The GTBank story: Push a door and it might open

…The first 12 years of GTBank Nigeria and what we can learn today

For the purposes of this piece, we only need a rough estimation. So take N20 million in 1990. Convert it to US dollars. The internet says the exchange rate at the time was something around N7.39 to $1. That works out to $2.7 million. That $2.7 million in 1990 is not the same amount today so to work out today’s value, we again use the internet which tells us that a dollar in 1990 is worth $2.35 today. In other words, $2.7 million is equivalent to around $6.4 million in 2023. Using a round and rough exchange rate of N900 to $1 these days, we can therefore say that N20 million in 1990 works out at N5.7 billion in 2023 (there are better and more accurate ways to do this calculation but I’ve used the laziest one).

I recently came across a paper by Professor Ayodeji Olukoju, a distinguished professor of history at the University of Lagos: Gentlemanly Capitalism and Entrepreneurial Management: Formation and Rise of Nigeria’s Guaranty Trust Bank, 1990–2002 is an account of the origin story of what we now know as GTBank, specifically the first 12 years of its life. There is much to chew on in the chapter (it’s part of a larger book about entrepreneurship in Africa) but what really stands out is the nature of what can be considered opportunity in Nigeria and how that has changed since 1990.

After beginning the application process for a bank licence in December 1989, the promoters were asked to pay the N20 million licence fee in March 1990 i.e. the amount needed to be deposited with the Central Bank as paid-up capital. This can be considered the point of no return for what had started the previous year as an idea between a couple of young and well-connected men. These days, you will need N25 billion for the same licence with the CBN. That is, 5 times what it cost in 1990. Some of this reflects Nigeria’s experiences with banking and the fact that the country once had 90 banks doing a combination of forex round tripping and assorted ‘sharp practices’ with less than zero actual banking. But it also reflects the Nigerian regulatory habit of using money – the easiest low-hanging fruit – as a way of keeping people out of an industry. There are other ways – like the regulator basing the decision on the quality of the plan or its ability to boost (or maintain) competition in an industry that always needs it. But raising the cost of entry, very significantly, has been the reality.

And that’s not even the more interesting part. As low as the cost of entry was back in 1990, relatively speaking, the money was only a part of the story. Consider this:

First, the core Promoters – Adeola, Aderinokun and Bode Agusto – had been friends since attending high school at St. Gregory’s College, Obalende, Lagos. Aderinokun married Agusto’s sister, who had been Adeola’s classmate at the Methodist Boys’ High School, Lagos. Their paths later crossed in the job market. This shared background oiled the process leading to the success of the bank. Adeola aptly remarked that secondary school bonding “never extinguishes.”

It turned out you needed a lot more than money in those days. You needed to be born into the right family, go to the right schools and make the right friends while you were there. They managed to convince 42 investors to back them – it seems that more wanted to join and they ended up being able to pick and choose who they wanted. An interesting illustration of this is that at a time Nigeria was under military rule with perhaps the most openly corrupt military elite the country has ever seen, they managed to avoid military men (serving or retired) on their board. They, however, got some prominent (at the time) politicians to back them. It is fair to say they managed to put together a convincing idea that won over investors.

The foundation Chairman, Chief J.K. Agbaje, was the first Nigerian Executive Director of the leading bank in Nigeria, Standard Bank (later nationalised as First Bank). He was recruited for the strategic purpose of facilitating the procurement of the banking licence by lending his credibility and deploying his influence as a highly respected retired banker. Adeola acknowledged at Agbaje’s retirement party, without elaboration, that he was “instrumental in obtaining a banking licence for the bank.” Osibodu, like Aderinokun, was a friend of Chief Agbaje’s son, whom he persuaded to help recruit his father.

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Chief J.K Agbaje is of course the father of the bank’s current CEO, Segun Agbaje. This was a bank set up by the elite and their children with a lot of help from their friends along the way:

One of the Bank’s investors and a future Director facilitated approval by the Minister, who was the godfather to one of her children.

But that in itself did not mean success was guaranteed and the overwhelming evidence is that they ran the bank diligently and smartly – my recollection from the time was that the bank had by far the best-trained, best-looking and best-dressed staff you could find in any Nigerian bank. You wanted to open an account there. (As with their investors, they were however very picky and the story is told that from 1990 to 2009, they barely managed to cross 1 million customers and then Sanusi Lamido Sanusi became CBN Governor with a blitz on the Nigerian banking industry. All of a sudden there was a flight to safety with people looking for a stable bank to squirrel their money. Almost overnight, GTBank grew to something like 3 million customers and many people will tell you the quality of their service went downhill from there.)

What does this tell us about the nature of opportunity in Nigeria? They were definitely not the only well-connected kids at the time or the only ones who could raise N20 million. But the opportunity was a rare one all the same that was probably closed to 99% of Nigerians at the time. 33 years later, the same opportunity is now closed to 99.99% of Nigerians.

There are a couple of lessons here. Banking is perhaps not a great example because, as stated earlier, Nigeria has had some very painful experiences with banking (I grew up watching stories about ‘Wonder Banks’ on Newsline on Sunday nights) which necessitated closing it off to most people. Still, it is not the nature of opportunity in Nigeria that it remains open for long – whether it is tech or Afrobeats. Nigeria is self-evidently not a country that has excelled at expanding opportunity to the hundreds of millions of Nigerians within the country’s borders.

The other lesson is that many doors that seem firmly shut in Nigeria often only just need a push for them to open. It must have seemed pretty audacious for a couple of guys in their 30s to decide they wanted to start a bank of all things in 1990 Nigeria. Professor Olukoju’s account suggests that they began discussing the idea in February 1989 and by December of that year, they had been invited for a formal interview at the CBN. And as already mentioned, in March 1990 they were asked to pay the aforementioned N20 million deposit In July 1990, the banking licence was issued to them. That is, from idea to banking licence (with fundraising along the way) took all of 18 months. That, too, is another thing that will not happen today.

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