In LEAVING THE TARMAC: Buying a Bank in Africa, Aigboje Aig-Imoukhuede, immediate past CEO of Access Bank Plc, captures how he and his friend and present CEO Herbert Wigwe, bought in 2002, one of the smallest and most crisis-prone banks in Nigeria and built it to one of the top five banks in the country today, highlighting their business model, challenges, setbacks and triumphs. THISDAY begins an exclusive publication of excerpts from the memoir described as a “financial thriller” and scheduled for presentation on 29th March, 2021, focusing on Aig-Imoukhuede’s preparation, vision and entrepreneurial dreams.
When I told my mother I was going to buy a bank she couldn’t understand what I was talking about. Only 18 months before, she pointed out, quite rightly, we had attended a big party hosted by Chief Gbolahan Osibodu to celebrate my appointment as one of three executive directors at the Guaranty Trust Bank, a respected bank in the country, as renowned for its ethical values and good governance as it was for its enormous success. It had taken me just 14 years from attaining my law degree at the University of Benin to becoming an executive director.
‘Why would you want to give up such a good job when you have worked so hard to get it?’ she wanted to know.
‘You are the youngest executive director in the country, why can’t you be happy with that? And how are you going to buy a bank anyway?’
I am sure most mothers would prefer their sons to have secure careers with blue chip companies rather than risk everything by setting up businesses of their own. It is so much easier to explain to friends, family and acquaintances what your son does if the listener already knows and respects the name of his employer, so much more reassuring to know that your grandchildren have the protection of a steady salary coming in while they are young and vulnerable.
There was also the question of the negative publicity that so many owners of banks had received over time.
There was a general perception amongst the Nigerian public that a large proportion of the many banks then operating in the market were backed by wealthy individuals, known generally as ‘Ogas’ or ‘Godfathers’. In Europe or America the term ‘godfather’ would suggest senior figures in a criminal organisation, but in Nigeria it is closer to the original religious role of someone who provides support and protection to another of lesser standing. In Nigeria the ‘Godfather’ is like the traditional feudal barons of Europe, men of wealth and influence who extend their patronage to protect and assist others.
Many of these godfathers would have amassed both their fortunes and their networks of contacts while serving in senior positions in the army and the government, or as contractors to the government. Having grown wealthy through their influence they would then use their banks to consolidate their positions within society. There was generally believed to be a godfather behind every bank and there was also a perception that without such a person it was not possible to even start, let alone build such a business. Inevitably, as political and military reputations waxed and waned, the fortunes of their various banks would follow suit.
The assumption, therefore, was that such banks had not been founded for the good of their customers, but rather for the benefit of the godfathers and their friends and families, and that they were therefore not truly professionally run.
In many cases these assumptions were well founded, although not in every case. ‘The issuance of banking licences was abused,’ Seth Apati writes in his highly recommended book, The Nigerian Banking Sector Reforms, ‘and became a “smart” way of gaining access to foreign exchange at the official rate, which was then sold off at parallel market rates.’
Why, my mother was wondering, would I be even considering buying a bank when I had no such person to back me?
‘You are a good professional,’ she said, ‘you have proved that, but if you have a godfather you certainly have never told me about him. So how are you going to do it? How are you going to play the necessary political games to acquire a licence? Who will do the introductions for you? How are you going to survive in such a heavily regulated industry? Banks are not owned by professionals like you.’
I believe that God endows each of us with different skills and talents and you have to pray that you recognise these and are able to improve on them and work on them to the best of your ability. One thing that people who know me well tell me is that I have an ability to see a long way into the future, that I can spot things that other people miss. I can analyse a set of scenarios and project what the likely end result will be. It allows me to make decisions that sometimes appear very courageous to other people, but seem less courageous to me since I am pretty confident that I can predict the outcome.
My mother was by no means unusual in her misgivings. I would imagine that at that stage about ninety-nine per cent of the population would not have been able to understand the concept of banks being owned by professional managers.
But in fact she was wrong, because a number of other professionals were already changing the way banks were owned and operated and in so doing causing a revolution within the banking industry’s competitive dynamics.
Things had changed even in the fourteen years that I had been working in the industry. When I commenced my banking career in 1988 there were two main banking models that characterised the sector; Merchant Banking and Commercial Banking, the first also called wholesale banking involved providing corporate loans, debt/capital advisory services and other financial solutions to large corporate customers, the second commonly referred to as retail banking involved cheque/cash handling services, and other financial solutions to individuals and corporate customers. The leading Merchant Banks maintained technical partnerships with well-respected American Investment Banks and I recall that four Merchant Banks stood out namely Continental Merchant Bank, (Chase Manhattan Bank), International Merchant Bank (First Chicago), ICON Merchant Bank (Morgan Guaranty) and NAL Merchant Bank (American Express Bank). The involvement of foreign technical partners influenced the strategies and cultures of these four banks to the extent that Merchant Banking in Nigeria took on the persona of America’s Wall Street. Embracing the ‘yuppie’ culture, the Merchant Banks recruited the best and brightest Nigerian graduates from local and foreign universities and exposed them to the best training.
It is not surprising that many of the men and women who would go on to redefine Nigerian Banking earned their stripes in these four institutions. The Commercial Banks were dominated by the ‘Big Four’, namely First Bank (originally Standard Bank), Union Bank (originally Barclays Bank), United Bank for Africa (UBA), a joint venture led by the French bank BNP and Afribank, formerly the International Bank for West Africa (BIAO). All of them had been indigenised as public companies quoted on the Nigerian Stock Exchange; their ownership comprised the Nigerian Government as well as the general public.
mployees of the big four started at the bottom rungs of the career ladder rising through the ranks as clerical officers into positions of management in a somewhat pseudo colonial working environment. Unlike their merchant banking counterparts, the older generation of commercial bankers had obtained their professional qualifications from the Chartered Institute of Bankers and only later in their careers did they obtain university degrees. It is not difficult to appreciate that while they existed side by side within the same banking industry these two models were in fact worlds apart.
Around 1988, when I started my banking career, the military government led by General Ibrahim Babangida had commenced the issuance of new banking licences as part of its economic liberalisation programme, ostensibly to support the country’s economic growth and development.
You needed a minimum capital of N3 million, ($600,000), for a merchant banking licence and N6 million ($1.2 million) for a commercial banking licence. Most investors applied for merchant banking licences, believing that the ‘Big Four’ commercial banks were just too enormous to compete against. It was also much easier to raise N3 million than N6 million. The licence applications were typically sponsored by godfathers, who funded the licensing requirements. There was a great deal of political horse trading and lobbying required to obtain a banking licence.
I chose to make my career in banking even though I grew up as the child of civil servants who had risen to senior positions in government. Herbert Wigwe, who came into Access Bank with me, grew up in very similar circumstances.
Our fathers were career civil servants who had always displayed honesty, working hard throughout their careers and content to serve the nation for a remuneration which afforded them a comfortable standard of living and allowed them to send their children to good Nigerian schools. The damage done to the Nigerian economy in the early 80s, however, had decimated the living standard of such honest civil servants.
It became hard if not impossible for our parents to maintain the standards of living that they had become accustomed to and it was impossible for children like us not to notice. We could also not help but notice that our peers, whose parents worked in the private sector for companies like United Africa Company (UAC) were not affected in the same way. The choice of career path seemed to be a no-brainer; once we graduated we were heading for the private sector.
Immediately after law school I joined Continental Merchant Bank, one of the yuppie merchant banks. I soon discovered that I enjoyed the practice of banking far more than functioning as a legal officer and decided that at the right time I would make a move to core banking, a decision I have never regretted. My three years as a legal officer, however, would prove invaluable throughout my banking career. Nothing is ever wasted when it comes to accruing knowledge, experience and skills.
I found that many lawyers working in banks (at least at that time) did not see their jobs as going beyond the role of ensuring adherence with laws and regulation. I approached my responsibilities with a solutions mindset, always seeking ways of enabling core bankers to serve their customers better, and soon built a reputation as a lawyer to whom bankers could go for good counsel. I was consulted even by very senior bankers and I gave advice freely, taking full advantage of the opportunity to build high-level contacts within the industry. Some of these senior bankers must have noticed something promising about me because within a year of joining Continental I was recruited to join a high-profile team of bankers, several of whom had worked in Continental Bank, to set up the new Prime Merchant Bank.
Coincidentally, around the same time Herbert had started his banking career in another new merchant bank called Kapital Bank, after qualifying as a chartered accountant at Coopers & Lybrand. By 1991 over a hundred of these new banks had come into existence, bringing the total number of banks in Nigeria to approximately a hundred and forty. Within nine years, however, there would be less than ninety still in business and by 2005 just twenty-five. Throughout my career the Nigerian banking industry has witnessed a high rate of corporate mortality.
The concept of the professional owner/managers in banking was first championed by Otunba Michael Subomi Balogun, the founder of First City Merchant Bank, (FCMB), and I must disclose a family connection as my younger sister is married to one of his sons, but I was already an admirer of his achievements before that union took place. A successful entrepreneur, he blazed the trail for professional managers within Nigerian banks, showing them that if they pooled their resources, even if those resources seemed relatively modest, invited investors to back them and went on to run good, professional banks, then they would prosper. Many others chose to follow his lead.
The early stand-out successes in this new banking model were IBTC, founded by Atedo Peterside, Diamond Bank founded by Pascal Dozie, Guaranty Trust Bank (GTB), where Herbert and I both went to work (avoiding the collapse of Prime and Kapital), which was co-founded by Fola Adeola and Tayo Adenirokun, and Zenith Bank founded by Jim Ovia. There were a few others but these names stand out for me. There was a fresh entrepreneurial dynamism driving these banks despite the constraints of the monetary and fiscal frameworks that Nigeria had adopted to deal with the macroeconomics challenges of the early 90s.
The banks that stood out then still stand out today for their professionalism. Zenith and GTB in particular continue to be recognised as well-run institutions with enduring track records of performance. All of them have solid teams of professionals coupled with winning customer value propositions. Above all else, however, they all possess a shared vision that they have remained committed to. All of these banks have also, in one way or another, made successful transitions from their founding chief executives, a key step in the journey of corporate sustainability.
The professional owners owned significant stakes in their banks at inception but also raised capital from others, typically high net worth individuals whose accounts they had managed in the past or institutional investors such as insurance companies and pension funds.
From inception these entrepreneurs were under pressure to deliver returns in the form of dividends and appreciation in the value of their banks, even as private companies.