In this interview, Mr. Abubakar Suleiman, Managing Director and Chief Executive Officer of Sterling Bank Plc, speaks on banking regulations, COVID-19 crisis, health of Nigeria’s banking sector and OneBank, his organization’s new digital bank.
What is your assessment of banking regulations in Nigeria and the health of the banking sector?
We are held to high standards. Sometimes, I feel we are held to much higher standards than other countries. This makes up for the perception gap that banks in emerging markets are riskier as the regulator does not want that to be an obstacle to the flow of capital. The pace at which we have implemented changes that have come with standards such as IFRS 9, BASEL 2, and BASEL 3 is quite ahead of the curve. The positive side is that these high standards enable us to continue attracting capital into the country. The minimum capital requirement set by the regulator is 10 percent for local banks and 15 percent for international banks. This is a double-edged sword. Having a high capital requirement affects your ability to create leverage. A desire to grow lending to the sectors that we are focused on could be negatively impacted if the sector does not have enough capital but at the same time if the minimum ratio is low then you could struggle to attract the funding you need. The good news is that at present, there is no funding challenge in Nigeria as there is a significant amount of cash reserve requirement.
Sterling Bank is in the news for building a digital bank. How does a digital bank work?
Many players have a mindset that once they build a payment system, they have built a digital bank. But a digital bank must bring everything a customer needs to do in physical interaction with a bank into a digital platform. It must entail important things such as onboarding, and digital documentation. With the advent of BVN and other digital identity verification technologies that we have, we are now able to do remote identity capturing and customer on boarding. The second component of a truly digital bank is, you have to be able to conduct your KYC digitally and remotely. Anything short of that is business as usual. After this, digital payment must be enabled. This is what most digital payment platforms who call themselves digital banks do. So, for us, we are far ahead of other players who allow just payments on their platforms, as we have presented an opportunity for customers aside self-onboarding process, to be able to build wealth and get loans through the OneBank app. It is pointless to have a truly digital bank when people cannot make money from what they have in their account. We have built a platform that allows you not only to keep and transfer money, but also to build wealth and get funding for your ideas and businesses. The last leg of what OneBank will do is the opportunity to access advisory services on the platform. This is important because the cost efficiency that is achieved when you have a truly digital bank is that you will be able to get banking to so many people than we can using our physical structures.
Why did Sterling build a digital bank?
The essence of this innovation is to improve Nigeria’s productivity. Imagine not having to walk into the banking hall to get an ATM card. Think about the number of hours committed to that before now. You do not have to take time out of work, school, or business to get an ATM card any longer. With OneBank, you apply online and get served within a few minutes. What we have done with OneBank is to give you back your time, so that you can be efficient in all you do. That is how productivity is enhanced. We have built some of the most exciting products in the banking industry, so we must be able to get it across to Nigerians wherever they are, and this cannot be done using the traditional banking system. The best option available to us is the digital route. OneBank by Sterling is truly the new way to live and we encourage Nigerians to use the app.
You have positioned Sterling Bank as an impact investor, which is unheard of in the Nigerian banking sector. What is the reason behind this?
Why we have taken this position is not just about Abubakar Suleiman. It is the creed of the bank I work for. Truly, I have pushed the agenda forward and out the more. Our belief at Sterling is that we cannot win when everything around us is failing. We hold it dearly that it is wrong to be a very large corporation or big business listed on the exchange running in a failed environment. We believe that big business will also fail. That, fundamentally, has defined our perspective as a brand. We do not want to be a successful business in a failed society.
What are the impact focus areas of your bank and how good has it been for business?
We work basically around what is known to us as the HEART of Sterling – Health, Education, Agriculture, Renewable Energy and Transport. We did our research and concluded on reforming these five critical sectors that will have meaningful impact in the lives of the people if we bring the money and a bit of technology into it. Not only are these sustainable sectors, they also account for the employment of a large number of people with the potential to contribute significantly to the country’s GDP.
Talking about how viable these sectors are to the business so far, I am happy to say that those who matter are now paying attention to us. These include government, development agencies, multilateral organisations, industry groups, business owners, investors and NGOs alike. These people come to us not only when they need finances but also to seek advice. It is something we would love to do again and again. So far, it has been a journey I am very proud of.
You are known for your work in raising funds for healthcare workers who are in the frontline. What is the idea behind this?
The trigger really for me is reading a news items that about 14 percent of those infected with coronavirus in Spain were doctors. For me, that is the most important factor within the healthcare value chain. You can buy ventilators, and maybe build world-class hospitals in 10 days like the Chinese or even manage to do so in 30 or 60 days, but doctors cannot be made within a year. They are the weakest link that is not duly protected. Another thing was when we realised that doctors who are lucky enough get paid N5,000 as hazard allowance. At that point, we concluded it was important to bring attention to the condition of healthcare workers in the country. We could not have gotten the country to a point where we lose about 14 percent of our health workers to COVID-19. I doubt Nigeria can ever stand that scenario as seen in Spain. We saw how countries which can pay healthcare workers better than Nigeria were losing them. At that rate, it is just easy to come to get those that we have.
Tell us how well you have done with the platform set up to run the fund?
We are very proud of what we have now and how far we have gone. What we did was to work with our foundation to use its crowdfunding platform, Giving.ng, to raise N1 Billion Health Workers’ Fund meant to buy protective equipment for health workers and also to pay them a token in appreciation of their service at this critical time. We want them to be motivated. So, when they walk into the COVID-19 Isolation centre, they have it in mind that some people are thinking about them and helping them sort some of the basic needs they might. To this end, we committed a sum of N25 million as a seed donation to the project. So far, we have been able to double what we seeded the fund with, thanks to the intervention of everyday Nigerian who keyed in. Now, we are in the region of N60 million. In managing the fund, we identified and invited the most respected public health professionals in the country to manage the fund and ensure they use their wealth of experience to solve the problem we saw.
If this pandemic drags on for long, do you think Nigeria can cope and how can we do more for the healthcare workers in the frontline?
The simple answer is that we are not doing enough for the healthcare workers. We do not need to have billions to make a difference. A simple donation by all of us will change the narrative. We have spent over half a billion naira in the fight against COVID-19 working with government and some partner organisations and agencies, building isolation centres and building more testing infrastructure, among others. If anyone donates N500 now, it makes a difference. So, if we get about a hundred thousand people to donate at once, even if it is just a N100 each, we would have achieved something reasonable. Nobody is doing enough, and we must do more. If you ask me what can be done if COVID-19 drags beyond this year and more. The implications of the crisis are enormous. Even if we are able to manage the issue with healthcare professionals as we are working on right now, there remains the challenge of healthcare facilities and system to manage the issue. Beyond that, the economic challenge is another factor that stare us right in the face, so the poorest of the poor within the system will have a lot to contend with COVID-19 or not. I do not subscribe to the idea that we will be fine the moment we are able to beat the virus. As a people, I feel it is important we pay attention to the healthcare system well enough in this country. Without healthcare, we cannot manage the well being of our people and neither can we educate our children. So Sterling Bank is fully committed to the cause of healthcare delivery in the country. It must be noted that this is not about the bank as a commercial entity doing CSR. What we are doing with the Health Workers Fund is to work with our foundation and other well-meaning corporate organisations who have the interest of the country and her people at heart to make impact in the industry through the most important stakeholders – the healthcare workers. We are committed for the long term and a good part of our revenue will go into the HEART sectors of which health sector is number one, every year.
Are there opportunities that Nigeria can take advantage of with this crisis?
China is the factory of the world right now. The status quo of about 25 years is already being negotiated by some stakeholders in the world who no longer want to do business there again. What this means is that most of the things made in China may not be bought again and this will no doubt affect transport, logistics, international travel and, by extension, international trade. When people say they are not ready to produce in China, it does not necessarily mean they are heading for Germany, London and other western countries, they are potentially looking for new partners and that could be in Africa or Nigeria. This is an opportunity for the country, but we must be ready to take that advantage once it is here. It is my view that Nigeria should prepare for the decoupling of globalization post-COVID-19 if we are to survive what is coming while building our economy to be a part of the new order to emerge after these times.
Do you think the reduction of monetary policy ratio to 12.5% from 13.5% by the CBN will translate to lower lending rates to customers?
I think the monetary policy rate is a signal. It does not directly feed into lending. It is the monetary authorities signaling what they expect the market to do. The reality is that they had already given us other more powerful signals. For instance, the interest on treasury bills was at four per cent to five per cent while OMO rate is around six per cent. Those signals were already there. So rather than buy treasury bills at five per cent, I may opt to lend at 15 per cent.
How does the devaluation of naira to 380 per dollar by the CBN reflect in the forex market realistically?
Exchange rate is a function of demand and supply. The more FX we have, the more supply we get. When we see oil price crashing and government revenue headed downward, it means that the supply side will be disrupted. It is wise for the market to reflect that. The reality is that we could not continue to do well when there have been changes within the market and demand and supply had seen adjustment. The real solution to our FX challenge that I know the central bank governor has been clear about is that we must re-awaken the capacity of our local production. By supporting the agriculture sector to supporting the health sector and manufacturing and refining, we will mitigate our vulnerability. As such, we will do better if we have something to sell to the world. The FX market is a short-term play. The long-term play which is critical to our economy is continuous local production.
How can we build back the healthcare and banking sectors so that in case we have another crisis like this in the future we are able to manage the situation?
The biggest mistake we can make in the country is to try to replicate the health care system of countries with life expectancy of 80 years or those that are significantly urbanised and have per capita income in excess of $40, 000 per annum. That infrastructure does not work well for us and we cannot afford it. What we can do as a country is to deploy technology smartly to address our peculiar challenges. We supported a platform called Tremendoc, one of the early players in telemedicine solutions to Nigerians. For as low as N600, you can get access to first level medical diagnosis without the cost of driving or getting yourself to a hospital and having to queue endlessly to see a doctor. With that amount, people can have access to medical examinations as it may be required. What Nigeria needs to do is to focus on primary healthcare. The country does not need a billion-dollar investment. What primary healthcare needs for success is about $10, 000 investments in each community. When combined with telemedicine, we will do better. Once we are done with that, we can focus on pharmaceutical and in between, we give attention to diagnosis. The point is that we cannot make the kind of investment the Western countries are making because we have a huge youth population, large rural communities and per capita income that cannot cater for that huge facility in healthcare delivery. In banking, my goal within the period I have left in the sector is to change the perception of people about banks in Nigeria. My belief is that banks should be significant enablers in building wealth. Part of this is to ensure that we lend to those who need funding. We should be unorthodox about the way we do it. Sometimes, it is important to unlock value within an ecosystem outside banking before we lend to it. For instance, we unlocked opportunities in the transport sector where we invested in a payment system for mass transit and then again in the agricultural sector where we provided blockchain-based exchange that allows farmers to access the market and buy their inputs. I believe as bankers, we must take steps to know the challenges of our customers, so we can achieve more. With the resources that we have, technology and the human capital that are in abundance, we must go beyond a business that just keeps the money for people and charges a fee for lending.