ENYK: The oil and gas sector in Ghana is of great importance to the Bank due to the cascade effect it is going to have on the entire economy. With the flow of crude and utilization of associated gas, the economy is due to expand tremendously. This will be seen in the supply of vessels to pipelines, construction of storage tanks, refineries, power stations, transmission grids, public utilities, airports, construction and real estate, manufacturing and hospitality services. With an estimated contribution of GDP being in excess of 40%, this sector shall also bring about lifestyle changes seen in expansion of the middle and upper income class and a corresponding increase in consumerism and spending patterns which shall also provides immeasurable opportunities to the Consumer and Retail division of the Bank.
These sectors will also require financing which raises the need for the bank to quickly adapt to the needs of the industry as a whole and position itself for the anticipated sectoral changes. The Oil and Gas sector shall therefore inform our strategy or strategies across the various segments. In my opinion, the growth of the oil and gas sector and especially the gas industrialization policy which will drive the country’s growth is the cornerstone of our business and critical to us achieving our goal of becoming Ghana’s leading bank.
Could you provide us with an overview of the services and products that Fidelity Bank offers to the oil and gas sector?
ENYK: Currently our client base in the Oil and Gas sector is largely drawn from mid to downstream companies although we are making significant forays in the upstream. We offer tailor made solutions to our clients due to the complexity of their operations. However on a broader scale, our offerings consist of Project Financing, Cash Call Financing, Contract Financing, Trade Financing, Term Loans, Overdrafts and Treasury Operations. With the midstream, our focus has been on project financing with emphasis on Tank farms and major Power projects in Ghana. We are currently one of the leading banks in project financing, notably power projects in Ghana. In the Downstream sector, Fidelity controls approximately 15% of the BDC market vis-à-vis a total of 26 banks. We seek to finance through trade lines and club arrangements an average of USD$530 million for this year.
How can Fidelity Bank compete with multinational banks for a market share of upstream clients?
ENYK: For Fidelity and other local banks the biggest challenge is having a significant foothold in the upstream sector, which is dominated by multinational banks. One of the principal obstacles is that, the parent companies of the major oil producers issue directives to the effect that they must only operate with specific banks based on their balance sheets, geographical locations and brand reputations. Furthermore, the scale of transactions and financing that the upstream companies require often goes beyond the capacity of local banks.
However changing trends, local knowledge of the local banks, multilateral associations, global club arrangements and syndications coupled with the efficiency and timeliness of the local banks is making this less of an obstacle. Apart from this, Fidelity’s strategy in this vein has also centered on genuine partnerships with the upstream majors through tailor made solutions and support in community social responsibility initiatives which is key in our part of the world where oil companies can be viewed with suspicion. This gives us the advantage of being able to act as a partner with upstream clients and help them to feel comfortable with and anticipate the specific conditions of operating in Ghana.
Considering Ghana as a destination for foreign investment, what is the current financial climate and what are some of the growth prospects that should encourage investors?
ENYK: There are some key indices which every investor looks at: political stability, security of contracts, efficient financial sector, educated and literate populace and an efficient infrastructure system. Ghana is arguably the most democratic and politically stable country in Africa at the moment, it has an effective financial infrastructure and relative investor friendly laws and a legal system that is effective and guarantees the sanctity of contracts. Focusing on the oil and gas sector, although we have only very recently begun to extract commercial quantities of oil we are already doing what our neighbours did not do. We have learnt lessons from the experiences of other oil producing nations and have emphasized the importance of a robust regulatory framework and the establishment of a local content policy. This not only protects investment but ensures transparency across the industry and builds local capacity.
Ghana is also the fastest growing economy, according to the World Bank with FDI into the country increasing by approximately 300 per cent within the past three years. This has seen major financial institutions zeroing down on Ghana, for example HSBC and Citibank have recently established offices here. There are lifestyle changes that are occurring; the increase in disposable income of Ghanaians with its domino impact on consumer spending and the real estate sectors. Ghana has the fastest growth rate (88 percent) of vehicle and motor purchase in Africa and has recently overtaken Nigeria as a hub for air transport with 36 airlines now operating here. These are all indexes that demonstrate Ghana’s continued growth. The obstacles Ghana faces are in developing its infrastructure at a much faster pace, establishing reliable power generation and in selling itself as a proposition to the investment community. We however see these infrastructural deficiencies, economic growth and indicated factors as opportunities that should attract investors.