Nigeria is widely viewed as coming late to the mobile money revolution that swept East Africa in the 2010s. But transferring money today in Nigeria, Africa’s largest economy, could scarcely be easier — shopkeepers, tradespeople, department stores, satellite TV companies, and nearly every other merchant accepts payment via mobile phone transfer.
That’s in large part thanks to Guaranty Trust Bank (GTBank), which, under the leadership of Segun Agbaje, helped popularize money transfers based on unstructured supplementary service data, a communications protocol used for mobile financial services. The industry has since moved into app-based transfers, and the Nigerian central bank recently approved the first licenses for mobile wallets, the latest step in a digital revolution transforming banking across the continent.
Agbaje joined GTBank in 1991 — the same year it commenced operations — after training to be an accountant in the United States, and he worked his way up as the bank grew. In 2007, he led GTBank’s listing on the London Stock Exchange, which raised US$750 million, and successfully placed Nigeria’s first private Eurobond issuance. Four years later, he was named chief executive officer. Today the bank has total assets of more than $9.7 billion.
Under Agbaje, GTBank’s retail clientele has grown ninefold, to 18 million, making it one of Nigeria’s biggest banks by customer base. It has also created the continent’s largest consumer-focused fairs in food and fashion as a way to help develop sectors that Agbaje believes are essential to promoting enterprise for indigenous small businesses and critical to boosting the country’s sluggish economic growth.
Agbaje recently sat down with strategy+business in the bank’s Victoria Island office to discuss global growth, Nigeria’s vast potential, the importance of small and medium-sized enterprises (SMEs), and the rapidly changing competitive landscape for banks.
S+B: You’ve spent nearly 30 years in banking. Today the Nigerian landscape is changing quickly as startups begin to compete more seriously with the country’s top banks. How does that change affect how you think about the business?
AGBAJE: Banking now is probably more interesting and more challenging than it has been in a long time. When I started in banking, whenever we carried out competitor analysis, all we would look at were banks. Today, when you carry out a competitive analysis of banks, you must look at fintechs, telcos, and anybody that would do fast-moving consumables. You would probably also look at betting companies. Basically, anyone who has the potential to use mobile wallets and mobile technology is a potential competitor.
For example, some online betting companies today have up to 25 million mobile wallets. If you have 25 million mobile wallets, you have 25 million potential customers for financial services. I also suspect [these companies] are using data analytics and artificial intelligence to target customers. Some of them might even have started finding ways to extend credit. So I think that whatever the telcos believe they have today [in terms of data] to compete in the financial-services space, the betting companies probably have just as much.
S+B: Last year, when PwC asked CEOs about threats to business in its 22nd Annual Global CEO Survey, the top responses from African CEOs were policy uncertainty, availability of key skills, overregulation, increase of tax burden, and exchange rate volatility. What do you think are the biggest threats today?
AGBAJE: I think that you can navigate many of those threats that you’ve just mentioned. The one that bothers me the most today is the changing competitive landscape. You will always worry about regulation. You will always worry about tax. You will worry about losing staff to countries such as Canada and Australia. However, I think that you will be able to deal with these threats better than you will with the changing competitive landscape. The process of change, the acceleration of change and the threats — it is actually quite scary how quickly it’s happening. Three years ago, we were talking about this like it was way, way in the future. It’s here today. And we’re living it very quickly. So, while I hear all of the other threats, I actually think they’re easier to navigate than the threat of the changing competitive landscape.
Everyone is doing digital technologies. They’re disrupting your business. It’s not like banks won’t be around, but will you be as relevant? Will you be as profitable? Because you’re sharing a lot of your profit with these new entrants and you’re sharing a lot of your customer base. I think these are bigger threats. If we have to pay a bit more tax, it’s no problem, as long as we make the money. Other threats, we can find ways around them, but this one is more difficult to handle.
S+B: Are you thinking about climate change at all?
AGBAJE: Yes. I think about what will happen to economies that are dependent on natural resources going forward, if, for example, oil goes away. What happens to oil-producing countries in 40 years? I think about climate change very differently. I look at it as the impact on the economies as a result of climate change, as opposed to the environment. For example, if you’re running Nigeria today, you should definitely have a plan for when oil goes away. We’re not planning enough, nor are a lot of other countries.
You should have a real, urgent plan. If something happens in terms of climate, will you be able to export cocoa, if that’s your major commodity? Will you be able to export rubber? When countries think of climate change, they should start thinking seriously about its economic impact on agriculture, on food production. I don’t see any contingency plans to handle the impact.
S+B: Where do you see the global economy going over the next year?
AGBAJE: Growth is coming down. England’s still struggling with Brexit. Europe has its problems. You still have China–U.S. trade tensions. So, I’m just not sure that things are very upbeat; you are looking at stunted growth from a global perspective.
S+B: How do you see that playing out in sub-Saharan Africa and then down in Nigeria?
AGBAJE: There are some economies in sub-Saharan Africa that seem to be growing. Ghana seems to be growing. The GDP growth figures for Nigeria are around 2 percent. Over the next 12 months, I can’t see anything that would significantly change that.
S+B: Is that enough for Nigeria?
AGBAJE: Of course not. If you look at our population growth, for Nigeria to achieve its full potential, it probably needs to be growing at about 5 to 7 percent. Two percent is definitely not sufficient for Nigeria.
S+B: Are there certain policies that could be used to boost growth?
AGBAJE: Obviously, as banks, we have been told we have to lend more, and yes, that would help. But I think we have some implicit subsidies that we need to deal with. We need to look at our oil subsidy and the power subsidy. If we address some of those things, we may have better short-term growth. It would not take that long if we removed the subsidies and the banks did a bit more lending.
S+B: The World Bank projects that in sub-Saharan Africa, the population is going to double by 2050, to more than 2 billion; Nigeria is expected to be home to over 400 million people by then, making it the third most populous country in the world. Is that an opportunity or a potential threat?
AGBAJE: It’s definitely a little of both. A large population that is a productive population and that is a young population is obviously an advantage. [Young people] pick up things very quickly. It’s potential growth. For us, it’s similar to what happened in the 1960s. You have a huge baby boomer population to sell to. It’s a disadvantage if you can’t create jobs, [if] you don’t have enough food. So, it’s a blessing and a curse, depending on how you deal with it.
If you’re running Nigeria today, you should definitely have a plan for when oil goes away. We’re not planning enough, nor are a lot of other countries.”
I’ve always felt that the most valuable resource in Nigeria is not oil, it’s the population, and that when you come into Nigeria, irrespective of what the data tells you and what the GDP per head is, there is potential that is not captured in that number. And even if we argue about the population figures — is it 150 million, is it 160 million, is it 200 million? — there are very few places in Africa that have that sort of critical mass, and 50 percent of Nigerians are young. So, basically, that allows us to grow if we’re able to tap into the potential of that population.
S+B: What challenges need to be addressed in order to harness that potential?
AGBAJE: A lot of the problems in Africa are leadership problems. Some people might be fans of [Rwandan President Paul] Kagame; some might not be. But we have business operations in Rwanda, so I have watched how the country has grown under what I would consider good leadership. Where you have good leadership in place, you tend to be able to unlock potential. In Africa, if we’re able to have dynamic leadership, we will be able to unlock the potential of the population.
S+B: There’s a debate about whether resource-dependent economies are growing productively or unproductively. Nigeria was an example of a country that didn’t create many jobs or see the oil wealth trickle down to ordinary Nigerians. Are there examples in Africa of countries that have gotten productive growth right?
AGBAJE: I think you’ve got one: Rwanda. When people talk about Nigeria, the reason you might call it unproductive growth is that a lot of what happens in the oil sector tends to happen outside the economy. Most of the money is banked outside the country. You actually don’t see or feel the full impact on the Nigerian economy as opposed to if you [experienced growth in] agriculture, or road construction, or local SME-type manufacturing, all of which tend to be more productive for an economy than oil. For you to see productive growth, you have to drive it in a way that impacts your SME and your retail sectors.
S+B: Nigeria finally signed on to the African Continental Free Trade Area agreement, the continent-wide free trade deal that aims at creating a $3 trillion market, knocking out 90 percent of tariffs, and bolstering intra-Africa trade. How do you view the potential impacts?
AGBAJE: I’m in a wait-and-see mode. We operate in 10 African countries, and…in terms of economic borders, it’s not that open, because everybody wants to control their monetary and fiscal policy. For you to benefit from the free trade agreement, you’re going to have to give up some of that control. You’re going to have to have a single currency, for example. You’re going to have to break down a lot of the economic borders. The full potential of the trade deal has yet to be seen.
S+B: Are there specific implications for a pan-African financial-services company that are different than for other sectors?
AGBAJE: If you’re able to move both goods and services across borders, you obviously then have a bigger market. If you’re a bank in Nigeria, and you have 18 million customers, and all those borders went away, you could start to look at your customer base much more broadly. And then it probably even changes your thinking. So as opposed to looking at your business and your strategy among 10 different countries, you can start to look at it as one, with one strategy.
S+B: Corruption is a big issue in Nigeria. What do you think is the impact of corruption on the Nigerian economy? And what steps do you think businesses can take to mitigate it?
AGBAJE: Ultimately, no matter what anybody says, corruption is not good for an economy. If you just [consider] how much we have lost to corruption in Nigeria over the last 40 to 50 years, it is obvious that it is not good for the system. How do you decrease corruption? My simple answer is to grow a private sector–driven economy. Let the focus not be about government contracts or government parastatals [state-owned enterprises]. As you do that, I believe that naturally, the level of corruption comes down.
S+B: Mobile money has come late to Nigeria, especially compared to Kenya. Do you think it’s taken too long?
AGBAJE: I am probably biased, but I think it was worth the wait. What has happened in Kenya is that as much as everybody loves Safaricom [the telecom company that owns mobile money pioneer M-Pesa], it is actually the largest bank in the country that [in the beginning was] not regulated [as a bank], and that is one of the biggest dangers. For me, this is a very scary thing. It is better to have grown your mobile money more carefully and made sure that your regulator, the central bank, has more oversight, as opposed to creating this entity, which is not regulated but turns out to be your biggest financial institution.
S+B: What other service areas do you think GTBank could get into beyond banking, given how rapidly the landscape is changing?
AGBAJE: We are hoping that regulation will not shackle us and that we can keep going. We created a single integrated payment platform called Habari, where customers can shop online, listen to music, stream videos, and access a plethora of everyday services online. Basically, we want to create a lifestyle platform, which is very different. I’m not sure there’s any bank that has what we have so far. It’s challenging. It’s difficult, but I think it is an area that we can go into and we can do well in. So far, in one year we’ve had nearly 400,000 downloads.
S+B: This is part of the aspirational brand you have said you’re trying to build alongside GTBank Fashion Weekend and the GTBank Food and Drink Festival. Why are these significant for the bank?
AGBAJE: One of the things we believe Nigeria needs to grow is a thriving SME sector, and when we organize our consumer-focused fairs for the food or fashion sectors, we don’t do it for multinationals or big businesses. We do it for SMEs. Over the years, people used to say that the reason banks were not lending to SMEs was that the SMEs didn’t have security. I disagree. It’s the cash flows that were not strong enough. It is cash flow that pays back loans. The whole idea of building free business platforms, as we have done in food and fashion, is to give SMEs the access to markets and networks they need to expose themselves and sell their goods.
With our events, we bring 300,000 people, sometimes more, to interact with and patronize these small businesses. Usually, this is the biggest exposure that these SMEs have ever had, and we offer it to them completely free. It helps them gain publicity: People get to know about the SMEs and patronize them more often, and this helps their business become more sustainable. So, it is all about promoting enterprise, really. And food and fashion are two sectors which we strongly believe that if Nigeria gets right, from an SME perspective, can help drive shared and productive growth.