By Dele Sobowale
“It is unthinkable that wisdom should ever be popular.”Johann Wolfgang von Goethe, 1749-1832.
Access Bank Plc is perhaps the most innovative Nigerian bank in the last two years as the changes in the nation’s economic landscape have multiplied the uncertainties banks and other financial institutions face in the country today.
It has diversified its business by establishing strong footholds in other countries based on careful appraisal of the economic prospects of those nations.
For those who might think that this is just a PR write-up for Access Bank, it is vital to point out that one of my nephews, who I encouraged to read Economics, name withheld, is with the World Bank Group in Asia; and we chat virtually all the time. Thus, when Access Bank announced its intention to raise N194 billion through Commercial Papers, the first point of call was my nephew; who quickly organised a series of calls, including to associates in the international finance community in Nigeria – to seek their advice – before commenting on the matter.
However, before presenting my findings and recommendations to prospective investors, there is a need for an observation about commentary in the age of social media.
“It ain’t the things you don’t know that cause the problem; it’s the things you think you know that ain’t so.” Ralph Waldo Emerson, 1803-1882.
Democratisation of commentary, which the internet has exploded, like all human inventions, is turning out to be a two-edged sword. Today, in every field of human endeavour – medicine, sports, law and constitution, environment and economics/finance, security and military – experts in the field are finding their decisions are being questioned by know-nothings – who might command a large following of fans on account of their success in other areas. Most Nigerians cannot understand that Professor Wole Soyinka, Bishop Hassan Kukah, Bona Boy, for examples – are experts in literature, theology and music respectively; and nothing else. Yet, their views are sought on virtually everything. As an economist, it is quite easy for me to call out instances when mass ignorance trumps professional knowledge on a particular issue. When Access Bank announced its intentions to raise N194 billion through commercial papers, the paper inadvertently opened the floodgates to three sets of critics lurking in the social space – those really ignorant, those deliberately distorting facts and envious bank competitors seeking to de-market Access bank.
It is a fact that in any country, the percentage of people knowledgeable in economics is less than half of one per cent. The vast majority are economics-illiterates; just as they are ignorant in law and engineering. That includes people holding PhD in other subjects. For instance, I am an illiterate in virtually every field of human endeavour.
Based on the advice given by Socrates, who died 399 BC, “To thyself be true”, I avoid getting involved in disputes depending on knowledge which I don’t possess. A lot of people have been commenting on the Access proposal without adequate knowledge. Without going into the details of my findings, one example will help to illustrate how totally wrong the critics might be.
“It requires wisdom to understand wisdom; the music is nothing if the audience is deaf.” Walter Lippmann, 1889-1974.
To be quite candid, the Access Bank appeal is like music being played to a small group of selected listeners, who fully understand it, only for others, for which it is not intended, to start commenting on the performance. The vast majority of Nigerians cannot meet the minimum requirement of N5 million investment. So, in reality, it is not our business. It is strictly speaking an invitation to the super-rich and the wealthy; and for people in that category, it will not constitute a stand alone investment. Rather, it will be considered as part of a basket of other investments; in order to determine whether it promotes their financial goals.Ordinarily, it would not have engaged my attention; given its elitist orientation. But, the measure must represent a vital aspect of the bank’s overall competitive strategy for growth and survival. That is the only aspect of it which makes it of interest to all of us. Nigeria cannot now afford to lose a bank; and it is in our collective interest to keep all of them afloat.
Some critics have queried the financial wisdom in issuing Commercial Papers when other options – increased deposit drive, inter-bank loans etc – are available; without considering the repercussions of each of those alternatives and the speed of the availability of the funds, as well as the costs. Given the prevailing interest rates dictated by the policies introduced by the Central Bank of Nigeria, CBN, inter-bank rates are extremely high right now; and it would amount to strengthening other banks at a time when every bank faces mounting internal and external challenges.
Information reaching us indicates that inter-bank rates now hover around 30 per cent per annum; and only the banks with the deepest deposit base stand to benefit from the operations. Meanwhile, every effort by the CBN and the banks themselves to increase deposits have failed to yield desired results.
The causes are not hard to discover. Currency change by the CBN, was so mismanaged, as to undermine the fundamental foundation of banking – trust.
Hitherto, depositors, anywhere in the world, took their money to the bank and expected to retrieve them as and when needed. Only banks on the verge of failing failed to pay depositors. CBN’s currency change of 2022/23 undermined trust. Not only were depositors denied access to their money; they were brutalised for asking. A few died in the queue.
There was no money in ATM machines established for dispensing cash outside banking halls. It was only the FG and CBN who failed to hear the declaration of small depositors – “never again”. Fortunately, the CBN had also licensed P.O.S operators; who immediately cashed in on the hardship imposed on depositors; but, steadily entrenched themselves as better alternatives to banks for deposits. Today, millions of small depositors, traders, transporters, artisans, food and beverage sellers etc, no longer take the trouble to go to banks. All their banking services are available conveniently in their neighbourhoods and sometimes 24/7. Banks are losing the battle for cash deposits; and, nothing known to economists indicates that the trend will be reversed soon. A group of P.O.S operators we have been tracking in our consultancy indicates that the number of clients have continued to increase steadily since 2024. Those engaged in invisible trades – illicit drugs, cybercrime, kidnapping etc – in particular, collect cash and distribute them to POS operators instead of banks where the funds might be easily confiscated. That is a long but necessary explanation to explain why deposit drive is out of the question.
THE RIGHT STEP AT THE RIGHT TIME
“SUBSCRIPTION PERIOD MARCH 20-25, 2025, 270-DAY MATURITY.”
That summarises the entire offer and the conditions for subscription – which the critics ignored. Obviously Access Bank had lined up the subscribers and merely wants to fulfil the necessary legal requirements. Those who still have to think about how to raise N5 million for the offer need not apply. For the bank, it is an excellent initiative. Cheapest way to raise funds.
Follow me on Facebook @ J Israel Biola
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