The Chairman's Statement to Shareholders
Esteemed Shareholders
Special Guests
Fellow Directors
Gentlemen of the Press
Ladies and Gentlemen
It is my pleasure to welcome all of you to the 38th Annual General Meeting of our Bank. It is also my privilege to present to you details of the financial operations of our Bank for the year that ended 31st March, 2007. Before I go into the details of the Accounts, permit me to briefly state major political, socio-economic, global and domestic events which impacted on the operations of the Bank during the year under review.
GLOBAL ECONOMY
The world economy witnessed relative stability as leading economies around the world recorded modest growth. Global economic growth was particularly rapid in the first half of 2006. All major regions of the world recorded growth. In the second half of 2006, global growth was moderate especially in the US.
The price of oil, which drives major economic activities of many nations, recorded stability towards the end of 2006 and till now. The price of crude oil per barrel hovered around 63 US dollar for most part of the year. However, there were upward price swings that peaked at 74 US dollars per barrel as responses to crises in Iran and the Middle East.
Asian economies continued to record dominance. China's trade surplus rose to 16.9billion US dollars in April 2007. Driven by a trade surplus with the US, the Chinese foreign currency reserve is currently one trillion dollars, the highest ever to be held by a single country. Analysts believed that China's current account surplus would hit 400billion US dollars this year. Chinese authorities are now concerned with large trade surplus and its effect on growth rate and price stability.
AFRICA
One of the major developments on the continent this year was the entrenchment of democratic institution in two African countries: Nigeria and Mali. Year 2006/2007 is also an excellent year for most African economies, reflecting robust growth and exceptionally good prices for exports.
The 2006 Reports recently released by African Development Bank (ADB) and the Organization of Economic Cooperation and Development (OECD) showed that the consistent economic growth recorded by four African countries (Nigeria, South Africa, Algeria and Egypt) helped Africa to record a GDP of 5.5% in 2006, the continent's highest economic growth in the last two decades. This is expected to reach 6% in 2007. The sustenance of sound macro-economic policies in most of the countries h also increased business confidence leading to a rise in private sector investments generally.
The International Monetary Fund (lMF) in September 2006 approved a debt relief for 14 African countries in Sub-Saharan Africa under its Multi Debt Relief Initiative to release resources for poverty- reducing measures. The Continent is also establishing another development institution, African Finance Corporation (AFC), to aid the development of the Region.
WEST AFRICA
The implementation of ECOWAS Trade Liberalization Scheme and Common External Tariff (CET) have continued to facilitate trade and easy access to markets among member nations.
The effort of Nigeria, Guinea, Ghana and Gambia in the Sub-region to launch ECO Currency by 2009 a right step towards strengthening the sub-region's economic bloc. Also, the adoptions of full trade liberalization, improved efficiency, transparent and good governance in most countries of the sub region are critical factors to success.
Nigeria continued to dominate the economic terrain in the sub-region. A Report published by the African Business in its April 2007 Edition revealed that out of the top 50 companies in the sub-region' 44 were based in Nigeria, 3 in Ghana and in 3 in Cote d'Ivoire.
DOMESTIC ECONOMY
Nigeria's inflation rate continued to drop from 15.5% in June 2006, 8.5% in December 2006, and 7.9% in January 2007, 7.1% in February to 5.3% in March 2007. The tight fiscal and monetary policies adopted by the Federal Government have succeeded in keeping inflation within a single digit.
The Central Bank of Nigeria (CBN) stabilized the exchange rate at =N=126.60 per dollar. This also Ied to stability in the prices of goods and services. Average interest on savings account was 4.3% whit average weighted prime lending rate of banks stood at 17.18% for the period under review. Efforts are, being made to still bring this down to aid growth and development, particularly in Agriculture an Manufacturing.
Nigeria's economy grew by 5.6 % in 2006 against the projected 10%. The Nigeria Economic Summit Group (NE.SG) however expressed optimism that the country's economic growth will average between 6 and 7 % m 2007 and beyond. ThIs optImism is hinged on the growth prospects whIch abound In the non-oil sector.
The CBN adopted an aggressive liquidity control measures leading to the withdrawal of public sector funds and upward review of Minimum Rediscount Rate from 13% to 14% in June 2006.
To ensure effective liquidity management, the CBN in December 2006 introduced a new framework for Monetary Policy implementation in the market place using short-term interest rate as its "operating target". The CBN had planned to achieve a stable value of the domestic currency through stability in short-term interest rates. The Minimum Rediscount rate (MRR) was replaced. with the Monetary Policy Rate (MPR) and was set at 10%.
The Monetary Policy Committee of the CBN in February 2007 took far reaching measures to prevent potential risks of increased fiscal injection and adopted the retention of Cash Reserve Requirement (CRR) at 3% and the liquidity ratio at 40%.Oil continued to be the major driver of the Nigerian economy. It contributes 20% of Gross Domestic Product, 95% of foreign exchange earnings and 65% of budgetary revenue in 2006. The excess crude proceeds Account stood at 9.57billion dollars by April 2007.This is responsible for the impressive 43.53billion US dollars (about=N=5.659trillion) external reserves of the country as at May 2007.
The current level of external reserves could fund 40 months of importation. Non-oil tax revenue in the country has also grown by 90% in the last three years.
Total exports from Nigeria increased by 43% from 31.1 billion dollars in 2005 to 42.3billion dollars in 2006. This placed Nigeria 43rd among the 50 leading exporting countries of the world. Industrial capacity utilization of the country is around 50% mainly because of poor energy supply i.e. electricity gas and fuel.
Nigeria finally exited its 32billion dollar debt burden with the final payment of 2.4billion dollars to the London Club. Standard and Poor and FITCH retained the BB- long-term rating (for foreign exchange currency) and BB for local currency rating respectively in their 2007 rating of Nigeria. The global rating agencies also projected a stable outlook for the country. The robust external reserves, low debt profile and positive ratings have helped to build up confidence in the economy and create healthy flow of foreign investment and portfolio management into the country. Nigeria in 2006 attracted 5billion US dollars of foreign investment. All indications are that this will continue to rise with peace and stability after the General Elections.
Nigeria's attempt to be the financial hub of Africa is gradually becoming a reality because it has sustained macro economic stability evident in the stable exchange rate of the Naira to the dollar. Nigeria boasts of the highest volume of reserves in Africa, which gives consumers of financial services confidence in the domestic economy.
Nigeria alone accounted for 79% of GDP of ECOWAS with its =N=18.22trillion (141.65billion US dollars) at the end of 2006.
The Nigeria telecommunication industry continued to expand and as at April 2007 telephone subscribers' base in the country reached 38milion while Nigeria is expected to attain 50% teledensity rate by 2010.
The recapitalization of the insurance industry announced in September 2005 was concluded in February 2007 and at completion of the exercise, 71 insurance firms emerged. Total capitalization level for the sector was increased by 507% from =N=30billion to =N=200billion. Foreign capital injection into the consolidation exercise stood at =N=15billion. There is no doubt the successful completion of the exercise will boost capacity and competitiveness in the industry.
The nation's capital market continued to be active and remained buoyant throughout the year.
BANKING INDUSTRY
After fifteen months of successful completion of the consolidation exercise, the Nigerian banking industry continues to record significant developments and no doubt remains the fastest growing in Africa. The profile of Nigerian banks has increased tremendously with growth in fundamental indices such as assets, deposits, credits and profitability.
According to the CBN, current Total Assets base of banks have increased to =N=46.6trillion in 2006 from =N=3.32trillion in 2004 while capital reserves increased to =N=957billion from =N=327billion within the same period.
Almost all the banks have engaged in rapid branch expansion, new products development, implementation of innovative marketing strategies, new markets development, and investment in information technology. Huge investments made by banks in information technology in the past year have enabled them to offer increased electronic and Internet banking at a pace comparable to developed economies.
THE BANK
The Afribank brand has continued to be more virile in the industry. Arising from its seamless see it consolidation, the Bank is already implementing a broad strategic plan that will see it emerge a market leader on the continent in the next five years.
The Bank has gradually recaptured most of the lost business ground through aggressive marketing, proactive management, market development and increased visibility among others.
Afribank won, through competitive biddings, the acquisition of Lead and Assurance banks. This feat is a demonstration of confidence of the regulatory authorities CBN/NDIC in Afribank. All the branches of the two banks have been reopened under the banner of Afribank and all their customers have been absorbed.
I am happy to inform you that the Bank has continued to increase its presence and impact in the last few months through opening of more business offices. The market has also responded positively to the initiatives and they have started to impact positively on the performance of the Bank. The Bank now has 250 branches and is at advanced planning stage to have 300 branches by the end of year 2007
NEW VISION FOR THE BANK
To give effect to the new strategic direction of the Bank aimed at redefining its business focus, your Bank in December 2006 adopted a new Vision:
"To establish Afribank as a prominent financial institution in the commercial banking sector and the leading provider of investment banking services to retail customers".
To ensure a successful buy-in, the new Vision has been communicated to all stakeholders of the Bank. We have no doubt that the Vision is capable of taking Afribank to the level stakeholders of the Bank desire it to be.
Let me assure you that the Bank shall continue to operate within the compass of the new Vision. We are currently in serious discussions on merger plans with banks that can add value to our vision. I want to assure all our shareholders that their interest is paramount and any arrangement entered into will be to their benefits.
FINANCIAL PERFORMANCE
Esteemed shareholders, your Bank during the financial year succeeded in growing its fundamentals. It is no doubt that the efforts of all the stakeholders have yielded positive results. The Bank has overcome the initial challenges of the consolidation and has in fact turned them into opportunities as manifested in the performance indices.
The aggressive market development initiatives of the Group enabled it to record modest growth in its Gross Earnings which stood at =N=27.53billion this year as against =N=15.63billion in 2006, an increase of 76.1%. The Group also posted a Profit Before Exceptional Item and Taxation of =N=9. 13billion this financial year compared with =N=3. 98billion in 2006, an increase of 129.356%.
The business expansion activities of the Bank earned it more market share in the year. Total Deposits and other Accounts grew by 54.82% from =N=91.89billion in 2006 to =N=142.27billion in 2007.
Total Assets and Contingent Liabilities of the Bank increased from =N=158.89billion to =N=217 Abillion, representing an increase of 40. 1 % in the year under review.
DIVIDEND
As promised in 2006 and in line with the dividend policy of the Bank, the sum of =N=1. 53billion is being proposed as dividend this year. This translates to 30 Kobo per share. In addition, the Board is also proposing a bonus of one share for every five held. We believe that shareholders should grow along with the Bank and share in its fortunes. We also appreciate the understanding Shareholders have demonstrated in the last few years. We assure you that the good times are back and can only continue to get better. The interests of the Shareholders will be adequately protected.
NEW DEVELOPMENTS
The Bank during the year introduced innovative products to the banking public. This was aimed at meeting the needs of customers and to expand the scope of bank's market influence. Some of the market driven products in addition to our existing products are: Cheque Purchase Facility, Afribank Mobile Banking, Share Purchase Loan, e-service and Advance payment Guarantee.
The Bank also secured mandates form private and public institutions for business relationships. The Central Bank of Nigeria appointed the Bank as a Primary Dealer in Federal Government Bonds while the Nigeria Immigration Service also appointed the Bank for its e-payment services. The Bank has made significant business inroad in its relations with several State Governments, Parastatals and private institutions. The Bank's approach is to proactively meet the needs of the banking public.
NEW BRANCH OUTLOOK
In addition to its improved quality service, the Bank initiated and implemented projects that improved the internal and external aesthetics of the branches. The move has improved our image and acceptance of the Afribank franchise. Our branches are now more business friendly and attractive. We are determined to keep it up and be competitive in all ramifications.
THE AFRIBANK GROUP
Afribank continued to leverage on its diversified structure. The subsidiaries have been restructured and empowered to be market leaders in their respective sectors. Group Turnover increased from =N= 15.6 billion in 2006 to =N=27.53 billion. The contribution of subsidiaries to gross income increased from =N= 0.99 billion in 2006 to =N=2.87 billion in 2007 while their contribution to Profit Before Tax increased from =N=0.28 billion to =N=2.2 billion.
It is heart warming to state that the subsidiaries have become more focused and responsive to market demands. They are now more than ever before positioned to help the Afribank Group realize its business objectives.
AWARDS
The Bank's operations during the year attracted recognitions both locally and abroad. The Bank . received the Industrial Deal of the Year Award presented to it by Project Finance International, UK for its participation in loan syndication for the United Cement Company, Nigeria. It also won the Corporate Excellence Award in Education from the Post Graduate School (Banking & Finance Programme), University of Ibadan, and an Award for Excellence for Sports Development from the Grassroots Sports Federation of Nigeria. The Sokoto and Enugu CBN Zonal Offices also presented Best Clearing House Awards to Afribank in the Year.
CHANGES IN THE BOARD
During the Year under review, a Non-Executive Director retired from the Board of the Bank. AVM Nura Imam (rtd.) put in over 5 years excellent service but had to resign from the Board for personal reasons which we understand and respect. The Board appreciates his contributions and sacrifices to the growth of the Bank. On behalf of the Board, Management, and Staff of Afribank, I wish him God's guidance in his future undertakings and thank him immensely for his services.
Personally, this is an emotional period for me as this will be my last attendance at an Annual General Meeting as the Chairman of your Bank. We decided to keep faith and stick to our tenure system believing that it is not how long but how well one has served. I thank all the stakeholders for the assistance and support given to me which made my modest achievements possible. I wish the Bank many more successes in future.
APPRECIATION
The Board appreciates the contributions of shareholders in the task to take Afribank to a higher level in the banking industry. The level of support and understanding shareholders demonstrated over the years was outstanding and deserves special commendation. We are grateful for your sense of commitment to the growth of the Bank which made the Bank to retain its franchise and achieve the current level of success.
We are also grateful to customers who believed in the ability of the Bank to add value to their lives and businesses. Their patronage no doubt has continued to keep us in business and makes our outing this year more memorable. They are our pillars of support. We assure them that the Bank is committed to making more positive impact in their operations.
Our immense appreciation also goes to the regulatory authorities for providing a conducive environment for business. We appreciate the support of other stakeholders who in one way or the other assisted the Bank to realize its dream in the year.
Lastly, the support and sense of commitment of Members of the Board deserves special commendation. Their desire to grow the Bank through personal sacrifices, by providing strategic direction and vision is rare in the industry. I thank all of them for their team spirit and focus. Together we shall make Afribank a good reference point in the industry.
Our staff rose to the occasion by embracing the new challenges spurred by the Bank's new drive for the top spot in the industry. This has resulted in improved performance. I thank all the staff for their dedication and commitment. I assure them of continuous improved welfare package as the fortunes of the Bank improve.
FUTURE OUTLOOK
From all perspectives, the future of Afribank is bright. The Bank has successfully put in place structures that can withstand any challenge the industry or market may present. The approach we have adopted has placed Afribank on the track of a top player on the continent.
Drawing from the vision, Afribank will operate in diverse sectors of the economy as a preferred institution. Its huge potentials assure it of market breakthrough, excellent results and a secured future.
Thank you.
Alhaji Aliyu K. Belgore
Chairman
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