By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)-The issue of demarketing has come to be a reoccurring decimal in the Nigerian Banking Industry; but this is an unwholesome and regrettable practice that has done more harm than good to the industry at a time Nigeria is suppose to be competing favourable with its peers in the advanced economies.
Demarketing is a term generally used to describe competitors in a particular industry trying to pull down one another. This practice creates panic amongst Banks customers and could ultimately lead to a run in any affected Bank.
The Central Bank of Nigeria (CBN) in trying to address this unwholesome practice in a 2006 circular to all Deposit Money Banks (DMBs) described this trend as an unethical and unprofessional practice.
The circular signed by the then Director of Banking Supervision, Ignatius Imala (now retired) read thus: It will be recalled that the CBN had earlier issued a circular reference BSD/08/2006 on the above subject titled. The Unethical and Unprofessional Practice of de-marketing colleagues/other banks in the Industry by spreading false rumours, dated April 12, 2006.
The CBN has again noted with serious concern the recent practice whereby some officers of deposit money banks engage in the de-marketing of other banks through disparaging comments and the use of negative text messages.
This development, which constitutes a threat to the safety and soundness of the banking system, is unprofessional, unethical and unacceptable. Banks and their staff are by this circular reminded that the responsibility for ensuring the safety and soundness of the banking system is a collective one for all stakeholders.
Banks are therefore advised to caution their staff on this practice as henceforth, any staff of a bank found to be involved in such an act will be summarily dismissed and blacklisted.
Also, if another staff of the same bank is involved in such a practice, the institution will face severe sanctions including but not limited to a monetary fine of N10 million (Ten Million Naira only). Appropriate channel will be opened by the CBN for the report of such unwholesome practice by banks customers and the general public.
Furthermore, in the overall interest of the banking system, all banks are advised to enthrone an appropriate corporate culture that would guide against such practices in the future,”
Now this is gradually creeping back into the nation’s banking industry as disparaging comments and damaging text messages are being sent round alleging that some banks are distressed.
Demarketing itself is aimed at limiting market growth; of what use will this be for operators in the Banking industry to do more harm than good to themselves when the sector is large enough to accommodate whosever desires to operate in it. All you need do is to be innovative, strategic and carve a niche for your brand.
As the largest economy in Africa, Nigeria’s current population based on the United Nations estimates is approximately 188 million. Early this year, the Biometric Verification Number (BVN) enrolment plan revealed that there are about 25 million Nigerians with bank accounts out of the estimated 188 million. Nigeria still remains unbanked and could be seen as an extensive market to be explored by all players who operate in the industry to breakeven and make fantastic profits. To simply put, the market is large enough for all comers to take on and grab their fair share.
Demarketing Creeping Back
In the space of about 10 years, this has cropped up a couple of times, in 2006, 2008 and now (2016). Despite warnings from the CBN to both Banks and its staff, this act has resurfaced in the post consolidated banking era. The CBN has said that Bank staffs who engage in demarketing will be summarily dismissed and blacklisted. For Banks who get involved, a fine of N10 million will be paid. This is yet to permanently put a stop to the issue of demarketing in Nigeria’s Banking sector.
The recent incidents came on the heels of rumours making rounds that some Banks are distressed following the Federal Government’s directive through the CBN that public sector funds should be moved from commercial banks to the CBN under the Treasury Single Account (TSA) initiative.
Also, is the recent occurrence in Skye Bank Plc following the change of the top management of the Bank on July 4, 2016 and attempts to demarket some banks as a result of this.
Following this, the CBN again, issued a circular refuting the rumour and said banks in the country remain healthy and are doing well despite the policy to move public funds to the TSA.
The circular dated July 7, 2016 and signed by Isaac Okorafor, its Acting Director, Corporate Communications reads thus: “The attention of the CBN has been drawn to malicious rumours and unfounded speculations that some banks in the country may have gone or may be going distressed. The CBN wishes to reiterate in the strongest terms that these rumours and speculations are untrue and do not reflect the actual health of the individual banks and, indeed, the entire industry,” the apex bank stated.
This unfortunately did not checkmate the escalating negative reports late August that Nigerian Banks are in distress due to the manner the CBN handled the issue. Nine Banks were barred by the apex bank from the interbank foreign-exchange market over $2 billion Nigerian National Petroleum Corporation (NNPC) funds in their custody. The CBN had handled this in a shoddy manner despite the fact that some aspect of the TSA directive clears the banks on any infraction and based on the fact that the issue was a case of dollar shortage to meet repayment schedule, the CBN gave the impression that the named banks hid the NNPC funds and this gave an opportunity for the recent demarketing to hold sway.
Banks Targeted
Banks who are victims of this unwholesome practice are the nation’s tier two banks which include, Fidelity Bank Plc, Diamond Bank Plc, Heritage Bank Plc, Sterling Bank Plc and Skye Bank Plc.
For Heritage Bank, not up to two years ago, it was named by the Asset Management Corporation of Nigeria (AMCON) as the preferred bidder that took over Enterprise Bank Limited in a deal which Kayode Lambo, former Head, Corporate Communications, AMCON said in a statement was for a consideration of N56.1 billion.
Of recent, Heritage Bank announced a profit before tax of N1.5 billion for the operating year ended 2015; representing its first full operating year since its acquisition of former Enterprise Bank Plc in October 2014.
The financial statement showed that the bank recorded Gross Earnings of N24.2 billion, Net Interest Income of N12.2 billion and Profit after Tax of N1.1 billion.
During the year, Heritage Bank attracted N312 billion as deposit from customers in 2015, indicating confidence in the bank. On the other hand, the bank supported businesses and individuals with N175 billion as Loans and Advances.
Consequently, the bank achieved a Total Asset of N483.4 billion for the 2015 operating year.
Heritage Bank also was recently selected by the CBN as its pilot partner to unveil, administer and manage the “N3 Billion Youth Innovative Entrepreneurship Development Programme (YIEDP). This also involves the disbursement of loans to 1500 applicants.
The Programme aimed at creating sustainable wealth and employment in the country with focus on dependable job creating sectors such as Agricultural Value Chain (fish farming, poultry, snail farming), Cottage Industry, Mining and Solid Minerals, Creative Industry (Tourism, Arts and Crafts), and Information and Communications Technology (ICT).
The selection of Heritage Bank as pilot partner for the programme was in recognition of its commitment to supporting Micro Small and Medium Enterprises (MSMEs).
Also in the month of August, African Import Export Bank (Afrexim) invested $150 million in Heritage Bank designed to support the growth of the bank. With such partnership from the CBN and a regional development bank, indications are that Heritage Bank is in a strong financial health contrary to the claims of the de-marketers.
Strategy/Confirmation of financial stability
As part of its strategy, Heritage Bank a year ago said it has a customer base of over one million and has deployed innovative technology to render banking services to its growing customer base in an unprecedented style as reflected by its ‘Experience Centers’. The Bank has also succeeded in carving a niche as an ‘SME Friendly bank’ due to its success in promoting and supporting micro, small and medium (MSMEs) businesses, a space largely neglected by the existing banks. The above are the realities which the de-marketers of Heritage Bank are trying to hide from the banking public.
Also, to confirm the financial health of the Bank, Moody in a recent rating affirmed that Heritage Bank’s capitalisation remains sound in relation to its low asset risk model and has capacity to generate income from its core business and settle its obligation as at when due.
Moody’s new bank methodology, confirmed Heritage Bank’s long-term A3 issuer rating and affirmed its short-term issuer rating of Prime-2.
The a3 BCA takes into account the bank’s low asset risk model that supports its very strong asset quality. Relative to its asset risk profile the bank maintains sound capitalisation.
“The bank’s baseline credit assessment (BCA), which encapsulates its stand-alone financial profile, and its adjusted BCA were also confirmed at a3. The outlook for all ratings is stable,” the rating agency stated.
Now the onus falls on the CBN once more as the apex regulator of the Nigerian Banking industry to do all within its capacity to protect the interest of all stakeholders in the sector. The CBN must decisively deal with the issues of demarketing and bring offenders to justice in order to create a fair playing environment if the sector is to move forward and compete among its peers in the advanced world.
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