Interview of Mr Ben Akuete, V-President, M&T Bank Baltimore.
M&T Bank is one of the major US banks applying the U.S. EXIM Bank programmes. Mr. Ben Akuete is a Vice President at M&T Bank and his primary responsibility is the expansion of M&T Bank’s lending activities in Africa. As Mr. Ben Akuete explains in the following interview, the EXIM programme is an instrument targeted at expanding the sale of US goods and services. M&T Bank has done many transactions using the programme to favour Nigerian and other African beneficiaries and he looks forward to doing some more in that direction. In this interview, Mr. Akuete fields questions on various aspects of the bank's business relations with Nigerians and Africans in general. Excerpts:
DDH: How did M&T Bank come to figure into the Nigerian dredging market?
Ben: In addition to the many traditional banking services provided by M&T Bank, the bank is also very active in providing loans to foreign entities looking to buy American-made goods and services under the US EXIM Bank programme. Our international area has a long experience doing business with companies in Mexico, Central America, and South America, so when we started doing EXIM Bank activities, those were the natural areas we started with...Mexico, Central America and South America. And then later, we expanded our activities to cover companies in the Middle East and the old Soviet bloc. About seven years ago, we further expanded our lending activities to Africa. The Nigerian dredging market is a very important and active one. US dredge manufacturers with competitive products are also quite active in the Nigerian market. With the combination of an important and active market in Nigeria and availability of quality products from the US, the stage was set for a bank like M&T Bank to facilitate the buy/sell process by providing much-needed financing under the US EXIM Bank lending programme.
DDH: But how did you come into the Nigerian market?
Ben : In M&T Bank’s quest to expand its lending activities in Africa, we looked at the whole continent. Undoubtedly, Nigeria remains a large, vibrant, and dynamic market and our choice to be a player in this market was a relatively easy one.
DDH: Was there any particular instance that led you people into Nigeria?
Ben: No particular instance; it wasn't on the spur of a moment thing. It was planned. Typically, before going into a new market, in this case the African market, one would look at the various segments of the market and determine which offers the best opportunities. In this case, Nigeria came up as one of the big and dominant players with tremendous financing opportunities.
DDH: But your connection with Kofa International and DSC seems so specific and strategic? It couldn't have been just a coincidence.
Ben: (Laughs). Believe it or not, it was more of a coincidence. Where you have serious people doing serious business, with interlocking interests, you are bound to have this kind of union. So, yes, DSC has been very active in many parts of the world and very successful in Nigeria. Kofa International was also very active in Nigeria as M&T Bank was also getting into the market. Incidentally, Kofa International remains active in Nigeria. Through our activities, we got to know each other and have worked together on a number of transactions.
DDH: Describe your bank's profile of activities for Nigeria and Africa or for leverage in dredger and ancillary equipment purchases?
Ben: For our Nigerian and other African activities, there is one main umbrella under which we offer services. This will be under the US EXIM Bank programme. Primarily we are looking at the medium term programme, which will extend from two to five years; in certain cases, it may extend to seven.
DDH: What happens within this two to five years?
Ben: That is the amount of time within which the borrower has to repay the loan and is influenced by the size of the loan amount and type of equipment Typically, repayment on any piece of equipment in excess of $350,000 may go up to five years. Most of the transactions that we do in the region are more than $2m and one can easily have five years to repay under the US EXIM Bank programme. There are other things that we can do in the market but this would be under the IFC (International Finance Corporation) Global Trade Finance programme. As you may recall, the IFC is part of the World Bank group, and they have this global trade finance programme that is aimed at helping companies in the developing world be a part of the global trade finance market. Under the programme, the IFC reviews various banks in the developing world and those meeting the criteria of the IFC’s Global Trade Finance Programme are invited to join as “Issuing Banks.” Banks in the developed world that are also interested in the programme are also reviewed by the IFC and may be accepted as “Confirming Banks.” Under the GTFP, the IFC offers its guarantee in support of Letter of Credit (and other trade finance instruments) issued by the Issuing Bank and confirmed by one of the Confirming Banks in the programme. M&T Bank is one of the confirming banks in the programme and this opens yet another avenue for us to work with Nigerian banks and other private sector businesses.
DDH: How would you describe EXIM Bank programme to a novice?
Ben: EXIM Bank is the shortened form of the Export-Import Bank of the United States. It is a governmental entity. Its primary goal is to help create and maintain jobs here in the US. And it does that by supporting sales of US-made goods and services to foreign entities. For instance, a company in the US that sells only in the US may be manufacturing 100 items a week. With sizable foreign orders, production would go up, more jobs will be created, and the tax base broadened. EXIM Bank generally facilitates this process by providing its guarantee or insurance to cover loans and other credits that might be given by a bank or the supplier of the goods to the foreign buyer.
DDH: So, a bank like M&T Bank buys into that programme?
Ben: Yes, M&T Bank is one of the very active participants in the U.S. EXIM Bank programme. For example, we have approved transactions to companies in nine (9) African countries so far.
DDH: That means it's not only M&T Bank that can manage this process?
Ben: There are many banks that participate in the US EXIM Bank programme. Many banks have their own areas of expertise in terms of industry. Many banks have their own areas of interest in terms of geography and loan amount. However, with respect to Africa, the number of U.S. banks doing EXIM Bank loans is small and M&T Bank is one of the very active banks in the region.
DDH: Has M&T Bank done any transactions in dredge purchases or related businesses?
Ben: Yes, we have successfully concluded transactions involving the purchase dredges and related items but for reasons of confidentiality, we will not be in a position to mention specific names. Also, we are actively considering quite a number of requests for financing for dredges. Fortunately we have been dealing with some very good companies interested in having their dredge purchases financed by M&T Bank. In short, I will say that we are very happy with the market.
DDH: Have you had bad experiences?
Ben: Yes on a couple of small transactions that did not involve dredges. Overall, M&T Bank’s Nigerian experience has been very positive.
DDH: In Africa have you had bad experiences?
Ben: Yes. You hardly ever make loans without experiencing delinquencies from time to time.
DDH: From your experiences so far, what faults can you identify with applications Nigerians make because this may go a long way in addressing the way people go about it?
Ben: I wouldn't refer to those things as faults. I would prefer to refer to them as hurdles for us to overcome. Primarily, this is about sharing information on what makes a successful application. We have found in our experience that the more the client knows about the various loan programmes, the better it is for all parties. The more the client knows about the manufacturer it is dealing with, the better. The more the client knows about the industry in which it operates, the better. Some of our best clients are the ones that know very much about the US EXIM Bank programme, have very good relationships with their manufacturers and their consultants, and are prepared to listen and learn, those are the people that invariably come on board with little of no difficulty.
How would you advise interested persons to learn about the EXIM Bank programmes?
Ben: There is tremendous information on the various websites. If one needs to know about the US EXIM Bank, it is www.exim.gov , for M&T Bank, it is www.mtb.com . Of course, one should not forget the Commercial Section of the US Consulate in Lagos. Considering the audience of this publication, I indicated earlier that M&T Bank has the pleasure of working with DSC and Kofa International on some transactions in Nigeria. Those two entities have experience in EXIM Bank financing and could be good sources of information. Of course, there are other manufacturers and consultants doing business in Nigeria. It is important for Nigerian companies interested in learning more about the EXIM Bank programme to get in touch with those entities that are active in the programme and have a reputation for diligent work and good performance.
DDH: So people are free to get in touch?
Ben: Absolutely. Interested parties may contact M&T Bank directly. They may also contact EXIM Bank and find out which US banks are active in Nigeria or they may contact the other previously mentioned entities. The serious players will always find a way to get those that can deliver.
DDH: What are M&T Bank's requirements to undertake EXIM Bank financing for any client?
Ben: We require clients to consult with their suppliers and to clearly determine the specifications of the items that they need financed. For the Nigerian clients, we also expect them to discuss the project with their local banks and obtain the support of the local bank. Once the Buyer has determined the specifications and availability of the items they need and have the support of their local banks, the rest is easy. Contact M&T Bank and get the ball rolling.
DDH: What is the procedure like?
Ben: On our part, we would like to see at least three years of audited financial statements. We would like to know which local bank is supporting the transaction. We would also like to see the profile of the company. The profile, at a minimum, should give us a brief history of the company. When it was established? Who owns it? Who manages it? What are the experiences and qualifications of management? What does the company do? What is the impact of the items to be financed on the future operations of the company? We would like to see a copy of the pro forma invoice duly signed by the seller and the buyer to indicate mutual acceptance. These are the basic things that we require to see. A review of the pro forma invoice, the financials of the company and then the profile, helps us determine which items are eligible for financing under this programme and the various terms and conditions under which the financing may be provided.
DDH When you talk about what items can be financed, what do you mean by that?
Ben: If we go back to the primary role of EXIM Bank, it is to help create and maintain jobs in the US. To ensure that, these items have to be made in the USA and shipped from the USA. Items for military use are ineligible for EXIM Bank financing. There are certain items that may qualify for short term financing and others that may qualify for medium-term financing.
DDH: Using these, can you define for us the conditions for short term and for medium term?
Ben: Items that fall under the short-term programme are many and will include raw materials, supplies, and inventory. Typically, these items are “current assets” and are sold or consumed within a year. Therefore, repayment period under the short-term programme is a year or less. Items under the medium-term will be classified as “fixed assets” to be used by the company over many production cycles in excess of one year. Examples will include dredges, road construction equipment, and vessels. Usually, Borrowers have between two to five years within which to pay off medium-term loans under the EXIM Bank loan programme. In certain cases, loan repayment may extend to seven years.
DDH: So, it does no harm for anybody to approach and get the opinion of the bank (M&T Bank) as to where his situation falls?
Ben: No harm whatsoever. In fact, we strongly recommend open and frank communication.
DDH: What quantum of funds is available now to service the projected financing needs of Nigerians or Africans such purchases?
Ben: M&T Bank has assets of over $57 billion. We have the capacity to provide substantial loans. However, if you are referring to the pre-approved line that US EXIM Bank has made available to 17 of the 25 Nigerian commercial banks, it is currently $405 million. At inception of that facility in June 2006, it was $300 million and involved 14 Nigerian commercial banks. The facility was expanded to $405 million and 17 banks in June 2007.
DDH: Is it possible to find out why some banks are in the programme and some banks are not there?
Ben: EXIM Bank has limited resources. These 17 banks are banks that EXIM Bank has gone out to meet with and has conducted thorough reviews of their operations. At the height of the reforms in the Nigerian banking sector, you may recall that some of the banks did not have to merge with any bank to attain the minimum required capital level. There were others that combined with one or two others of similar sizes and there were some that resulted from mergers of more than two banks. EXIM Bank’s choice appears to have been influenced by the number of merger partners too. But the short answer is, of the 25 banks, EXIM Bank has been able to commit resources to review those 17 banks. It is not to say that the other eight are never going to be in this programme. All it means is that EXIM Bank has not had the chance to look at their papers in as much detail as it has done on the other 17. On the part of M&T Bank, we are prepared to work with any of the 25 banks.
DDH: In working with those banks that are not in EXIM Bank programme, does it mean that M&T Bank will work solo and not with EXIM Bank to finance such transactions?
Ben: No. EXIM Bank will accept for consideration any bank that is presently not one of the 17. The main difference is that the application process is faster with the 17 banks because much of the analytical work has been done already.
DDH: So any of the 25 banks that comes up fresh and meets all the set conditions, EXIM Bank will work with?
Ben: Yes, that is correct.
DDH: Your bank has been working now with the Nigerian banks, what is your working relationship like?
Ben: It's excellent although there is always room for improvement in relationships of this nature. Our attitude is that we should not rest on our oars. We have been in the market for quite some time. We have met many banks, if not all of them. Some, of course, we have met more often than others because of their needs and the needs of our mutual clients. When I say there is room for improvement, it's just to emphasize the point that we don't want to rest on our oars; we will not just sit back and say, 'well, we know these guys, we can work with them'. No, it's not enough. When we are in Nigeria, we try and make time to meet with them. When they are here in the U.S., we try to meet with them as well. We don't necessarily have to have an ongoing transaction with them before we communicate with them. We try to maintain contact. Keeping good lines of communication is very important to us.
DDH: As you may have heard once in a while, Nigerian dredge operators sometimes complain about their difficulties with Nigerian banks in getting their loans approved. Is there something you can tell dredge operators about how to get their acts right and have a smoother sailing with their loan applications?
Ben: I would prefer a general answer. In all industries, you have very strong players, you have moderate players, and you have weak players. In all industries, you have very well established entities and you have new entrants as well. What M&T Bank has found all across Africa and in our other markets, is that the strong players in the market have good relationships with their banks. Let's look at it another way. When a foreign entity approaches M&T Bank for a loan, that foreign entity is saying 'I am a good company, I am a good risk, lend me the money, I will repay you according to terms'. And that company expects us to buy that. One would think that if these companies were that good; their local banks would be very interested in them as well. After all, their local banks get to see the cheques that come in and the cheques that are paid out. The local banks know those clients better than we do or than we might ever get to know them. So, yes, there would be occasions when the local client will come and say 'well, the local bank is not treating us right or is not willing to support us'. That may not necessarily mean that they are being treated unfairly because in all the markets, including the US market, some companies are able to have facilities through banks, others get rejected for good reason. We must not forget that the companies that come in to borrow are in business to make a decent profit. The banks are also in business for profit: to take reasonable risk and be rewarded for it. The advice that I will offer to a company that wants to borrow is for that company to have reliable financial statements and efficient and transparent operations. Once a company attains those, banks will trip over each other for that company’s business.
DDH: Do you have any comments generally on the subject matter?
Ben : Your magazine is doing a very good job letting companies in the Nigerian market know more about products and services pertinent to their operations. To a very large extent, your magazine is doing a good job educating foreign entities like M&T Bank about what is going on in the Nigerian market with respect to dredging and related activities. Such education helps all parties and I congratulate you and your staff for that.