdrawal limit affect their operations?

As at November 2022, FirstBank has over 196,000 Firstmonie agents spread across 772 Local
Government Areas (LGAs) in Nigeria. These agents have also processed over 1.16 billion
transactions valued at N26.52 trillion. About 45 per cent of our Firstmonie Agent network are in
rural areas, 18 per cent located in semi-urban areas and only 37 per cent are in urban areas.
Beyond Cash-in-Cash-Out (CICO) transactions, these agents also render other services such
as account opening, airtime purchase, bill payment, government-revenue collection, transfer
and disbursement, mobile-money (wallet creations, deposits, withdrawals), bank verification
number (BVN) enrollment and other non-bank ecosystem value-added support services, in line
with CBN’s guideline for Mobile Money and Agent Banking businesses. These services have
helped to bring banking services closer to local communities thereby empowering them and
facilitating their economic development. Through Firstmonie, FirstBank provides convenient low-
cost financial access for millions of Nigerians in rural areas. Therefore, given the spread of our
agent banking network and the scope of services they offer, the cash withdrawal limit is not
likely to have an adverse effect on their operations. In reality, we see it as an enabler that will
bring more people into the banking system. The new cash withdrawal limit will help to drive the
penetration and uptake of digital/mobile wallet offerings in the industry.

FBN Holdings doubled its Q3 2022 profit to N105 billion and the performance by the bank was
the major contributor, can you take us through the drivers of the impressive Q3 result?

FirstBank’s Q3 2022 results reflect the robustness of our business model and go-to market
approach even in a challenging business and operating environment. The impressive
profitability performance was driven by the resilient execution of our strategy and transformation
program. Specifically, FirstBank delivered a 42.4 per cent year-on-year (yoy) increase in interest
income on the back of yield optimisation on existing assets and addition of about N700 billion to
the risk asset portfolio. Also, the bank recorded a decent 6.8 per cent growth in fees and
commission within the period driven by significant improvements in LC commissions, account

maintenance charges etc. The bank also recorded over 47 per cent y-o-y increase in other
operating income within the same period. Overall, I would say that the results are a clear
outcome of the collective efforts and resilience of the entire staff and the Board of Directors of
the FirstBank Group in deliberately executing on our transformation agenda. We remain
confident that our growth trajectory is sustainable, and we are focused on delivering on our
2020 – 2024 strategic ambition of accelerated growth in profitability through customer-led
innovation and disciplined execution.

What is the level of non-performing loans and what has the bank been doing to reduce it?

FirstBank Group has achieved great strides in reducing its NPL from double-digit in 2016 to
below regulatory benchmark of five per cent in Q3 2022, which attest to the fact that the bank is
strong and resilient. FirstBank has, in the recent years, built an enduring risk culture and
governance systems, as well as strengthened its risk management infrastructure through
technology, process automation and specialised training.

Few years ago, FirstBank embarked on a business expansion drive within the continent, can
you take us through the performance of your subsidiaries in the continent?

FirstBank embarked on its African expansion in 2011. Today, the Bank is present in six other
African markets namely: Ghana, Senegal, Sierra Leone, The Gambia, Democratic Republic of
Congo, and Guinea. As part the 2020 – 2024 strategic plan, FirstBank refreshed its vision to be
“Africa’s Bank of First Choice” to serve as an anchor for its renewed African expansion drive. As
such, the Bank is exploring entry into additional high-impact African markets. While the growth
journey of each African subsidiary is different, we are extremely proud of the investments that
we have made in these markets and the positive contributions we are beginning to see from
each subsidiary. Overall, I would like to note that all our African subsidiaries are making positive
contributions to the Group in terms of profitability.

How is the bank positioning to take advantage of the AfCFTA?

The African Continental Free Trade Area (AfCFTA) agreement has created the largest free
trade area in the world (measured by the number of participating countries) as it involves most
of the 55-member countries of the African Union with a combined Gross Domestic Product
(GDP) of $3.4 trillion and connects 1.3 billion people across the continent. According to the
World Bank, the AfCFTA has the potentials to lift 30 million people out of extreme poverty and
raise the incomes of 68 million others who live on less than $5.50 per day. It also has the
potentials to drive $292 billion in income gains for participating members. FirstBank is already

actively playing in seven African countries with plans to enter additional high-impact African
markets in the short to medium term. The bank has also institutionalised a collaboration
framework across all operating jurisdictions to ensure clients operating in multiple African
jurisdictions can be effectively served across the network. The bank has developed special
products (known as First Global Transfer) to facilitate regional payments for our pan-African
clients in addition to our online and digital platforms. On the part of the customers, FirstBank
has conducted several non-oil export seminars to raise awareness levels on the opportunities
presented by AfCFTA and equip our clients with the right knowledge to exploit these
opportunities. As a bank, we view AfCFTA as an enabler of our corporate vision and we will
continue to ensure the right investments are made to capture the opportunities it presents.

Your UK subsidiary recently marked its 40th anniversary, what was the journey like in that 40
years and looking ahead, what should customers be expecting from FirstBank in UK?

FirstBank’s foray into the United Kingdom (UK) forty years ago is a clear demonstration of
uncommon foresight by the leadership of the Bank. Given the burgeoning trade relations
between Nigeria and the then European Union (which included the UK) and the growing status
of London as a leading global financial center, the decision to establish a subsidiary of FirstBank
in the UK could not have been better made. Since commencement of operations in the UK,
FBNBank UK has provided a bridge for Nigerian firms with interests in the UK to achieve their
financial goals and meet their banking needs. FBNBank UK has provided trade and
correspondent banking relationships that have facilitated the achievements of several Nigerian
and indeed other African entities’ trade objectives. This is in addition to offering other services
such as advisory, mortgage and investment products to its clientele base. FBNBank UK has
also provided access to foreign capital markets to African firms and countries to raise much-
needed capital that have contributed to the economic transformation of the African continent. As
we look to the future, customers of FBNBank UK can be assured of the same excellent services
they have become accustomed to with more innovative products that will help them solve their
emerging needs.

We saw the licencing of a few banks in 2022 and the industry becoming more competitive, why
should your customers continue to bank with FirstBank?

Indeed, the industry has changed and will continue to evolve at a faster pace with the
competitive landscape becoming more challenging because of the inter-play of several actors –
new banks, fintechs, etc. However, customers will continue to gravitate towards institutions that
provide the best digital banking services that address their changing needs for convenience,
speed, and security. With over 128 years’ experience in this market, we believe that FirstBank is
well positioned to continue to delivery excellent customer experience and thrive. Our customers
can bank on our commitment to continuously re-invent our processes and products to meet both

their present and future financial needs. The bank will intensify ongoing efforts to simplify
banking for every customer segment leveraging cutting-edge digital capabilities and platforms
that make banking more seamless. Combining our deep local knowledge of this market with our
unmatched physical presence, FirstBank customers will always have an edge over their
competitors. Our rich bouquet of products and service offerings also guarantees there will
always be the right product for every customer, with each customer interaction constantly made
better through data-driven insights. Our “You First” brand promise to our customers is a
commitment that will always keep us on our toes until every customer’s financial needs are
excellently satisfied. Overall, to the customers, we commit to provide the best value proposition
and deliver exceptional customer experience.

FirstBank has made good progress in positively impacting the communities where it operates.
Can you speak about some of these?

At FirstBank, we are committed to nation-building and have been driving sustainable social,
economic and environmental growth for over 128 years of our existence. Our community
development initiatives are anchored on our strategic Education, Health and Welfare pillars. Our
engagement in sustainable business practices is based on our promise of enhancing social and
economic development as well as contributing to environmental sustainability for the present
and future generation.

Our key programmes include Infrastructure Development programme; Endowment programme;
Future First (Financial Literacy, Entrepreneurship and Career Counseling); E-Learning Initiative;
SPARK (Start Performing Acts of Random Kindness) and CRS Week. First Bank Infrastructural
Development programme is aimed at promoting infrastructure development under its identified
areas of support. This includes providing infrastructure facilities in schools, hospitals and
environmental infrastructure projects. This is in recognition of the importance of these facilities
in improving the quality of life. We have built over 16 infrastructure projects which include
universities and secondary and primary schools. The FutureFirst programme in partnership with
Junior Achievement Nigeria has impacted Over 1,000,000 people across the regions of the
country including Lagos, Port Harcourt and Abuja with knowledge of financial literacy and
entrepreneurship. Over 175,000 students have benefitted from the E-learning initiative thus far.
This include 20,000 indigent students that have received free low-end devices preloaded with
accredited content. SPARK which was introduced in the maiden edition of the Corporate
Responsibility & Sustainability (CR&S) week in 2017 espouses reigniting our values which
appear to be eroding fast.

The initiative focuses on creating and reinforcing an attitude of going beyond just meeting the
material needs of people who are unable to help themselves to showing compassion, empathy,
affection. In 2022, over 8 million people were impacted including students underprivileged

including widows in 8 countries including United Kingdom, Ghana, DRC, Guinea, Sierra Lone,
Senegal & Nigeria. We had partnerships with over 100 Charities / NGOs including LEAP Africa;
International Women Society; UNGC; UN Women; Junior Achievement Nigeria. In addition, one
of our long-term approaches to sustainability includes minimising the bank’s direct and indirect
impact on the environment. So, beyond our education and health interventions, the bank has
been employing international best practices tools to manage risks in the lending process in
accordance with our subsisting Environmental Social and Governance Management System.
Over N6.2 trillion worth of transactions were screened for ESG risks. We are partnering at the
moment with the National Conservation Foundation on the Green Recovery Nigeria (GRN), as
part of the Bank’s climate initiative which includes driving afforestation and reforestation.

Culled from ThisDay