Two-time winner of the CFO of the Year Banking Sector, at the Nigeria CFO Awards, Mr. Ugo Nwaghodoh, the Group CFO at UBA Plc, says every day is a different day. The affable professional, in this exclusive interview with The CFO, shares his views on the macroeconomic environment in Nigeria, financial reporting, new media, family time and many more. Excerpts…
What does your role entail as the CFO of a leading financial institution in Nigeria; what is your typical day like?
In a global financial institution, like UBA Plc, the Group CFO is responsible for individual and corporate performance management. The CFO has responsibility for financial reporting in compliance with relevant accounting standards and extant regulatory requirements in the different countries of operation. It is my responsibility to continuously seek efficiency gains in cost and balance sheet management for the Group. Together with my colleagues, we are responsible for regulatory management, including tax planning and strategy, capital management and investor relations as well as broader corporate strategy. The CFO is a decision analyst and provider of fact-based business intelligence, just as he is one of the anchor drivers of the CEO’s strategic actions towards achieving the vision of the institution.
As regards my typical day in office, every day is a different day. Whilst there are standard dashboards and action triggers, my day is always shaped by the different priorities of each day. So, I will say that every day is always exciting, challenging and dynamic, as the diverse responsibilities, fast changing business environment, scope of operation and geographic coverage of UBA colour each day with new opportunities and challenges requiring new thinking and approach.
What is your view on the new media? How is new media impacting the decisions in the financial services sector?
We are in a digital age and the new media is revolutionizing not just banking but the entire ecosystem within which we operate. Interestingly it is helping to deepen banking penetration in a lot cheaper way than the “old order” of setting up “brick and mortar” structures to serve customers. With the new media, customer interaction is stronger, closer and more personalized. For instance, we at UBA pioneered the twitter alert in Nigeria. We are one of the most active banks on Facebook, Linkedln, Google+ etc, as we leverage these platforms to serve our customers, particularly the millennials, who we see to be the next customer segment growth frontier for our business, since they will be the next generation business leaders and middle-upper income class. UBA also supports RED TV, an entertainment digital TV that appeals to trends in fashion and lifestyle. Overall, new media is helping to break barriers and boundaries. We continuously invest in new technologies to proactively take on emerging competitions from Fin
techs even as we also partner with the relevant pioneers of this revolution.
What do you think are the key developments and issues in the financial services sector?
Amongst other events, I think some domino variables are notably impacting the financial services sector. Fintechs and attendant disruptive innovations are “good” and “bad”; whilst they create new opportunities and efficiencies on the one hand, they are also encroaching a part of the conventional revenue pie on the flip side, thus the intensified competition to defend market shares. The rapidly growing influence of cryptocurrencies such as Bitcoins, Ripples, Monero, Lifecoin etc are riding on block-chain technologies and presenting new challenges in the areas of money laundering and terrorist financing.
Cybercrime is on the increase and thus necessitating continuous investment in cybersecurity systems. Following the 2008/2009 financial services cyclone, regulatory oversight has been enhanced. Notably, the adoption of risk-based supervision and BASEL II implementation have changed risk management practice and overall culture in the industry.
What are your views about the menace of youth unemployment, which is predominant in Africa and the potential implications vis-à-vis the acclaimed entrepreneurial mindset or capacity of Africans?
It is evident that we are sitting on a huge human capital resource base in Africa but so sad that we all focus on mineral resources. Incidentally, if we do not appropriately harness this idle resource, it may become a curse. I take mild relief in the emergence of a number of philanthropy initiatives that are helping to give hope to youth, particularly in an entrepreneurial way that I believe should help to improve the productivity of our youths. A case in point is the Tony Elumelu Foundation, which is training, mentoring, networking and providing seed capital to start-ups, largely founded by youths. Alhaji Aliko Dangote is also helping in such regard and we are seeing a number of African-sponsored Foundations springing up to address this notable challenge. Good to note the social welfare programme of the new government, but we need to see more, particularly the approach has to be self-sustaining to ensure that the youths are truly empowered. I must say that this should be seen as a national duty for everyone,
and it should not be left to the government and the ultra high networth individuals alone. At our respective levels, we should go all-out to empower youths in an entrepreneurial way that gets them productive. Otherwise, we may all have to contend with the negative social menace that may arise from this ugly youth unemployment situation in Africa.
The volatile macroeconomic environment is intensifying competition in banking, what will be UBA’s edge in 2017 and beyond?
Competition is what makes the market interesting and I must say it remains critical for the growth of the industry, so we are always prepared and ahead of the curve. Our medium term strategy is built on our clear values of Enterprise, Excellence and Execution, which are the fundamentals behind every competitive strategy. We continue to invest in all our three growth levers; people, process and technology. We have reinvigorated our Enterprise culture, that ensures we create exceptional value to customers at all times, anticipating their tomorrow’s needs and meeting them today. Being a service business, our strategy is at best, as good as its execution, so we are investing quality time and substantial resources in our human capital to accelerate productivity. We strive for excellence at all times, driven by the culture of continuous improvement.
As a doyen in the Accountancy field, how would you assess the progress Nigeria has made in corporate financial reporting, particularly since adoption of the International Financial Reporting Standards?
There is still a lot of room for improvement, but it is satisfying that financial reporting and disclosures have improved greatly in the last half decade. This has enhanced transparency and has modestly helped to bridge the information gap in the market. I must say the transition to IFRS has been pivotal to the evolution of corporate reporting in the country and with the continuous review of IFRS, the disclosures are getting better each year. You may be aware of the imminent adoption of IFRS 9 by January 2018; this replaces IAS 39, which is the standard that guides the Recognition and measurement of Financial Instruments. This comes with even higher level of disclosures and the approach is more forward looking, proactive and anticipatory. One of the good things coming out of this, is also the global alignment in terms of financial reporting, as this is also helping to drive investor appetite for Nigerian investment. I eagerly look forward to the wider global adoption of integrated reporting, which is the next
level of corporate reporting. Integrated reporting is the strategic reporting of critical non-financial and social performance that truly represent a more holistic view of the performance of the organization, as it helps stakeholders to better understand and assess the fundamentals of the business as well the prospects.
What is your outlook on the Nigerian economy and the broader African continent?
The last two years have been quite challenging for Nigeria and indeed Africa, largely on the back of vulnerabilities to global commodity prices and a host of domestic distortions. In Nigeria, relatively weak fiscal revenue and lingering FX scarcity may subdue GDP recovery, albeit I am quite optimistic on the growth outlook. Whilst the IMF and World Bank forecast a soft sub-1% GDP growth for Nigeria in 2017, I am more upbeat on the economy given higher crude oil price and increasing output, rising external reserves, which has seen some 7% YTD gain towards USD28bn, with attendant expectation of Naira stability. Also, we are gradually seeing improving productivity in the non-oil sector, as reflected in the recovery of this mainstay of the economy in the third quarter of 2016. Interestingly, the recovery in commodity prices should complement the economic diversification reforms across most African countries. So, I see a return to the strong growth years, which will now be driven by a blend of commodity price boom and improved productivity in agriculture, manufacturing and ICT sectors.
What are your biggest accomplishments?
What I consider to be my best career achievement has been the number of my replicas in the market. I find resounding satisfaction in helping those who work with me to grow to the peak of their career through leadership and conscious mentoring. I am happy to have seen a number of colleagues I supervised in the last couple of years, become CFOs in reputable institutions including banks. This is particularly exciting, because it further reinforces my emphasis on human capital development through learning-on-the-job, formal and informal knowledge exchange and career mentorship.
What is your advice to new entrants in the field?
Whilst different factors make people thick, I believe in continuous self-development, professionalism, team work, diligence and hard-work. These, for me, are the cardinal stones for a successful career in finance. It is important to say that a minimum dose of accounting, finance and general management is critical to being a CFO of a global financial institution, albeit the role requires a lot more versatility and thus CFOs need to acquire minimum knowledge of economics, analytics, MIS and broad information technology and relevant bodies of knowledge to adequately meet the rapidly and continuously changing responsibilities of the function.
How would you describe yourself and how do you use your leisure time?
I like to spend my leisure time with my family, bonding with them and exchanging views about life and recent events. When I have a bit of time, I see movies, play in-door games and hang out with friends. I also spend a bit of time with my mentees, exchanging views and providing guidance on their career, business and lifestyle.
Safaricom post-IPO investor wealth rises to Sh1.3trn peak
The Safaricom stock hit a historic peak recently, closing at a high of Sh32.80 per share on Friday, thereby swelling investor wealth eightfold since its listing on June 9, 2008, inclusive of dividends.
Shareholder wealth as measured by market capitalisation has now touched Sh1.314 trillion, representing an increase of a whopping Sh1.114 trillion from the time the company listed 40 billion shares at Sh5 a share 11 and a half years ago.
When the company’s cumulative dividend pay-out totalling Sh301.2 billion over the 12-year period is added, Safaricom investors have enjoyed a return of 708 percent on initial investment of Sh200 billion. The dividend alone has been enough to allow investors to recoup their capital at listing and remain with an additional Sh101.2 billion balance.
The gains last week also pushed the company valuation as a share of the entire market to 50.4 percent and underlined its dominance on the stock market. Crossing the 50 percent threshold means Safaricom’s market worth is now more than the combined valuation of all the other 61 listed companies.
Analysts have attributed the rally in the last one year to sustained foreign demand, with the growth in dividends being a key factor in driving its attractiveness to investors who have few other options to make money in the market.
“The feel-good factor surrounding Safaricom has spilled over into the New Year, on bullish sentiments by foreign investors,” said Standard Investment Bank analysts in a note.
Last year, the stock led the market in net foreign inflows at Sh4.6 billion, which backed a share price gain of 42 percent to Sh31.50 between January and December 2019. During the year, foreign investors accounted for 75.4 percent of total traded volumes on the counter.
Since the beginning of this year, the stock has gained 4.1 percent. The company’s ability to continue to generate record profits — combined with a generous dividend policy that sees it pay out 80 percent of net earnings to shareholders — helped maintain demand through a bear run that gripped the NSE between 2015 and mid last year.
Safaricom has managed to make large capital investments in telecommunications infrastructure, introduce new services and pay incremental dividends with minimal debt and without seeking additional funding from shareholders.
The firm has therefore been able to build up cash reserves quickly, culminating in two special dividend pay-outs in the past four years.
In the year ended March 2019, the company declared a final dividend per share of Sh1.25 and an additional special distribution of Sh0.62 per share, bringing the total to Sh74.92 billion.
It had also paid a special dividend of Sh0.68 per share during the financial year ending March 2017, on top of an ordinary dividend of Sh0.97 a share.
Driven by growth in M-Pesa revenue, the firm’s net profit for the year ending March 2019 rose by 14.7 percent to Sh63.4 billion.
In the six months to September 2019, its profits recorded a similar margin of growth — 14.4 percent to Sh35.65 billion — again on strong M-Pesa and mobile data revenue performance.
Egyptian investment firm EFG Hermes Holding said in their 2020 yearbook markets report that the rise in profitability and market capitalisation of Safaricom and large banks, while the rest of the market lags behind, will see their dominance become more entrenched at the NSE.
These are the stocks most likely to benefit from an expected return to the equities market by local institutional investors, who have in the past three years tended towards the fixed income segment. “Local institutions remained invested in fixed income for most of 2019, but the impact of the rate cap repeal on local rates and monetary easing could force more local institutional money back into equities in 2020,” said EFG Hermes in the report.
Safaricom’s influence on the market has, however, had the effect of skewing the performance trends of the main indices, depending on whether they are weighted on price or market capitalisation.
The market cap weighted NSE All Share Index is currently at a 16-month high of 171.36 points, reflecting the positive effect of the huge weight that Safaricom has on the index due to its valuation.
On the other hand, the price weighted NSE 20 share index, where blue chips with a high nominal price (such as BAT Kenya, Bamburi, EABL and Standard Chartered) carry more weight, has benefitted less from Safaricom’s gain.
It closed at 2,701 points on Friday, which is below its 2020 high of 2,707 points recorded on January 3.
Rolls-Royce announces highest annual sales of 5,152 cars in 2019
Rolls-Royce Motor Cars has achieved the highest annual sales in 2019 with a global performance unequalled in the company’s 116-year history, the luxury car company announced recently.
According to Torsten Müller-Ötvös, Chief Executive Officer, Rolls-Royce Motor Cars, a total of 5,152 cars were delivered last year to customers in over 50 countries, an increase of 25% on the previous high set in 2018.
With these historic results, Rolls-Royce continues to make a meaningful contribution to the overall performance of its shareholder, BMW Group.
Rolls-Royce sells 5,152 cars in 2019, records best-ever sales in 116-year history
“This performance is an altogether different magnitude to any previous year’s sales success. While we celebrate these remarkable results, we are conscious of our key promise to our customers, to keep our brand rare and exclusive.
“We are pleased and proud to have delivered a growth of 25% in 2019. Worldwide demand last year for our Cullinan SUV has driven this success and is expected to stabilise in 2020. It is a ringing testament to the quality and integrity of our products, the faith and passion of our customers and, above all, the skill. The dedication and determination of our exceptional team at the Home of Rolls-Royce at Goodwood and around the world is part of our success,” Müller-Ötvös said.
Meanwhile, the car company disclosed that it recorded growth in sales across all regions during the year, which was driven by strong customer demand for all Rolls Royce models.
However, North America retained top status with one-third of the car maker’s global sales followed by China and Europe.
Rolls-Royce Motor Cars, through a global network of 135 dealerships sold in more than 50 countries, and as part of its long-term commitment to sustainable growth, the company announced two new dealerships Rolls-Royce Motor Cars Brisbane and Rolls-Royce Motor Cars Shanghai Pudong.
Rolls-Royce Motor Cars is expected to launch later in the year a flagship dealership in London, which would double the size of the previous location.
Hyundai plans to invest $87 billion into producing 44 new electric vehicles
Hyundai Motor Group is set to invest $87 billion in the production of electric vehicles and autonomous driving. This was announced by the company’s Executive Vice Chairman, Chung Eui-sun.
The $87 billion investment would be put to work over the course of 5 years in future mobility technologies like the planned production of new electric models.
Speaking during the Hyundai new year ceremony held at the company’s head office in Seoul, Eui-sun announced that the company plans to expand its electric line-up to 44 models, including 23 battery EVs and 14 hybrids, and two fuel-cell EVs. He said the first new battery EV would be launched next year.
He further said, “To consolidate our leadership in vehicle electrification, we plan to operate 44 electrified models by 2025, including 11 dedicated battery EV models, by bolstering the development of EV platforms and core components.
“In particular, in our fuel-cell electric vehicle business, where we boast the world’s top technological competitiveness, we will hit our stride by providing fuel-cell systems to customers not only in the automotive industry but also in other sectors”.
Eui-sun further revealed that the company is also big on self-driving commercialisation as it aims to develop an autonomous driving platform by 2022 and to start operating self-driving vehicles in 2023 before commercial production the next year.
As part of its self-driving commercialisation plan, Hyundai invested $2 billion last year into a joint venture with Ireland-based autonomous vehicle startup Aptiv.
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