8 November 2016
Lagos, Nigeria

SWIFT Business Forum West Africa 2016

Business Forum West Africa – Africa is still rising

“Even in the face of economic challenges, the West African region sees consistent growth,” said Hugo Smit, Head of Sub-Sahara Africa for SWIFT, opening the conference and presenting the latest SWIFT traffic growth. “Africa rising is still applicable. The world and environment are changing and we need to adapt.”

Business Forum West Africa 2016A keynote address was delivered on behalf of the Honourable Minister of Finance Kemi Adeosun. “The Government is facing cash-flow challenges due to global economic recession,” she said. “This time calls for diversification of our economy, exports of Nigerian products and strengthening of the manufacturing sector.”

She said the government was looking to the private sector, including the Business Forum’s senior banking delegates, to harness the potential of innovative technology to better serve customers and drive uptake of financial services. She added that the Business Forum provides an ideal opportunity for high level executives from across the financial community in the region to debate and discuss the most important issues facing West Africa.  

This time calls for diversification of our economy, exports of Nigerian products and strengthening of the manufacturing sector.

Honourable Minister of Finance Kemi Adeosun

Correspondent banking 2.0

Business Forum West Africa 2016In an opening session which looked at the future of payments, Leo Punt, Deputy Chief Executive, EMEA, SWIFT, explained that cross-border payments represents 20% of all global payments flow. However, in terms of transactional revenues it represents 50%. It is an important business for banks and under significant pressure for change.

However, the correspondent banking model is being challenged by a multitude of new players and technologies in the market as well as increasing customer expectations. The industry is therefore exploring ways and means to innovate and improve the correspondent banking experience through new technologies, new business models or invigorating existing systems

Ike Williams, Chief Information Officer at Heritage Bank, said the bank is taking advantage of the many offerings on the market. “Companies focused on payments will approach us and we assess which has potential, taking into account suggestions from the regulator,” said Williams. “However, we need to build in some degree of flexibility as demands and technology develop. We also have to make sure that if something doesn’t work, it doesn’t bring the whole system down.”

Tayo Asupoto, General Manager of Settlements at Guaranty Trust Bank, takes a consumer-led approach to new technology. “The customer is at the centre of everything we do,” she said. “We tailor deliverables and products based on customer needs. As Bill Gates once said, as we go into the future we will no longer need banks, but we will need banking. Nigerians are very forward looking people that embrace change. Therefore, banks in Nigeria are coming to terms with this and catering to a generation that wants to do business using phones and other technologies.”

The customer is at the centre of everything we do. We tailor deliverables and products based on customer needs.

Tayo Asupoto, General Manager of Settlements, Guaranty Trust Bank

SWIFT and the broader industry are also reacting to changing customer expectations. Punt explained that given rising expectations by customers and corporates alike, the correspondent banking model has room for improvement – it is currently costly and lacks transparency “SWIFT has worked closely with correspondent banks to see where the model can be improved,” said Punt. “The SWIFT global payments innovation (gpi) initiative, announced in December 2015, is designed to improve the customer experience in correspondent banking by providing faster, same-day transactions, increasing transparency and predictability and providing end-to-end tracking of cross-border payments.”

Regional payment structures key

SWIFT traffic data shows that while there is consistent growth in intra-African trade, absolute levels are still low. The majority of trade messages from Nigeria, for example, are going to the US, Europe and Asia Pacific and very little traffic is going to other African countries – only 7%.

Dipo Fatokun, Director of Banking and Payments Systems at the Central Bank of Nigeria, noted that structural reform is required to stimulate growth in intra-Africa trade. “Most African countries are commodity traders,” he said. ‘’Countries need to reform their economies so they can grow their activities outside the commodity sector. Diversification is required.”

“Improving the payment infrastructure is also key,” Fatokun continued. “We need to connect the continent.”

Improving the payment infrastructure is also key. We need to connect the continent.

Dipo Fatokun, Director of Banking and Payments Systems, Central Bank of Nigeria

Joseph Akunyumu Tetteh, Director of Banking at the Bank of Ghana, agreed that a payment system is needed that can support intra-African trade; he argues that the best way forward is a common currency to facilitate payments and a central regulator.

The West African Monetary Institute (WAMI)’s objective is to create such a system. Abdoulaye Barry, Director of Financial Integration at WAMI, said that the organisation will create a national payments system committee to support this. It will harmonise payments systems at a regional level, assess the strengths and weaknesses in each country with an aim to ensure that all are on the same level as those such as Nigeria and Ghana.

Business Forum West Africa 2016Build confidence, increase investment

As a key player in one of Africa’s largest economies, the Nigerian Stock Exchange (NSE) plays an important role across the continent. Ade Bajomo, Executive Director at the NSE, explained that the organisation is attempting to grow the domestic Nigerian market, as well as being a champion for development of other markets by creating an open, vibrant and collaborative environment. 

“We are working to become one of the foremost African exchanges”, he said. “We are creating a hub that is reliable and efficient with strong standards in regulation, efficiency and liquidity.”

Segun Sanni, CEO of Lakewood Investments and Trust, focused on how to ensure liquidity in the market. “The current challenge is not with infrastructure, regulation or technology. It is with the wider economy,” he said. “If we manage the economy and investors have confidence in it, further investment will come in.”

If we manage the economy and investors have confidence in it, further investment will come in.

Segun Sanni, CEO, Lakewood Investments and Trust

Business Forum West Africa 2016However, Bajomo added that markets should have as little friction as possible. “It has to be easy to invest and pull out; list and de-list,” he said. “Processes need to be easier and more transparent. We need regulation and innovation. This will build confidence that will in turn increase foreign investors.”

Kyari Bukar, CEO of the Central Securities and Clearing Systems noted that for capital markets, clearing and settlement infrastructure is critical to deepening liquidity. “We are not living in isolation but are part of a region and we have to play our role,” he said. “Nigeria, Kenya and the African Development Bank have floated an entity called Africlear, an international CDS, to which all markets can connect. It is a hub and spoke entity that will process transactions, remove the ‘hoops’ and reduce the cost of transacting across markets. This will help increase liquidity.”

A regional economic overview

Professor Apkan Epko, Professor of Economics at the West African Institute for Financial and Economic Management, gave an overview of the status of the different economies in West Africa. He noted that most of the West African countries were at the same level of development from the 1950s to the1970s as Singapore, Malaysia, Indonesia and Taiwan. However, while the region has experienced growth of around 7% over the last 10 years, they have not seen the same level of investment in infrastructure or industry. As a result, he says most countries in the region still have high rates of unemployment, declining productivity and rising inflation.

Professor Epko explained that West Africa has been strongly affected by the drop in commodities prices, which has exacerbated the situation. Additionally, it faces some other significant challenges including hard and soft infrastructure gaps, particularly in the energy and transport sector, excessive recurrent expenditure and an increasing level of public debt.

That said, the sub-region still holds potential, said Professor Epko, arguing that countries must diversify their economies away from mineral and commodity exports.

Facing regional economic challenges

The following session looked at some of the challenges facing the Nigerian and Ghanaian economies and what their central banks are doing to improve the situation.

Business Forum West Africa 2016Dipo Fatokun, Director of Banking and Payments Systems at the Central Bank of Nigeria, outlined the country’s gloomy outlook. While it saw growth year-on-year of 7% from 2000-2010, the country is now in recession. Exports halved from 2014-2015, and are expected to be even lower in 2016. Inflation, which used to be in single digits, is now at 17.9%. The Naira also fell 30% against the dollar this year. He said that the economy remains too reliant on commodities and that the government is putting greater focus on diversification and other measures to address this.

“Nigeria depends on oil, and we have suffered two set-backs – firstly, the global price of oil went down. Secondly, the amount of oil we exported decreased due to instability in the Niger delta. This has a significant impact on an economy which is so dependent on one commodity.”

Fatokun added that measures have been put in place to tackle the situation: the country is attempting to reduce its dependency on imports and is encouraging credit for production and manufacturing. It is trying to gain greater control over foreign currency markets.

Yao Agbelenko Abalo, Advisor to the Governor of the Bank of Ghana, explained that Ghana is facing similar challenges as a result of commodity price falls. The country relies heavily on oil, cocoa and gold exports; with the crisis, there have been serious implications for FX in the economy and consequences for managing the budget.

Abalo added that the Central Bank began fiscal consolidation, cutting expenditure and reducing the budget deficit from about 11% to 7%. There were other variables in the economy that could absorb some of the shock – thankfully, for example, the economy benefited from a floating exchange rate. A combination of these measures has brought back confidence in the economy. Investors are coming back.

Both panellists agreed that ‘’de-risking’’ is an issue in their respective countries. De-risking sees the reduction of international banking relationships, not only to decrease risk but also to cut costs. However, both countries are taking steps to address this trend. The Nigerian Compliance Officers Forum is discussing whether all banks should adopt SWIFT’s KYC Registry to increase the transparency and consistency of their data, and in Ghana, the community has signed up to SWIFT’s Sanctions Screening solution, which screens incoming and outgoing messages against the latest sanctions lists.

Tackling cyber-crime – investment critical

Cyber-attacks are becoming more sophisticated, better organised and better funded. The threat is real and is becoming increasingly challenging for the financial community.

Sam Okenye, Chief Information Security Officer at the United Bank for Africa (UBA), explained that the issue has posed a major threat to UBA. In the last quarter the bank successfully blocked more than 23,000 attempted attacks on infrastructure, 17 phishing websites and 5 emails to customers.

“We need to keep our ears to the ground and monitor what happens,” said Okenye. “Banking is where the money is and cyber criminals are therefore putting in the effort. We are rolling out secure products which go through a lot of tests. This requires a lot of investment, processes and people.”

We need to keep our ears to the ground and monitor what happens. Banking is where the money is and cyber criminals are therefore putting in the effort.

Sam Okenye, Chief Information Security Officer, United Bank for Africa

Business Forum West Africa 2016Fidelity Bank in Ghana is facing similar problems. “Cyber risk is one of our biggest challenges as a bank,” said Tunji Alabi, Chief Information Officer at Fidelity Bank Ghana. “The attackers try to grab the lowest hanging fruit. We are a small bank and therefore have to be creative to fight cybercrime.”

Both agreed that a lot needs to be invested in security programmes. A high percentage of profit has to go back to innovation and security. “The greater cost is not doing this and being exposed,” said Okenye.

SWIFT is also doing a lot to tackle the issue of cybercrime. “We realised we needed a dedicated programme in place,” said Leo Punt. “The Customer Security Programme aims to improve information sharing throughout the community, enhance SWIFT-related tools for customers and provide control and assurance frameworks. Through the programme, we are also sharing best practices for fraud detection and enhancing support by third party providers.”

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