...The lessons that can be drawn from GTBank Nigeria's first twelve years
We only need a basic estimate for the sake of this post. In 1990, let's say N20 million. Exchange it for US cash. According to the internet, the currency rate was approximately N7.39 to $1 at that time. In total, that comes to $2.7 million. We utilize the internet once more to calculate the current value and find that a dollar in 1990 is worth $2.35 today. That $2.7 million in 1990 is not the same amount today. Put differently, $2.7 million will be worth around $6.4 million in 2023. So, using the current round and approximate exchange rate of N900 to $1, we may calculate that N20 million in 1990 will equal N5.7 billion in 2023 (there are better and more complex ways of calculating this but i will be using the least complex way).
Recently, I stumbled over the following paper written by University of Lagos eminent history professor Professor Ayodeji Olukoju: The first 12 years of what is now known as GTBank's existence are covered in the book Gentlemanly Capitalism and Entrepreneurial Management: Formation and Rise of Nigeria's Guaranty Trust Bank, 1990–2002. The chapter, which is a portion of a larger book about entrepreneurship in Africa, offers a lot to think about, but what truly sticks out is how Nigerian opportunities have evolved since 1990 and what makes them unique.
The promoters started the process of applying for a bank license in December 1989, and were required to deposit N20 million as paid-up capital with the Central Bank in March 1990. This was known as the licence fee. For what began as a concept between two young, well-connected guys the previous year, this can be seen as the point of no return. These days, the same license with the CBN will cost you N25 billion.
That is five times the price it was in 1990. This is partially due to Nigeria's past banking experiences, as the nation formerly had ninety banks engaged in less than zero real banking and a combination of FX round tripping and other "sharp practices." However, it also represents the regulatory practice in Nigeria of utilizing money, the low-hanging fruit that is easiest to get, to discourage individuals from entering a certain industry. There are alternative approaches, such as the regulator basing the choice on the plan's quality or its capacity to increase (or preserve) competition in a market that is constantly in need of it. However, the reality has been a very considerable increase in the cost of entrance.
The more intriguing aspect isn't even that. Even though the entrance fee was extremely low in 1990, money was not the main factor. Think about this:
Adeola, Aderinokun, and Bode Agusto, the three main Promoters, had been buddies from their time as secondary school students at St. Gregory's College in Obalende, Lagos. Aderinokun wed the sister of Agusto, who had been a fellow student of Adeola's at the Methodist Boys' High School in Lagos. Later, while looking for work, their paths crossed. This common history oiled the steps that led to the bank's success. Secondary school connection "never extinguishes," as Adeola so brilliantly put it.
It turned out that in those days, you required much more than just money. It was important that you go to the proper schools, be born into the right family, and make the right friends while you were there. They were able to persuade 42 investors to support them; nevertheless, it appears that more were interested, as they were ultimately free to select the investors they desired. An intriguing example of this is how they were able to avoid having military officials, either active or retired, on their board during the period when Nigeria was ruled by the military and had what may have been the most overtly corrupt military elite the nation had ever seen. But they managed to get some well-known politicians to support them at the time. Let's just say that they were able to put together an idea that was able to convince the investors.
Chief J.K. Agbaje, the chairman of the foundation, was the first Nigerian executive director of Standard Bank, the country's top bank until it was nationalized as First Bank. He was brought in with the strategic intent of using his influence as a well-respected former banker to offer his credibility and aid in the acquisition of the banking licence. Adeola acknowledged at Agbaje’s retirement party, without elaboration, that he was “instrumental in obtaining a banking licence for the bank.” Like Aderinokun, Chief Agbaje's son was a friend of Osibodu, whom he convinced to assist in recruiting his father.
Of course, Segun Agbaje, the bank's current CEO, is the son of Chief J.K. Agbaje. This bank was established with significant assistance from their friends along the road by the wealthy and their offspring:
A prospective director and one of the Bank's investors made it easier for the Minister—who also happened to be one of her children's godfathers—to approve.
However, that did not ensure success, and the overwhelming evidence shows that they managed the bank wisely and diligently. At the time, I remember that the bank had by far the best-trained, best-dressed, and best-looking employees of any Nigerian bank. You desired to register for an account there.)Similar to their investors, they were extremely selective, and from 1990 to 2009, it is reported that they hardly crossed the one million client mark. Following this, Sanusi Lamido Sanusi, the CBN Governor, unleashed a massive assault on the Nigerian banking sector.
People started searching for a reliable bank to stow their money in and there was an abrupt flight for safety. Many would tell you that once GTBank reached almost 3 million customers almost overnight, the quality of their service went downhill from there.)
What does this indicate about Nigerian opportunities? They were by no means the only kids with connections or those who could amass N20 million at the time. Nevertheless, the chance was exceptional and most likely inaccessible to 99 percent of Nigerians at the time. The same option is no longer available to 99.99% of Nigerians, 33 years later.
Here are a few things to learn. Banking is perhaps not the best example because, as was previously mentioned, Nigeria had some extremely unpleasant banking experiences (I grew up watching Sunday night stories about "Wonder Banks" on Newsline), which forced the industry to close to the majority of its customers. However, neither tech nor Afrobeats are the kinds of opportunities that stay available for very long in Nigeria. It goes without saying that Nigeria has not been good at providing opportunities for the hundreds of millions of Nigerians living inside its boundaries.
The other lesson is that in Nigeria, a lot of doors that appear to be securely closed frequently simply require a little prodding to open. For a couple of guys in their 30s to decide to open a bank in Nigeria in 1990, of all places, must have looked quite bold. According to Professor Olukoju's version, they started talking about the idea in February 1989 and received an invitation for a formal interview at the CBN by December of the same year. Additionally, as was previously indicated, they were requested to pay the N20 million deposit in March 1990. They received their banking license in July 1990. That is to say, it took exactly eighteen months from concept to bank license, including fundraising.
But if that sounds amazing, it is because the door stopping a bunch of young guys from starting a bank turned out to not have been firmly shut after all.
This piece was first published in 1914reader.com
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