By Bashir Ibrahim Hassan
Early last February, Henry Semenitari was barely one month old on his new position as CEO of Unity Bank Plc, when the Central Bank of Nigeria (CBN) announced another hike in the Cash Reserve Ratio (CRR) for the second time in less than six months. The February hike pushed the requirement for CRR from 50 to 75 percent. The last hike was in August of 2013. With Nigeria’s economy being public- rather than private sector-driven, many banks in Nigeria have come to depend heavily on public sector deposits for their liquidity base showing.
The hike has the potential of exposing the true colour of some Nigerian banks that, because of their access to cheap and easy money from the public sector, make minimal contributions to the growth of the real sector and yet continue to declare huge profits every year. Such increase in CRR is bound to reduce access to such funds and force banks to become innovative both in mobilizing savings and increasing lending. In addition, it will reduce the inclination for insider lending which contributed significantly to non-performing loans of some of the banks in recent years.
Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves with the Central Bank of Nigeria or whatever country for that matter. And as is the case with many of Nigeria’s banks, the largest customer deposits usually come from state governments and their agencies.The argument of the CBN leadership is that it does not make economic sense for the government to borrow over N2 trillion from the banks, while its agencies have over N1.3 trillion sitting interest-free in the same banking industry. To correct the anomaly, the Central Bank increased the CRR for public deposits to 75 per cent hoping this will stir the banks to go out and chase deposits, which they will have to advance as loans if they are to make any profits on such deposits.
It worries the apex bank and industry watchers alike that while banks had access to cheap public sector funds, they tended to focus on lending to government, general commerce and importation, paying less attention to crucial productive sectors such as agriculture, manufacturing and SMEs.But this policy did not come to the new CEO of Unity Bank as a surprise. He saw it coming and got prepared.
Asked in a recent newspaper interview what his challenges in the new position were, he identified the task of transiting the bank from a “high public sector –driven bank to a private sector driven”. Truly, Unity Bank, which was a product of the largest merger of banks in Nigeria’s history, was forged by fusing nine banks into one in 2005 with the biggest bank in that merger being the Bank of the North—historically the bank of the state governments of the entire Northern Nigeria. Bank of the North has enjoyed the patronage of keeping the huge public deposits of the odd Nineteen Northern states government for several years. It is a legacy that the CBN is now challenging with stricter regulations, including use of the CRR tool. It is also a legacy that Semenitari is prepared to face and convert into strength. And his chief tool for achieving this is robust retail banking service.
Retail banking seems to be the gospel Semenitari has chosen to preach. He is bringing to Unity Bank 22 years’ solid experience in the banking industry with a recognised strengthens in business process re-engineering and design. His specialisation is in strategic process enterprise management and integration of business process models with Information Communication Technology (ICT) to drive business at product and strategic business unit levels.First, the main derivative is leveraging on a very strong Unity Bank’s network across the country totalling over 240 branches. Second is agriculture. With branches in most remote corners of the country, no bank in the country is better-located and situated within the agrarian belt of the country than Unity Bank, . From where I came from one can find Unity Bank branch at Chiromawa, amidst the rural tomato and rice growers of Kura and Garun Malam Local Government area councils. Few meters away, Dangote is now setting up a tomato manufacturing plant.
Thirdly and closely related to agriculture, is the promotion of the rural economy through SMEs, which provide the gateway to middle market businesses and in fact the main driver of the large business in Nigeria. In short Semenitari vision is to make the Unity Bank a retail bank of choice in the next five years.
With a vision set on retail banking service excellence and given the strategies outlined by Unity Bank now under Semenitari and the supporting human and technological capital he is willing to unlock and deploy, in few years the bank will be a model for others to emulate in Nigeria’s banking industry. And the starting point obviously is raising the bank’s capital from its current 50 billion Naira base to see to its implementation. Already the capital market is awash with discussions on the forthcoming share capital issue by Unity Bank Plc.
Bashir Hassan wrote from Abuja and can be reached on email@example.com