Interview with Mr. Tayo Aderinokun
The Managing Director of Guaranty Trust Bank Nigeria PLC

Tayo Aderinokun Deputy Managing Director, Guaranty Trust Bank

Summit Communications: Since you have become Managing Director, what would you consider as your major achievements in the past and what is your plan for the future?

Mr. Aderinokun: We have managed to build an institution, which is a bit more than I can say for a lot Nigerian organizations. This is because most Nigerian organizations are more a personification of the owners. What we have tried to do in the last 12 years is to promote an institution that would outlive the promoters. We first went public when there was really no need to. It wasn't like we needed capital. We actually sold off the shares of the present shareholders to go public and that again is unusual by Nigerian standards. What we have always done in terms of creating talent and structures is to promote professionalism. What we even see in terms of the transition that just happened is a reflection of what our objectives are. Of course, we also want to create a big organization, an organization that would be important to Nigeria and gradually we are getting there. Today, I would say that we are the fifth or sixth largest bank in the country and considering that we were almost the last bank of our generation to be licensed, I think that we have done quite a bit.

Summit Communications: In your opinion, what would you consider as the advantages of being a new generation bank in comparison to a traditional bank; from your own perspective and also that of the customer?

Mr. Aderinokun: Let's take it first from the customer's perspective. New generation banks are generally more proactive; they are more flexible. You can get things done faster, quicker. The old generation banks started in an era when customer service was not really an issue but that has changed over time. It is still taking them some time to adjust to the realities of today. Therefore, I would say to the customer, in the new generation banks you get better service, get more customized service delivery and if you need things done properly then the new generation banks will do that for you.

Summit Communications: You say that traditional banks can learn something from you. Turning it around, what have you learned from the traditional banks? What could you apply from them?

Mr. Aderinokun: There are structures and benefits of being conservative. There have been structures that have stood the test of time. You can learn quite a bit from them. For the new generation banks, I would say some of their weaknesses are that processes are really not in place. They do things on an ad-hoc basis, as it comes. Again, those are some of the things that we at Guaranty Trust Bank try to do differently. About three years ago we decided to call in a consultant to document all our processes. Now we have a process manual that documents everything we do and how it should be done. In most new generation banks you don't find that. You can be sure that your money is safe in the older generation bank because they are bigger and they wouldn't do anything fancy. On the other hand, some of the more modern structures you still wouldn't get in the old generation banks. So if you are looking for something innovative, something customized for your own business, you would probably get it more with the new generation banks than with the old.

Summit Communications: There is a very competitive and vibrant financial sector in Nigeria; what would you consider as Guaranty Trust's main competitive advantage, and why should people bank with you?

Mr. Aderinokun: We normally say we try harder, maybe because we are trying to catch up. We consider our major competitor to be Citibank because they do business the way we do. There are many local banks that claim that they are our competitors. Yes, they may be about our size but we believe that our business practices are totally different from most of these banks. When we look at Citibank and ourselves, we believe that we try harder. We put in more effort in order to compete because we don't have the advantage of a big global network like the Citibank Group. For every business opportunity we get, we probably have to write twice as many proposals, make twice as many presentations to get the same business that Citibank does. We've been having a battle cry to beat Citibank for 10 years and all of a sudden, we beat Citibank this last year and we didn't even realize it until somebody pointed it out. Sometimes you think it's a lost cause and it can never happen in your lifetime. We actually beat Citibank in profits this year, so we are winning. Our people are more responsible. We train just as much, if not better than they do. Our major advantage over Citibank is that we can make our decisions locally. For a person in Citibank to make a major decision, he is going to have to go to New York or London. What we have over the rest of our competitors locally is really our level of professionalism. Over time we have built a reputation as a bank that does things right, that does things properly, that would not cut corners. People who value that kind of relationship stay with us.

Summit Communications: You say your bank is doing things right. Lately, the financial sector in Nigeria has been suffering from very bad press, cases of misconduct. Do you think that this is as a result of the high level of competitiveness here in the sector, causing banks to have to find other ways to make profits and assure their shareholders?

Mr. Aderinokun: That is part of it. Nigeria is not any different from other places in that regard. Anywhere you create an avenue for quick profit, human beings are the same, they will react in the same manner. It requires a very different kind of human being to see an avenue to make money and not take it. The Nigerian banks are true to this. You might ask, why don't we do it? I think that over time, we've discovered that it is being lazy that makes one cut corners. We make as much money as a lot of those banks. In fact we make a lot more money than most of the banks but we play by the rules. What we have done is that we have challenged our own people to find innovative, creative ways to achieve the same objectives without breaking the rules. Today, what these banks were banned for was illegal foreign exchange transactions. But, what people fail to realize is that in the legal foreign exchange operations, there is still a lot of money to be made. They just need to train their people. Today, we are one of the big four banks in both local and foreign currency trading and we do it legally. The other banks will not really bother to train their people, to challenge them, to reward them because it is easier to just cut corners. It doesn't require any thinking or putting any structures in place. People take the easy path. We decided to take maybe the more difficult but the more sustainable avenue. What we have now discovered is that they have left that market niche for people like us. Within the foreign currency but even with the regular currency trading there is money to be made. That is one aspect. Additionally, there may be too many banks for the business that is available. Today we have about 100 banks. We used to be 120 and around 20 fell out about eight years ago in the first shakedown. Of those 100 banks, I would say that 95 are basically based in Lagos. So while there are too many banks in Lagos pursuing too little business, there is still the rest of the country. Again, a lot of these banks are just tiny outfits without enough capital or enough size to do anything really serious. If we consolidated those banks into 20 reasonably sized banks, then we would probably have a much better financial services environment. The banks can do better business, and the regulators can have a manageable number to deal with.

Summit Communications: The Central Bank recently introduced the Dutch Auction System. What are your long-term expectations for this system?

Mr. Aderinokun: My impression is that the government really needed to devalue and it figured that it would be easier for them to let the banks and the customers do it on their behalf rather than to officially come out and say that they were devaluing. I think that is the logical reason for introducing the Dutch Auction System at this time. Instead of making a loud announcement, with the Minister of Finance and the National Assembly actually saying "We are devaluing", they said "We are doing the DAS", so do it on our behalf. Obviously the structure of the market means that if you want to do a DAS, the panic itself will depreciate the NAIRA and it will do so very quickly. You can see what happened, in a couple of weeks the rate came down rapidly.

Summit Communications: What is the logic behind devaluing if you have a country that is so highly dependent on imports?

Mr. Aderinokun: None if you ask me. But the only other way in which we can do it is to have enough because it's a demand and supply issue. If we don't have enough, we have to follow the market. Until we can get more in terms of foreign exchange, more in terms of dollars, we have to continue depreciating. Its the only way, even though it makes our situation worse, to develop that industrial base which will promote ultimately the generation of more foreign exchange. The more you depreciate your currency, the more difficult it becomes. It's a no-win situation but I am yet to find another solution. Let's see what happens in the future because we all realize that we shouldn't be doing it this way, but there is no other alternative.

Summit Communications: You mentioned earlier that you were the sixth largest bank in Nigeria without any big international connections, although you have banks in Gambia and Sierra Leone. How important do you see the American market in the international strategy of Guaranty Trust? Are you looking at the market to open up branches or to introduce strategic alliances with American banks?

Mr. Aderinokun: It would be nice but I cannot say truthfully that we have looked at that as a strategic alternative. It would be interesting to get a banking license in America even though for us it may be difficult, given the image of Nigeria and Nigerian banks. I don't think that the Federal Reserves or any of the state governments would give us a license because they would have to know us pretty well. Also, given our age, we might be hoping for too much to get a banking license in New York. But if we did, then really I believe now that we can make things happen because there is a fairly large Nigerian population over there. In the money transfer area there is a natural business to start with. Officially, Nigeria does quite a bit - the Federal government, the States government, do quite a bit with America and if a Nigerian bank is there, some of that business you will get if not a large chunk of it. So yes there is room but given the climate now, I would be surprised if a Nigerian bank of our stature and age gets a license to operate there.

Summit Communications: Do you think a lot of that has to do with the bad image that Nigeria has? How would you like Americans to perceive Nigeria?

Mr. Aderinokun: I am going to talk about the reality of Nigeria. Nigeria is a large country - 120/130 million people. It's only natural that a normal proportion of that will be bad people. Just as if you take 350 million Americans, I am sure the percentage of dishonest Americans is not any smaller than the percentage of dishonest Nigerians. Nigerians are so many; if the distribution of dishonest people in a population is 1%, if you have 100 million that means that 1 million of them are dishonest. 1 million is a lot of people scattered all around, so it looks like everywhere you look, it's bad Nigerians. Nigerians are 20% of the black world; every time you see a black man, there is a one-fifth chance that he is Nigerian. So just by the sheer numbers, you come up against many more Nigerians and you get this impression that all Nigerians are crooks, which is not necessarily true. Nigerians are very enterprising, extremely tenacious people, very intelligent and you find lots of them doing extraordinarily well, especially when it comes to education. I would like Americans to look on the positive side. Given what Nigerians have gone through and keep going through everyday, it's a miracle that we are still alive and doing new things. At times I sit and wonder at how Nigerians manage, given the salaries that they earn. You pay somebody a salary that cannot even get him or her to work if they were just to use it on transportation. But people still come to work, live, eat; I don't understand how it works. We don't have social security, but I am sure that there is an informal social infrastructure that ensures support; there must be something going on otherwise people wouldn't be alive. So I want Americans to see Nigeria more from that perspective - very industrious people, quick to learn, tenacious, the typical Nigerian believes that he is smarter than most people, those are positive things. What I think we lack is leadership and organization. If those two things can come, I am sure that things would be a lot better than they are now.

Summit Communications: You mentioned that there is a Harvard Business School case on Guaranty Trust Bank. Could you tell us a bit more about it?

Mr. Aderinokun: What happened was that about six or seven years ago, Fola went for a course in Harvard, and his story fascinated one of the professors so much that he said he had to come and see things for himself. Back then, Guaranty Trust Bank was just about five years old but we had done so many things which were considered unusual for a small bank in a third world country, with no foreign involvement. The case was a one part case and I think the professor retired some years later and a new person, a much younger person took on that course and he also decided to write follow-ups, so we now have a four part case. We feel quite proud of it because it is quite an interesting case - it is an organizational behavior case. I think we are the only Nigerian organization that has had a Harvard Business School case written about it.

Summit Communications: So talking about American investment, do you think the government has done enough to create a conducive business environment to attract foreign investment?

Mr. Aderinokun: It could be much better. I think that in order for us to have foreign investment, we first need to put together infrastructure. We are not doing as well in that area: roads, electricity, telecommunications, all those things need to be put in place. I could say that we are on our way but we are still very far away from achieving it. Secondly, even though things have improved significantly from the military days, we still need to streamline our laws and the receptiveness of our people. We are not very foreigner friendly, not with human beings but with the structures that we have put in place: civil service, customs and immigrations, the rules, those things are really not foreigner friendly. They need to be improved upon before we can say that we are creating an environment for foreign investment. What would a foreign investor really get? He can get cheap labor. There is a very large pool of fairly educated people that you can get at a very low cost and Nigerians are very quick learners. If you are looking for what Taiwan was 20 years ago, then I think Nigeria is it, except that the infrastructure was probably there. The civil service, the rules and regulations were probably more conducive as well.

Summit Communications: Do you think that the financial sector has a role to play as well? We see very high interest rates; if investors were to come in should they bring their own money because the lending rates are high in Nigeria?

Mr. Aderinokun: Yes, but you see, that is more a reflection of a lot of other policies. You can't blame the financial system for high interest rates because it is monetary policy and fiscal policy that translates into what happens there. If there is high inflation, in order to be able to attract deposits, interest rates have to be high. If I am paying high interest rates to attract deposits, obviously I have to lend high in order to be able to cover my costs. We are just following the market. My spread is what is important to me not the rate of interest. If I can get a spread of 5% at an interest rate of 10%, fine. Why does it have to be 30% interest rate while the spread is still the same? The direction that government wants rates to go is the way it will go if the policies encourage that, especially in our environment where interest is a managed float rather than letting the market decide what it is going to be.

Summit Communications: Banks get blamed for everything that goes wrong in Nigeria lately.

Mr. Aderinokun: Yes, it is very convenient nowadays. In fact the one line of argument I find most ridiculous is that banks are not lending to the productive sector so we are the ones responsible for the low capacity utilization in manufacturing. The truth is, I really don't determine who borrows. The person who borrows is the person who has the credibility, and who can pay me back. It doesn't matter if you are a manufacturer or a miner. I am totally blind to that. It's who can pay me, who can give me a better return, that's really it. It just so happens that there are other infrastructure issues that just don't make it easy for manufacturing to thrive in this environment, and that is really the problem.

Summit Communications: What is one of the main unusual things that this Nigerian bank has been able to achieve and what would you say is the most significant of those challenges?

Mr. Aderinokun: We have been pioneers in most things that we have done at Guaranty Trust Bank. When we started, we pioneered real time online banking in Nigeria. We didn't start until we were fully computerized and our branches could talk to each other, even though it was done in Lagos. Real time online in 1990, that was novel, totally unheard of. The layout of our branches, even the interior, the core, was again totally different, it was friendlier. Before, in the traditional bank you found cashiers behind cages but we removed all of that and made it what you see in most places today. We started with the plaza, which was our flagship branch then, we started with that new layout. We introduced very many novel concepts especially in the area of customer service, and total quality. Before total quality management became fashionable, we introduced TQM for our staff, the way we do things. Later it became a buzzword. In our desire to have extraordinary customer service everybody in the bank decided to become tellers. So the teller function was rotated amongst ourselves, from the Managing Director to the most junior person, everybody had his or her teller days such that at any point in time, you couldn't be sure who you were going to see serving you. It was actually something that was pretty well received. Before Guaranty Trust Bank came, the whole face of banking in Nigeria was slightly different especially in the customer service area. Cashing a check was an exercise that took you at best half a day; you went in the morning, you put in your check and probably went away after taking a tally that showed that you were maybe No. 9 and then came back later to find out if they had reached No. 9. We changed things so that you walked into a bank and in five minutes, you got your money and you were gone.

Summit Communications: Where did you get these ideas?

Mr. Aderinokun: Put it this way; the two of us who started the bank had a vision of what we wanted the bank to be. We were bankers; I worked for Chase in New York. Fola worked for NAL, which was at that time an affiliate of First Chicago. So we had an idea of what we wanted to do. We wanted to change the face of banking and we were lucky that we were some of the few professionals that got a banking license because banking licenses were at that time being given to either top military officers or big businessmen who had contacts in government. We felt also, apart from the desire to make money, that we owed this country a duty. Given our exposure, we could try and bring to the local environment a lot of the things which we were seeing and which were normal abroad.

Summit Communications: The Harvard Business School recognized those differences although they are standard in the U.S. Did they recognize that those changes were quite significant in Nigeria?

Mr. Aderinokun: You go for a program in IMD, you talk about the organization that you came from and that you are doing this, doing that, and people think that, even in Europe, it's only cutting edge organizations that have reached this stage. Then we went there and said we do this normally, explained how we remunerate our people and so they found out that this is an institution that is slightly different from the ordinary run-of-the-mill organization in Nigeria. I am glad to say that 12 years later, some of the things that we pioneered are now the standards. It makes us happy that we have managed to raise the standard in the industry in which we participate. These standards were totally new and were some of the things that were responsible for Guaranty Trust Bank's success. As I said, we were the last to be licensed among the new generation banks so we are quite proud of what we have done.

Summit Communications: If there is one more change that you would want to see happen as a new Managing Director here, what innovation would you have up your sleeve?

Mr. Aderinokun: That is difficult to say because it's not like I am coming from outside, I have been part of this whole thing, there hasn't been anything that I wanted to do that I haven't had the opportunity to do. It's more a case of let's improve on what we have over time. I don't have any dazzling new thing. What I would like to see though is a Guaranty Trust Bank that is going to be bigger because I think that size is going to be important in going forward. In fact, we would not be averse to combination with like-minded organizations to create maybe the second or third largest bank in the country. If we get that size, with our innovative spirit and entrepreneurial culture, I think we could create a world-beater. Size is what we need now.

Summit Communications: But you've certainly expanded quite rapidly already with the branch network that you've got.

Mr. Aderinokun: Yes, but that will not make us No. 3, at least not very soon. The first three banks are about two or three times our size and you don't catch up overnight, at least not by opening branches; it would take us 20 years to catch up. It has to be a combination. First Bank has 350 branches, and we are only at 33. Even if we keep opening 10 branches every year, it would take us 15 years to catch up and they are not standing still anyway. So I think that it is a combination that can really do it. Today we are in the N80 - N90 billion balance sheet range and the ones we are going after are about N250 - N350 billion. It would be interesting to combine with one or two of the medium size banks: let's create something; one, it would be a more profitable organization because we do not have to duplicate branches. We believe that we have the entrepreneurial culture, the trained people to make it work. Now we are in Gambia, in Sierra Leone, we hope to get to Ghana; let's also try to create a regional network before the South Africans come and swallow us up. We'd have something credible that can meet their challenge. Later we can try and conquer the world. The next generation or the generation after will do that, let's just try and set the framework, that's really what we are trying to do.

Summit Communications: So the final dreams are limitless?

Mr. Aderinokun: Yes. Why can't there be another Citibank coming from Africa? We have had the potential for a long time, so maybe in 500 years it will be Africa ruling the world. If somebody had told you 200 years ago that America was going to rule the world ... so anything can happen. If we believe that there is a God and he loves all his children equally, then it would be time for Africa.

Thank you very much for this interview!