Interview: Zenith Bank chairman Jim Ovia discusses Nigeria’s economy
As Nigeria emerges from recession, Jim Ovia, founder and chairman of Zenith Bank, talks about the country’s prospects, his company’s expansion plans and the impact of its deal with Prudential Life.
Have you noticed a deterioration in Nigeria’s business climate as a result of the slump of the last year?
The recent recession has shown the extent of resilience and elasticity in the Nigerian business environment. That is not to say that the road has been easy. It has not been an easy five quarters, especially in an economy that is not very used to recessions.
This was the country’s first economic recession in over 25 years. But the business environment has weathered the storm quite admirably, revisiting strategies and remapping ways of achieving business goals in a tight economic situation.
As is to be expected during a recession, there has been a slowdown in economic activities as foreign and institutional investors adopt mostly a wait-and-see approach. The currency has suffered exchange rate shocks; there has been a rise in youth unemployment, and so on.
But credit to the domestic economy has been stable, the foreign exchange market has also been stabilised, and government has aggressively pursued its economic recovery policies and strategies, boosting renewed enthusiasm that is now fast-tracking economic recovery.
Some of the most difficult fallouts of the recession have been the need to trim down on workforce, spending, and in some instances, social investments as institutions restructure in the face of lower demand, earnings and profit.
But overall, I would say that the Nigerian business environment demonstrated highly commendable resilience and is no doubt excited by an end to five consecutive quarters of negative growth. The 0.55% growth registered in second quarter 2017 is a breath of fresh air which the tough Nigerian economy is expected to build on to achieve faster recovery and growth in the coming quarters.
The last time the Nigerian economy was in recession was 1987. So, considering that the global economy experiences cyclic recession every 10 years or less, it could be argued that recession is not one of the attributes that the Nigerian economy is traditionally associated with.
But more importantly, there is always a lesson learned from every setback. Nigeria is no doubt coming out of the recession better than it entered it. For example, gone forever is that era when crude oil revenue accounted for over 90% of the country’s foreign exchange earnings and about 80% of the national budget.
Now, the country is pursuing the diversification of its foreign exchange earnings with renewed vigour, and developing polices and strategies that would strengthen its local industries. And the impact of these policies on the economy will be seen in the coming years.
How have you adapted to the challenges of recession in Nigeria to ensure continued success?
As a brand that has been around for nearly 30 years, and one that understands the cyclical growth dynamics of the global economy, we have to be prepared at all times to tackle economic challenges. We continue to leverage a quality workforce, state-of-the-art technology and excellent customer experience to ensure strong competitiveness at all times, in or out of recession.
Our privileged position as Nigeria’s biggest bank in tier 1 capital and asset base empowers us to take on big ticket transactions, especially infrastructure projects with a positive impact on the Nigerian economy and on our own corporate bottom line. We continue to invest massively in human capital development and world-class banking technology to sustain excellent customer service that has become our trademark.
Our strong brand equity and unwavering customer confidence in our ability to deliver world-class banking experience, as well as our excellent corporate governance structure and stable leadership have helped our robust performance during the recession. Growth in all major indicators has remained strong despite the recession, because we are building the Zenith brand on sustainable structures that will stand the test of time.
How would you assess the economic outlook for the country over the coming 12 months?
I am highly optimistic that the worst is over, and that the economy could bounce back to its pre-recession annual GDP growth threshold of around 5% within the next two years or thereabouts.
Do you plan to increase the number of countries in which your businesses operate?
Absolutely. Zenith now has a presence in the UK and several African countries, including The Gambia, Sierra Leone, and so on. Our bank stocks are traded on the London Stock Exchange.
Our UK subsidiary recently opened a branch in Dubai as part of our expansion strategy. Within the African continent, we plan to leverage on our size as one of the top 10 banks in the continent, and also, on the economic muscle and potential of the Nigerian economy (our primary market) to spread our brand into strategic markets within West Africa and other parts of the African continent.
This is increasingly important as intra-African trade and commerce continue to blossom, especially owing to the African Union and ECOWAS integration plans. Gradually, trade among African economies is on the rise, even as countries within the continent continue to break the age-long dependence on importation to meet their domestic needs.
In 2016 for example, trade statistics published by the National Bureau of Statistics showed a significant decrease in Nigeria’s imports and increase in exports. These are benefits arising from the country’s pursuit of policies that support import substitution and development of the domestic industries. The same is true for several other African economies.
The gradual improvement in intra-continental trade is expected to boost productivity and rapid economic expansion within the continent, address unemployment challenges, boost inclusive growth and development as well as self-sufficiency in food production, manufacturing, and so on. As a leading African financial services institution, we are eager to support the continent in harnessing its huge economic potential.
The recent investment by the UK’s Prudential Life in Zenith made headlines. What is the medium to long-term strategy behind the deal?
With nearly 200m people, Nigeria has the seventh largest population in the world. But the country also has one of the lowest insurance penetration rates in the world, at around 0.7% of GDP.
No doubt, Nigeria holds massive insurance potential. And this is what the recent partnership with Prudential Plc is designed to explore, not just in Nigeria but across Africa’s nearly 1bn population.
Prudential UK is one of the oldest and most capitalised life insurance companies in the world. Our partnership will redefine the life insurance industry in Nigeria and significantly enhance our global competitiveness. It would significantly boost the confidence of other foreign investors in the Nigerian insurance landscape, enhance productivity in the insurance value chain and create massive job opportunities.
Will the Prudential deal help Nigeria to address its healthcare challenges?
If you look closely at the underlying principles guiding insurance services worldwide, you see that this sector has a lot in common with social enterprise. While insurance firms are in business to make profit, they are also in business to provide life-saving support to all segments of the society, from the rich to the not-so-rich.
With the new partnership that has given birth to Zenith-Prudential Life, we are better positioned to play this all-important role. We are excited about the prospect of increased insurance penetration in Nigeria and using our products to meet the most pressing needs of the populace – including access to quality healthcare.
How important is making a positive impact on development in Nigeria and Africa for you?
Zenith Bank believes strongly in giving back to the society where we operate. We measure our overall corporate performance not just by the financial profit we make, but also by the extent to which we impact the wellbeing of the society and the environment.
Giving back should be driven not by what makes a corporation look pretty on the pages of newspapers but by the actual need of the community where the investment is made. And identifying this need is only possible through effective stakeholder engagement and feedback. This approach has helped us to make a meaningful impact in our social investments.