Emeka Emuwa, CEO, Union Bank : Interview

Interview : Emeka Emuwa

In what ways has the recession impacted the Nigerian banking environment?

EMEKA EMUWA: The recession has meant two very difficult years in every industry in Nigeria. The impact was felt first by customers and then by banks, with significant increases in the number of non-performing loans. The industry was affected differently across sectors, with bigger impacts in the oil and gas, and power sectors. Nobody was insulated from the effects of the recession. This has carried over into 2018, and we will have to see how the residual impacts affect banks’ portfolios in 2019. Banks have become more cautious, with growth rates remaining at low levels across the industry.

How engaged are Nigerian banks when it comes to driving financial inclusion?

EMUWA: Since mid-2016 a lot has been done to bring new customers into the banking sector. Agency banking has spread across the country all the way into rural areas. The key to reaching the unbanked population is to create tailor-made products. Customers in different parts of Nigeria have different needs, and with the degree of financial exclusion varying significantly by region, it is especially important to design products that work in areas such as the north, where rates of financial inclusion are particularly low. As the banking sector begins to recognise and adapt to the different patterns of behaviour across the country, the adoption rate of banking among people unfamiliar with formal banking is accelerating. In terms of the banking industry’s part in this engagement, we see that there is a combination of competitive and collaborative drivers. Banks mostly compete for the same pool of existing customers, and the tens of millions of potential customers are attracting competition. This higher potential is restricted however, as the financially excluded are generally not people with high incomes, limiting the returns for banks and making collaborative efforts key to driving inclusion beyond the more immediate population. Banking networks are very involved in such collaborative exercises.

What impact will financial technology (fintech) and other new technologies have on retail banking?

EMUWA: It is important to recognise that within the ecosystem of banking, members have to work together in some manner. This realisation has made the ecosystem more integrated than ever. The increasing adoption of fintech will continue to be driven not only by innovative start-ups and their growing partnerships with banks, but also by the improving in-house development capacities of traditional financial companies. That said, it is impossible to create all these tools in-house, so it is also important to develop skills in order to effectively engage with the evolution of technology. In terms of the impact of technology on the retail banking sector, we expect the core services of commercial banks – including payments, collections and borrowing – to become cheaper, quicker, simpler and more efficient. Efficiency gains are crucial, as lower costs per customer are essential to expanding the number of people that banks can service and the personalisation of product offerings.

How can banks and regulators work to improve access to credit for SMEs?

EMUWA: While people often talk about SMEs as a singular category, there is a significant difference between medium and small enterprises. While medium-sized enterprises have fewer challenges, smaller firms are not too different from individuals in their ability to access credit. Many SMEs find it difficult to access credit, as they do not have the capacity to present the structured and organised capabilities that banks require. Support for SMEs should therefore go beyond offering more funds at lower rates in order to provide important services such as access to lawyers, accountants and tools to increase financial literacy.