ADEDUNTAN:  FIRSTBANK IS FUTURE-PROOF AND REMAINS COMMITTED TO THE GOLD STANDARD OF EXCELLENCE IN BANKING

* With over 4.6 trillion-naira loans to customers in Q3 2023, FirstBank is committed to economic growth and transformation. 
At the dawn of the new year, it is natural for the Nigerian banking sector operators to anticipate dynamic shifts in regulations, increased digital innovations, and a focused approach toward sustainable growth and financial inclusion, while both the government and private sector eagerly anticipate the banking industry’s pivotal role in driving economic resilience, fostering innovation, ensuring regulatory compliance, and spearheading inclusive financial initiatives to bolster national development.
As a mark of readiness for the 2024 journey, the Group Managing Director of FirstBank of Nigeria Limited, the premier bank in Africa, Dr. Sola Adeduntan, in this interview with Festus Akanbi speaks on wide-ranging issues including how to insulate the Nigerian economy from the fallouts of the current hostilities at the international scene, the prevailing operating environment in Nigeria and the First Bank’s blueprint for optimum performance in 2024.
The global community is yet to recover from the hostilities in Eastern Europe and the Middle East and the wars do not look as if they will end soon.  How can Nigeria, a leading producer of oil, take advantage of the attendant disruptions to world order to reposition its economy instead of continuing to count the losses of the wars?
Since the emergence of the COVID-19 pandemic, global uncertainties have been on the rise; manifesting either as geo-political trade tensions or full-blown wars such as the ongoing Russia-Ukraine war and more recently, the Israeli-Hamas hostilities in Gaza. Despite concerted global efforts to resolve the conflict, the Russia-Ukraine war seems on track to mark its second anniversary in a few weeks from now. This has also led to significant disruptions to the global supply chain, especially in the commodities and energy space.
As a leading oil producer, one way Nigeria can take advantage of the disruptions caused by the wars is by positioning herself to fill the vacuums created by the breakdown in relationships among established trading partners and regions, e.g. the Russia – Europe gas supply deals. However, to do this, the right infrastructural enablers must be in place as well as a significant rise in volumes of daily crude oil outputs beyond current levels. Nigeria must position itself as a more reliable source of gas supply to Europe in the short to medium term.
On the flip side, Nigeria can take additional steps to further insulate her economy from external shocks by strengthening local manufacturing capabilities and improving agricultural production to reduce the Nation’s import dependency.
However, due to growing global interconnectedness, it is becoming more difficult for any nation to fully protect its economy from volatility on the global scene. Nonetheless, this period calls for a heightened sense of awareness among Nigerian policymakers to ensure minimal distortions to the Nation’s economic conditions.

Nigeria’s crude oil production benchmark in the 2024 budget has been pegged at 1.78 million bpd, whereas OPEC is proposing a cut that will leave Nigeria with 1.5 million bpd. How can Nigeria remedy this in a way that will not significantly jeopardise the implementation of the 2024 budget?
Traditionally, Nigeria has struggled to meet its OPEC output quota over the last couple of years. Although the Nation is currently recording some improvements in daily output volumes (largely due to the improving security situations), the country’s production volumes as of November 2023 stood at 1.25mbpd (excluding condensates), according to available official figures. This represents about 3 million barrels cumulative monthly reduction when compared with the average daily production output of 1.35mbpd recorded in October 2023.
In preparing the 2024 budget, the government has made some key assumptions around crude oil production outputs and price, that is, 1.78mbpd and $77.96/barrel respectively. Given the expectation that security around crude exploration will keep improving and crude oil theft will progressively reduce, these assumptions do not seem overly aggressive. Also, the Minister of State for Petroleum Resources recently expressed strong optimism about the country’s ability to achieve its crude oil production budget benchmark.
However, recent moves by OPEC to cut crude oil export to buoy global crude oil prices should not immediately be a challenge for the Nation seeing that our national daily crude production levels are still a bit far off from OPEC’s quota. Rather, we should focus on entrenching the improvements in crude oil production levels to make them sustainable. Where OPEC’s production cuts become inimical to economic growth, it is also possible to engage OPEC for exemptions from the production cuts given our current difficult economic situation. Nevertheless, the Nation also stands to benefit from the upsides of a higher crude oil price if OPEC’s production cuts are effective. This should offset the envisaged reduction in production volumes.
I would also like to note that the Nigerian authorities should enhance the ability of the non-oil sector of the economy to generate sizeable revenues to support the government’s expenditure. This will help to reduce the perennial over-reliance on crude oil revenues.

The Federal Government borrowing in the 2024 budget is to increase from N6.3 trillion in 2023 to N7.8 trillion in 2024, with much of it coming from Nigerian banks. How will you allay the fear of a possible crowding out of the private sector from banks in the coming year?
Given the government’s current preference for local borrowings, I can understand where the fear of a possible crowding out of the private sector is emanating from. However, this does not necessarily have to be the case.
Over the years, Nigerian banks have sufficiently demonstrated their commitment to supporting the real sector of the economy. For example, as of H1 2023, the value of loans disbursed to customers by just seven Nigerian banks stood at almost NGN23 trillion. As of September 2023, FirstBank alone has grown its loan book to customers by over N1 trillion over the December 2022 closing position. This is a clear testament to FirstBank’s ongoing commitment to the growth of the Nigerian economy.
As bankers, we fully understand and have embraced our catalytic role as agents of economic transformation. In addition, banks deliberately pursue a diversified earning asset portfolio strategy. As such, lending to the real sector will continue to offer much-needed diversification for banks’ overall portfolio health.
In summary, I do not think the private sector has any need to worry as we will continue to support all sectors of the economy (including government) to realize their objectives.

With the inflation rate trending at 26.72%, and its attendant strain on the economy, how realistic is the dream of the private sector for an affordable lending rate in 2024?
Interest rate remains inextricably linked to the inflation rate. To narrow the margin of negative returns (which usually happens when the inflation rate far exceeds the interest rate in an economy), monetary authorities like the Central Bank of Nigeria (CBN) move to restore the attractiveness of investments by raising interest rates to tame inflationary pressures.
The rise in interest rate also affects customers differently depending on which side of the divide they fall. For depositors, a rise in interest rate means they will earn more returns on their savings or investments, while borrowing customers may have to take on a higher lending rate as banks also try to adjust for the higher funding costs.
Nevertheless, it has also been proven that an unusually high-interest rate burden exerts considerable pressure on borrowers’ ability to repay their loans. Therefore, it is in the best interest of both the banks and their customers to collaborate in arriving at a lending rate that works for both parties. I do not believe that any bank will unreasonably raise its lending rate above its justifiable cost profile, given the elevated competition that exists in Nigeria’s financial services industry.

The current administration plans to grow the GDP to $1 trillion in 2026. Although the Central Bank Governor has directed banks to gear up for recapitalisation to enable them to adequately lend to the economy, do you believe the nation’s capital market, largely dominated by local investors, is liquid enough to generate the needed capital for banks?
The Government’s aspiration for a $1 trillion economy in the next 8 years from 2023 seems well-anchored given the significant fiscal changes that have been implemented since the new administration came on board. If successfully implemented, these actions hold immense potential to unlock new growth opportunities within the economy.
As of 18th December 2023, the Nigerian Exchange All Share Index (NGX ASI) has grown by almost 45% from its closing position in December 2022. This suggests significant activity in the capital market within that period. Also, as the inflation rate tapers in advanced economies, we will begin to see normalization of interest rates in these jurisdictions. Given this trend, we expect to see a growing volume of Foreign Portfolio Investments (FPIs) into the Nation’s capital market as investors seek high-return jurisdictions and portfolios.
Therefore, given these tailwinds and other factors, I remain confident that the Nation’s capital market will be sufficiently liquid to support the potential recapitalisation of banks.

The Bank recently took its culture of impressive performance higher with a 79 per cent increase in its gross earnings on a year-on-year basis as it declared N922.2 billion in its nine-month result for 2023. In terms of