In an interview with Who’s Who Legal, Kenneth Okere, head of the corporate bank/capital legal unit of Ecobank Nigeria, describes the domestic legal marketplace and discusses the opportunities and challenges facing the local banking sector.
Name: Kenneth Okere
Position: Head, Corporate Bank/Capital Legal Unit
Company: Ecobank, Nigeria
Established in 1985, Ecobank was one of the first commercial banks owned and managed by the African private sector. Today, the bank has operations in 32 countries across the African continent – more than any other bank in the world – and provides wholesale, retail, investment and transactional banking services to governments, financial institutions, multinationals, local companies, SMEs and individuals.
Alongside its banking function, Ecobank has launched several corporate social responsibility and sustainability policies throughout the region to help Africa achieve economic and financial integration across the continent. One of the bank’s key aims is poverty alleviation and it continues to invest in and grow its micro-finance capacity in partnership with Accion International, one of the world’s leading micro-finance institutions. Since launching its micro-finance bank in Nigeria in 2007, it now has branches in Ghana, Senegal, Benin and Cameroon and plans to open operations in a further 20 countries in the next five years. In addition, it assists over 200 microfinance institutions to support over 2 million micro-clients across the continent.
While the banking regulatory and legal framework in Nigeria still requires some improvement, recent measures taken by the Central Bank of Nigeria to safeguard and inject liquidity into the financial system have been well received. In 2012 a financial system assessment programme organised by the International Monetary Fund concluded that the banking sector is “now well capitalised, liquid, and profitable”. As confidence in the system is restored, foreign direct investment continues to rise. According to a study published by Ernst & Young in May 2013, Africa’s global share of FDI has grown from 3.2 per cent in 2007 to 5.6 per cent in 2012 and Nigeria is one of the most attractive jurisdictions for projects. Investors are further encouraged by Nigeria’s growing middle class and the signs of an impending consumer boom.
Who’s Who Legal spoke to Kenneth Okere, head of the corporate bank/capital legal unit at Ecobank concerning his role at the bank, the Nigerian legal marketplace and growth opportunities for the banking sector.
Tell us about your role.
As head of the corporate bank/capital legal unit of Ecobank Nigeria, I provide legal support alongside my team to corporate bank, inter-affiliate and cross-border transactions. This role involves providing legal advice, preparing, reviewing and packaging transaction documents and liaising with both local and international lawyers to conclude transactions.
What led you to a career in-house?
I began my career as a trial lawyer but veered off into corporate practice when I was invited to join the in-house legal team of a commercial bank we provided legal services for. I have remained in-house for the past 15 years without any regrets and have found it to be both challenging and rewarding.
How big is the legal department?
The legal department is fairly large and comprises 21 skilled lawyers, three paralegals and three clerical staff, with the lawyers organised into teams to match the bank’s regional structures. In addition to the regional hubs, there are three further specialised units: litigation; head office, regional support and company secretariat; and the corporate bank/capital unit.
The legal department is headed by the company secretary/chief legal counsel.
How much work is completed in-house? When do you enlist the advice of external lawyers?
Most of our work is done in-house including credit review, general legal advisory services, litigation management, security documentation and review of agreements.
The advice of external solicitors is usually sought when the bank is involved in big-ticket transactions locally and internationally (which is quite often), as well as on multi-jurisdictional matters. Advice is also sought in situations where a legal issue is novel or fluid, or when a second legal opinion is required for sensitive tasks/transactions. We also retain external solicitors to represent the bank as counsel in court and in the perfection of securities at the relevant government agencies/ministries.
Tell us about any recent projects your team has been working on. Which law firms did you hire?
Recently we have been working on some international syndications relating to the acquisition of oil blocks in Nigeria by two international companies, the provision of reserve-based lending to two multinational oil companies, the reacquisition of on an oil block for subsequent resale by a state-owned oil company in a West-African state, the establishment of a 1.4 million metric tons-per-day fertiliser plant in a West-African state, and the $3 billion syndicated loan facility for the Nigerian subsidiary of the telecommunications giant MTN.
For these transactions, the parties engaged renowned international law firms including Clifford Chance, White & Case, Linklaters and Fulbright & Jaworski. We have also had cause to work with Norton Rose and Allen & Overy for other transactions.
In addition to the matters above, we have also worked on separate local and international matters with several Nigerian commercial law firms including G Elias & Co, Aluko & Oyebode, Olaniwun Ajayi, Udo Udoma & Belo-Osagie and Banwo & Ighodalo, and we have been truly impressed by their high-quality service.
What is the single most important personal characteristic that you look for in an external lawyer?
Competence and a skill set encompassing specialist knowledge of the issue for which he is engaged; knowledge of the bank’s business; and the ability to add value.
Describe the Nigerian legal marketplace. Is there a lot of choice for clients? How can firms distinguish themselves?
Generally, the Nigerian legal marketplace is vibrant, robust and constantly evolving. As a result, the legal marketplace holds a lot of promise for lawyers and clients alike.
Firms can only distinguish themselves in this market by the quality of service and the value they add to their clients’ businesses.
What impact has the global recession had upon the Nigerian economy? Has financing slowed down? How reliant is the economy on international jurisdictions?
Prior to the global recession the Nigerian economy was experiencing a modest level of growth; however, worldwide economic difficulties led to a decline in crude oil sales and resulted in a fall in external reserves. The equity market as well as the real estate sector took a hit and foreign direct investment declined rapidly. Consequently, financing activities at the bank decreased as businesses chose to consolidate rather than embark on new ventures.
However, due to deliberate government policies in the petroleum and energy sectors, we are beginning to witness increased activities in both areas. Banks in Nigeria are now significantly involved in financing equity and capital expenditures in the petroleum and energy sectors through syndications and club deals.
Being a monolithic economy that primarily depends on the export of oil for revenues, the Nigerian economy remains largely influenced by happenings in international jurisdictions. The country’s dependence on the export sector is very significant; about 95 per cent of all foreign exchange revenue is derived directly from the export of oil. As a result, changes in world oil prices directly impact the Nigerian economy. To reduce the country’s exposure, the government has instituted policies to develop other critical sectors of the economy such as agriculture, which used to be the mainstay of the national economy prior to the discovery of oil.
Nigeria is expected to overtake South Africa in terms of gross domestic product over the next several years. Have you seen an increasing number of foreign entrants looking to enter the country?
As the seventh largest producer of oil in the world and with the biggest economy in sub-Saharan Africa, Nigeria is naturally an attractive choice for foreign investors. Following the government’s reform programme of the power sector we have seen an appreciable number of foreign businesses partnering with their Nigerian counterparts to acquire stakes in the privatised state electricity company – Power Holding Company of Nigeria. In addition, the government’s monetary policies and reforms in the Nigerian capital markets have encouraged foreign investors to purchase high-yielding government bonds and securities.
Only recently, the prime minister of Poland led a delegation of 30 Polish companies to Nigeria in search of opportunities in the country’s economy, due to Nigeria’s sizeable market and growing confidence in its economy.
Nigeria remains a largely untapped economy, thereby presenting itself as an attractive option for would-be investors.
What is the biggest challenge for the banking sector in Nigeria?
The Nigerian banking sector has experienced a great deal of turbulence in recent years, ranging from the aftershocks of the global recession to addressing challenging new regulations. However, in my opinion, the biggest challenge remains the issue of non-performing loans.
To tackle this problem, the government recently established the Asset Management Corporation of Nigeria (AMCON) to buy certain non-performing loans from the banks. While there is no doubt that AMCON has greatly assisted the banks in cleaning up their books, the measure has received criticism for being a reactive rather than pre-emptive approach to the problem. In addition, concerns have been raised over whether the measure might unduly encourage banks to increase their appetite when booking risk assets and whether the existing legal framework is robust enough to deal with borrowers who are not willing to repay their debts.
Which areas of the economy offer potential financing opportunities for the banks?
The main areas include:
the emerging power sector: the recently unbundled state electricity company presents banks with fresh financing opportunities as acquirers purchase the company’s assets;
the Petroleum Industry Bill: the national assembly is considering a new Petroleum Industry Bill which will open up the oil industry for local participation. This is an opportunity for Nigerian banks to fund local participants willing to acquire some of the assets of the oil majors;
the maritime sector: following the new Cabotage law, there are many more ventures in the maritime sector;
infrastructure: the Nigerian economy is beset by an infrastructure gap which the government is attempting to bridge; and
consumer finance: with a large and burgeoning population as well as an emerging middle income group, many shopping franchises have recently flooded the Nigerian market in order to take advantage of the country’s growing middle class and banks have been weighing in too.
Micro-finance is growing rapidly in the region. What legal and regulatory challenges does it present?
Micro-finance is provided by the various micro-finance banks (MFBs) scattered around the country, as well as by non-governmental organisations (NGOs). While the MFBs provide credit, mobilise deposits and are supervised and regulated by the Central Bank of Nigeria (CBN), the NGOs merely provide credit and are not as highly regulated. This is further compounded by the emergence of “wonder banks” that promise scandalously high interests on deposits, and equally mobilise deposits from vulnerable sections of the public. Often these wonder banks are not registered and disappear as soon as they emerge.
At present, there are well over 500 micro-finance banks in Nigeria, all of which are regulated and supervised by the CBN. This is in addition to supervising commercial banks, primary mortgage institutions and other specialised banking institutions.
Clearly, the specialised nature of these institutions and the diverse services they offer provides a unique challenge to both regulators and practitioners.
I should also highlight the fact that in 2010 the CBN revoked the licences of about 200 MFBs and thereafter initiated reforms which led to the abrogation of universal banking. Banks must now be licensed in one of three categories, namely commercial, merchant or specialised (this includes the MFBs). Furthermore, in January 2011 the CBN also issued new regulatory framework and guidelines for providers of non-interest Islamic financial services and subsequently revised its Micro-finance Policy Framework.
In my view, the challenge for all stakeholders is to ensure that the existing framework and policies protect the interest of the vulnerable section of our population as well as safeguard the financial system as a whole.
What has been the biggest positive change to the legal profession in Nigeria since the start of your career?
It is difficult to single out any one as there have been several significant changes. But if I were to pick out a few they would include: the changes to the civil procedure rules to allow for front-loading – which is the process of filing litigation documents in courts ahead of trial, and which has significantly reduced the time it takes to conclude litigation; the establishment of multi-door courthouses in certain jurisdictions, which have encouraged the settlement of disputes out of court without the usual acrimony associated with litigation; the establishment of commercial courts to deal exclusively with commercial issues; and the increase in the retirement age of judges.
All in all, the legal profession in Nigeria has made huge strides in the past decade and a half.