By: Goddy Egene
For its renewed support of agriculture, Sterling Bank Plc recently received two awards
The federal government has now realised the need to focus more attention on the agricultural sector to make it the mainstay of the economy after many years of neglect. Although agriculture is an important sector of the economy with a high potential for employment generation, food security and poverty reduction, little attention has been paid to agriculture over the years.
As at 1961, Nigeria was the leading exporter of groundnut with a world’s share of 42 per cent, had 27 per cent of the world’s palm oil export, 18 per cent of cocoa and 1.4 per cent of cotton as the major West African cotton exporter. However, the reliance on oil led to the neglect of agriculture. But the realisation that the global demand for oil would continue to reduce made the government to introduce ways of diversifying the economy and the introduction of agricultural transformation agenda(ATA) by the federal government under President Goodluck Jonathan.
Agricultural financing Schemes
In order to transform Nigeria into a leading player in terms of agriculture, ATA was launched which has changed the usual approach to agricultural sector would change. Fertilizer procurement and distribution, marketing institutions, financial value chains and agricultural investment framework have been restructured. Various scheme have been introduced under which farmers and agricultural practitioners are being empowered. These include: Nigerian Incentive-based Risk Sharing for Agricultural Lending (NIRSAL) and the Growth Enhancement Support (GES).
While ATA has been hailed as good programme, the government definitely needs support of financial institutions to achieve make it realisable. And the banks have been striving to contribute in this regard with some of them getting recognition for that.
One of such banks is Sterling Bank Plc. The bank came on board three years ago to support the reforms introduced by the present government aimed at repositioning the sector to drive Nigeria’s economy.
Sterling Bank Plc, also known as “the one-customer bank” is a full service national commercial bank in Nigeria, which evolved from the nation’s pre-eminent investment banking institution to a fully-fledged commercial bank; and completed a merger with 4 other banks – Indo-Nigeria Merchant Bank, Magnum Trust Bank, NBM Bank and Trust Bank of Africa – as part of the 2006 consolidation of the sector.
With the acquisition of the business interest of the defunct Equitorial Trust Bank in 2011, the Bank enhanced its position in the hierarchy of major players in the sector especially in Agriculture finance where it has established itself as a role model and supporter of the growth in the non-oil sector.
Given its firm believe in the ATA of the federal government and its support for the programme, Sterling Bank has received two awards in this year alone has received two national awards as a reward for its contributions to the growth of the agricultural sector.
The first award, ‘Best Bank in the Commercial Agriculture Credit Scheme (CACS) which was presented to the bank by President Goodluck Ebele Jonathan, while the second award is ‘The Best Agric Bank in Nigeria. According to the bank, while the first award is a testament to its commitment to the agric business in Nigeria, he second is a testimony of its soaring pedigree in the business of agriculture finance in the country
“Sterling Bank has been in the forefront of the Growth Enhancement Support Scheme (GESS) since inception and has been actively involved in financing Agro dealers under the scheme to ensure that it plays its role as a reputable financial institution determined to make a mark in all sectors of the economy especially agriculture. It must be mentioned that Sterling Bank’s model for the GESS was eventually adopted by NIRSAL and it is currently being used by the industry,” the bank explained.
Financing the value chain
Apart from the GESS, all actors along the value chain are financed by Sterling Bank. For instance, the bank is currently financing projects like rice mills and indeed has financed one of the largest in Nigeria at the moment. Amongst others, Sterling Bank has also financed a state-of-the art soya bean oil milling plants, major agrochemical and fertilizer companies and ventured in the financing of poultry business despite the perceived high risk.
Besides, the bank also provides advisory services to poultry farmers on best production performance methodologies. This cuts across producers (crop and animal), processors, Input providers, and mechanisation amongst others. According to Sterling Bank as a bank committed to enriching lives, it takes delight in finding solutions to the needs of its customers and customers’ strategy development, and advises them on untapped opportunities.
The commitment of Sterling Bank, a leading commercial bank in Nigeria and one of the country’s fastest growing banks to the growth of agriculture in Nigeria is legendary. Despite the fact that the bank ventured into agriculture finance barely three years ago, it has received a lot of accolades in the sector, where it currently ranks among the top three banks.
Sterling Bank devotes five per cent of its loan portfolio to the sector and has plans to increase this to 10 per cent in the coming year. The portfolio cuts across the whole agricultural value chain.
Going by its nine months results, Sterling Bank loans and advances stood at N325 billion, and at five per cent, the bank committed about N16 billion to agricultural financing. However, with the plan to raise this to 10 per cent and likelihood of higher performance in the years ahead, Sterling Bank’s support for agriculture sector will be higher.
Impressive nine months results
Already the bank has recorded impressive nine month performance. The bank grew its profit before tax by 41 per cent. While the bank’s gross earnings rose by 12 per cent, profit before tax and after tax rose by higher margin of 41 per cent and 39 per cent respectively. Sterling Bank recorded gross earnings of N73 billion in 2014, compared with N65.12 billion recorded in comparable period of 2013. Net interest income rose from N24.22 billion to N32.1 billion. Profit before tax grew from N6.02 billion to N8.50 billion in 2014, just as profit after tax rose from N5.07 billion to N7.06 billion. A further analysis of the results showed that the bank’s pre-tax profit margin rose from 9.24 per cent in third quarter 2013 to 11.6 per cent in September 2014, underlying the improving profitability of the bank.
Commenting on the results, Managing Director of Sterling Bank, Mr. Yemi Adeola said, it was driven by increasing brand acceptability as shown in its growing revenues and reduction in impairment charges. He said as part of the initiatives to support its retail banking proposition, the bank has re- aligned its business by market segments for a more focused market reach, just as it continued to increase its transaction channels.
Adeola noted that the 41 per cent growth in profit before tax despite pressures on earnings arising from monetary policy changes was driven by improvements in revenues and a 30 per cent reduction in impairment charges.
“This will put us in a strong competitive position to achieve our growth plans in coming quarters. In the meantime, we remain focused on efficiency and are optimistic that the full year returns will be in line with our earlier Management guidance,” Adeola said.
According to him, as part of the initiatives to support its retail banking proposition, the bank has re- aligned its business by market segments for a more focused market reach while it has continued to increase its transaction channels and it is on track to deliver additional 21 branches and 500 Automated Teller Machines (ATMs) by the end of the year.
“Following our Extra-ordinary General Meeting billed for November 11, we plan to conclude the on-going private placement before the end of the year. This will put us in a strong competitive position to achieve our growth plans in coming quarters. In the meantime, we remain focused on efficiency and are optimistic that the full year returns will be in line with our earlier Management guidance,” Adeola said.