My first job after university was to help run ”Credit and Marketing” courses for banks. My uncle wrote the first credit policy manual for any bank in Nigeria and we ran the first of those courses where he was the main facilitator sharing his experience as a credit officer.
What I couldn't really place a finger on initially was how Nigerian bankers know where to look for credit deals. The material we were using was from ”First Chicago Bank” where my uncle had attended some courses and got permission from them to adapt for Nigeria, it was different.
In America, the assumption was that there was already a lot of market data and the analysis being done was also based on verifiable sources. There were also a lot of inbound requests and the marketing activities mainly involved refining the value proposition and targeting.
In Nigeria (late 80s) there were new categories of customers coming up as there was a lot of economic growth but there was still a lot of opacity and all what we were teaching the bankers about policy and analysis only made sense if things were properly structured. They weren't.
I knew there were insider deals but everyone pretended that they were not happening. Most of the new bank CEOs like Chris Adibe of ACB and the Nebo Arah of Fidelity (our first clients) were foreign-trained professionals who seemed to value integrity and preached it openly.
All of this was fine until we did the same course for Ivory Merchant bank. The course went well until the day of the final dinner and I saw the cars of the credit officers. I knew those cars were not purchased with bank salaries. My uncle saw it too. He started asking questions.
I think it was after that course I realized that banking in Nigeria was morphing into something else. It was also around the time of the SAP crisis and multiple exchange rates. It was prime time for financial dealmaking. Most of my NYSC contemporaries in banking became rich.
I remember how common it was to be invited to celebrations of someone’s first ”million”. My salary then as a consultant was 400 Naira a month. I was tired of it and wanted to get into the action too. My uncle was actively discouraging me, talking about people with ”burnt fingers”
I didn't listen and almost got into major trouble with a finance house. Finance houses were ground-zero for all the deal-making. Many people inside banks set up their own finance houses outside to do FX and treasury deals. There was a lot of commission paid for raising deposits.
We were also running leasing courses to accompany credit courses as leasing was a hot new form of alternative financing. One of the facilitators happened to be the president of the Equipment Leasing Association of Nigeria. He had also started a finance house and I asked to join.
The company was located in Ikeja and I was living there at that time. It was very convenient for me as well. I could walk there from my house. First job I was asked to done was build up documentation for raising money. I was excited! Millions were coming. There was one small snag
I didn't have a formal employment letter. Each time I asked for it, I was given a new target for deposits and my commission level was raised. I felt this was a small problem as I trusted the CEO. He was a well known ”oga” and respectable. I was totally wrong.
I finally convinced some family members to give money. I had about 16 million Naira in cheques and a draft for another 5 million. Remember that the exchange rate for Naira to pounds at that time was 10:1. I was uncomfortable about the company suddenly that week for some reason.
The CEO kept asking me to submit the cheques but I held on to them. One afternoon, I decided to go to his house at Ikeja GRA to discuss my employment letter and upfront commission. I got there and it was empty. The family had moved and even the house helps had left, only guards.
That set off an alarm in my head. I knew something was up. Dude was in the office till that evening and kept telling me to pay in the cash as he was going to America to close a new equipment deal. He was going alright, but with depositors cash. He took 150m Naira with him.
Luckily, none of my money I raised was part of what he took with him. I returned the cheques and draft to very grateful family members. He was later apprehended and prosecuted. I saw him one day in NYC driving a taxi.
What is wild is that at that time, the authorized share capital for a bank was about 20 million Naira. The money the man stole was enough to set up many banks. Several major banks we see today were started in that era. This is how I also see if fintech today. Be careful.
Those bad deals are also very possible today even with strong regulation. A friend of mine in Togo was showing me some Telegram messages last week from some crypto scammers from Nigeria. There are many paths for this now, not just Ponzi schemes masquerading as fintech.
The reason I started this thread was from another conversation I was having about raising money. From what I have now discovered, raising money is more about emotion than reason. It was never strictly a business endeavor but more of a social activity or even borderline criminal.
It is very easy to corrupt any system that thrives more on emotion than empiricism. Even with empiricism, data can be fudged to look appealing. In the end, taking money from people is about appealing to primal things.
Bankers are still doing those insider deals till today. 80% of the trillions owed to AMCON are by a few untouchables in Nigeria. Many financial institutions almost went down because of one corporate deal.
You know the interesting thing? Insider deals are a global phenomenon. Even in VC.
I am seeing things now and just shaking my head. Better to build the next GTBANK than be a Forum Business Finance.
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