By 2025, I predict that it would be irrelevant which bank your account is domiciled in Nigeria. Nigeria will move into a new era of banking which I will call Open Banking. This banking structure will see a highly integrated system that abstracts out any specific bank where you hold your account.

With the success of the Bank Verification Number (BVN), an interface for all banks and their customer accounts have been created. Technically, what matters now is the BVN and not necessarily where the account is domiciled. If you have an account in Zenith Bank and you want a loan from Paylater, the fintech lender does not really care about the Zenith Bank element provided it can use the BVN data to pull the data it needs from Interswitch and NIBSS (Nigeria Inter-Bank Settlement System).

So, as we deepen our banking digitalization, bank accounts will become increasingly abstracted out. Even in your bank, they need the BVN more than they need the bank account you maintain with them. This is going to be a golden age for fintech (financial technology) companies as the Central Bank of Nigeria will make it easier for banks to do business with them. There will be minimal practical limitation for CBN-certified fintechs to pull data from banking institutions through BVN.

In United Kingdom, banks are now expected to share the level of current account transactions to third parties like fintech companies and other banks.

A giant change is coming for banking in the UK. Not Brexit, but Open Banking, the new directive that will require the largest UK banks to give third parties access to their data, down to the level of current account transactions. The Open Up Challenge has backed 20 teams who are building apps and services at the forefront of this change with £5M of prize money funded by a number of UK Banks,.

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Launched in February 2017, the Open Up Challenge is intended to inspire the creation of apps and tools for small businesses (SMEs). Along with cash awards, Nesta enticed fintechs by offering access to a huge trove of anonymised SME banking transactions, giving them a chance to experiment with Open Banking-style datasets in advance of the system’s launch.

The advantage for the fintech will be that they will not be responsible in the direct acquisition of these banking customers. They will just have access to them as they make products. Largely, by removing that acquisition cost, fintechs can offer services in cost-competitive formats. This will give them a huge edge over banks on pricing.

Kenya is getting there faster than Nigeria through its MPESA, a mobile money service. Today in Kenya, an MPESA account is more important than a bank account, if one is even needed. You can do all the things that matter in your life for months without a need for a bank account. Increasingly, the banking institution has been abstracted out. The bank accounts for savings and current accounts have limited values in Kenya because MPESA is the bank. Right there, what matters is the phone number.

Nigeria has not gotten there, but moving around Lagos and talking to people, I will be telling my African bank clients to begin to prepare for a future where the focus will shift from just having the bank accounts in-house to building a banking aggregation construct business that makes use of data from anywhere. In other words, aggregating data from other financial institutions to deliver better services at scale and cost-competitively.

Under the aggregation construct, the companies that control the value are not usually the ones that created them. Google News and Facebook control news distribution in Nigeria than Guardian, ThisDay and others. Because the MNCs tech firms “own” the audience and the customers, the advertisers focus on them, hoping to reach the readers through them. Just like that, the news creators have been systematically sidelined as they earn lesser and lesser from their works. But the aggregators like Facebook and Google smile to the bank. The reason why this happens is because of the abundance which Internet makes possible. Everyone has access to more users but that does not correlate to more revenue because the money goes to people that can help simplify the experiences to the users who will not prefer to be visiting all the news site to get any information they want. They go to Google and search and then Google takes them to the website in Nigeria with the information. Advertisers understand the value created is now with Google which simplifies that process.

Yes, banks must begin the transition of thinking less on how many bank customers they have to one that focuses on how they can aggregate what is out there to build a business at scale using the aggregated data. Just as Google may not care about the number of websites it owns by focusing on data it can aggregate from millions of websites to deliver better search results to people, Nigerian banks must evolve to the era of aggregation open banking. Your lending strategy has to change and as we see companies like Interswitch redesign their businesses, it will not take long for massive fragmentation that only banks built on aggregation can exploit. I see Konga and Jumia as future banks. If they get CBN certifications (Konga through Konga Pay has one), they can pull NIBSS data and offer lending services to merchants in their networks. Amazon, the global ecommerce giant makes more than $1 billion of loans yearly to merchants in its platform. If Konga and Jumia begin to make loans, banks will continue to lose customers.

All Together

Nigerian banking will change by 2025. The structure of our economy and the capacity to transfer money instantly will have many implications in the industry. For any bank to win, it will have to find a way to become a digital hub using the constructs of aggregation to compete. Your number of customers is irrelevant. What matters now is how efficiently you can curate the millions of accounts in the ecosystem under an emerging open banking framework. Building those structures must begin now because as blockchain makes itself into the banking architectures, the whole thinking of a bank brand will die.

By practically removing most banking frictions, blockchain through the web, will make every bank to have the same level of footage because there is no further efficiency to be optimized since there is zero friction to begin with. If Bank A offers the same quality of service as Bank B, the brand advantages will erode. That brings the commoditization of banking thereby facilitating the aggregated-based era of open banking. Now is the time to plan for this emerging redesign in the sector.

On October 14, 2017, Mr. Tony Elumelu, the Founder of the Tony Elumelu Foundation, and the Chairman of both Heirs Holdings and United Bank for Africa Plc, addressed entrepreneurs, policymakers and other shareholders during the Tony Elumelu Foundation Entrepreneurship Forum. The Forum is a key component of the Tony Elumelu Entrepreneurship Program (TEEP) which selects 1,000 African entrepreneurs and supports them with a combined $10 million as part of building entrepreneurial ecosystems in Africa. Mr. Elumelu had committed $100 million over ten years for TEEP.

He spoke before more than 1,300 entrepreneurs including alumni of TEEP, Vice President of Nigeria, governors, ministers and representatives of corporate entities.  The key thrust of the talk was the Africapitalism which is an investment philosophy he has pioneered globally.

In this piece, I will summarize his presentation which I listened live in the Nigerian Law School auditorium, Victoria Island, Lagos.

Preamble

Before we go into Mr. Elumelu’s presentation on Saturday, I will like you to read the basis of his talk by understanding the vision that drives the Foundation and TEEP. This will give you a good perspective as I summarize and analyze his presentation.

As an entrepreneur myself, I understand what it feels like to yearn for a lifeline, to hope for a ‘big break’, to look forward to enjoying some luck.

In 2010, we launched the Tony Elumelu Foundation to spur our continent’s development through entrepreneurship and competitiveness.

As an entrepreneur myself, I understand what it feels like to yearn for a lifeline, to hope for a ‘big break’, to look forward to enjoying some luck. As a matter of fact, part of my own success is owed to someone that believed in me, and was prepared to invest in my talents and take a bet on my future.

It is for this reason that I developed the economic philosophy of Africapitalism, which positions Africa’s private sector and most importantly entrepreneurs, as the catalyst for the social and economic development of the continent. Based on this guiding philosophy, we have launched successful programmes and forged meaningful partnerships with stakeholders across the globe.

In 2015, I heralded the ‘Decade of the African Entrepreneur’ by committing $100 million, to the TEF Entrepreneurship Programme – the first of its kind and scale in Africa. Since then, our alumni – across all 54 African countries – have begun growing businesses and improving lives, contributing to our goal of empowering 10,000 entrepreneurs who will collectively create one million jobs and generate $10 billion in revenue.

We are committed to giving from the perspective of empowering the recipient, rather than making them dependent on us, because prosperity is assured only when ALL Africans are financially independent. My vision for the Foundation is to unlock the obstacles that Africa’s entrepreneurs face, so that they, rather than aid agencies or governments will spur the continent’s transformation.

At the end of our 10-year commitment, thousands of businesses will grow and flourish, driving sustainable prosperity across Africa. This is my vision. I invite you ALL to learn about what the Foundation does, what we hope to do and to discover what we can do together. In doing so, I am confident that we will achieve sustainable development in Africa.

That is indeed this summary. But I hope you can read on.

The Africa Challenge

Mr Elumelu began his presentation by acknowledging King Ebitimi Banigo, the king of the Okpoama region in Nigeria’s Niger delta. King Banigo had owned a bank which Mr Elumelu worked. Tony used the moment to show appreciation for the opportunity his mentor provided to him. It was a very fascinating moment in the auditorium.

Then he began his presentation by examining the challenges African youth face today with dwindling job opportunities. He noted that youth need jobs. With jobs, they will not be leaving the continent. Jobs will reduce the mindless deaths in the seas as many young Africans migrate to Europe and other places. He also noted that with opportunities at home, these young people will not be selling their organs just to survive.  He made a case that Africa needs hope.  That hope will reduce vices and crises that precipitated to the Arab Spring which saw upheavals in most parts of Northern Africa. Opportunities will solve the problem of human trafficking and restore the dignity of our citizens.

The Development Paradigms

Mr. Elumelu noted that African governments and their largely foreign development partners have been working for years to provide roadmaps that can help provide the opportunities for our young people. These entities have tried many models and initiatives but the impacts have been marginal.  The lack of opportunities remains because the solutions offered have not been extremely successful. He noted that about $500 billion has been spent through different programs by development partners and yet at the end, the African youth remain with limited hope. Largely, the efficiency in the deployment of the capital has not been stellar. So, he pushed that the world needs to rethink how it is engaging in the development of the African continent.

He has an answer: the Africapitalism through vehicles like TEEP. TEEP offers a new development model in Africa, built and organized around young people under market-driven forces.

A New Model – Africapitalism /TEEP

Tony is the father of Africapitalism, an economic philosophy which “positions Africa’s private sector and most importantly entrepreneurs, as the catalyst for the social and economic development of the continent”. His vision is that he can build a vehicle to use business to seed a new Africa where entrepreneurs will create jobs and prosperities in the continent.  By empowering these young entrepreneurs, their businesses will grow and over time, they will have places people can find jobs to earn decent livelihoods.  It is a virtuous circle that the entrepreneurs supported by the Foundation will blossom providing opportunities in their local African communities. Those communities will progress and the welfare of the citizens accelerated. The impact will be that hopelessness will be replaced with hope across many African communities. Simply, TEEP wants to accomplish the following:

• Unlock potentials in young Africans
• Overcome hopelessness in the land through economic prosperity

Examining the TEEP Development Model

The core of the TEEP Development Model is anchored on free enterprise. It is based on the construct that the path that will fix Africa will go through the private sector and young African entrepreneurs are going to be the catalysts to that growth and development paradigms. TEEP does believe that by investing directly in the young Africans, it can have more catalytic impacts across African communities if the entrepreneurs are fixing and improving challenges in their places through markets.

Mr Elumelu noted that entrepreneurs and markets can redesign Africa. He noted these key facts:

• Steve Jobs started Apple. Apple has a market capitalization in excess of $800 billion with cash reserves of about $300 billion
• Bill Gates started Microsoft. Microsoft has a market capitalization of nearly $600 billion
• Jack Ma started Alibaba. Alibaba has a market capitalization of nearly $460 billion

When these companies are compared with a big country like Nigeria, the point becomes obvious that entrepreneurs can have huge impacts beyond whatever government can do. Nigeria’s foreign reserve is a paltry $35 billion, far below what a technology company has in its bank account. Mr. Elumelu sees this as a reason why the use of markets to accelerate development will have more impacts than what most developmental organizations are doing.

Key Elements and Factors for Success

As he explained the nexus of the TEEP program, he noted three core elements for the African entrepreneurs to triumph:

• Ingenuity
• Creativity
• Passion

Mr. Elumelu noted the following as factors for success which entrepreneurs with the above noted key elements will need to succeed:

• Operating Environment: The operating environment deals with the whole nexus of legal, infrastructure, policy and other enablers and anchors that can help organizations thrive. African entrepreneurs need those for them to compete effectively in an increasingly globalizing world. He also noted that within these operating environments, there are inhibitors like negligence of the needs of entrepreneurs by policymakers, lack of meritocracy, and problem of entitlement mentality.
• Transmission Mechanism: Here, entrepreneurs will need to have the ability to effectively transmit ideas into products and services. In other words, they need to take action besides any idea they may have. And when that action is taken, it needs to lead to products and services which markets want.

The Peerless Philanthropist

Mr Elumelu noted that only Africans will develop Africa. He explained that luck should be democratized through the institutionalization of pillars which can help build businesses. He made a reference that Steve Jobs might have died with his ideas. But America did the right thing by making it possible for him to impact his world through structures and catalysts made possible in that nation. Africa needs to find ways to support its innovators.

According to him, he is leaving a legacy and every African should aspire to do something. Our strength is the legacy we leave behind and not the size of our bank accounts. That passion is the motivation for the $100 million commitment to stimulate an entrepreneurial ecosystem in Africa through the Tony Elumelu Entrepreneurs.  The program is sector agnostic and extremely competitive with only 1,000 accepted this year out of excess of 98,000 that began the application. (Disclosure: I am one of the selection committee members.)

He concluded by making a case that we need to transform Africa to ensure that poverty is eliminated. Otherwise, there is a huge risk that our continent can be gone if our youth continue to struggle with lack of opportunities. We want a future with unbounded opportunities in the continent and he challenged Africans to commit to build our continent since “no one but us will develop Africa”.

Today, Mr. Aliko Dangote spoke in the Tony Elumelu Foundation Entrepreneurship Forum which brings thousands of entrepreneurs, policymakers and corporate entities together for a shared vision of empowering and institutionalizing luck through entrepreneurship in Africa. Mr Tony Elumelu had committed $100 million over ten years to seed a new generation of 10,000 African entrepreneurs. Today’s event was graced by governors, investment bankers, ministers and the Vice President of Nigeria. The Founder and Chairman of Dangote Group, Aliko Dangote spoke. In this piece, I will summarize his presentation which I listened live in the Nigerian Law School auditorium, Victoria Island, Lagos.

The Beginning

Mr Dangote explained that he began his business as a trader. Then he moved upscale becoming a bulk trader. From the inception at 1978 to around 1997, he was largely an importer, trading commodities. Then from 1997, he began the push into redesigning the business by making it an industrialized conglomerate. Simply, Dangote over time moved his business from the downstream commodity operation into an upstream business: he went from trading into manufacturing.

Aliko Dangote began with a N500,000 loan from his grandfather. To give a perspective on the value of this money around 1980, his first Mercedes Benz cost him N5,100. If an average Mercedes Benz (he did not specify if he bought it new or old) goes for $40,000, that loan should be in the region of $4 million today. But he did note that he returned the money to his grandfather as he felt that he did not need the money. He was contented with the N5,000 he was generating per day from the four trucks of cement he was managing. (You can also use this to ascertain the value of the loan. Around 1980, Nigerian naira was stronger than the US dollar. So, even if you make it 1:1 then, and have to multiple by today’s ratio of 350, you will get N175 million. But even today’s dollar has lost value to the dollar of 1980. The implication is that N500,000 was a lot of money in 1978).

The Discovery Process

Dangote made a very important comment during his presentation. He did note that he tried many businesses but some did not work out. He tried building a bank but was not successful in it. His words” “I tried banking but was not as lucky as Oba Otudeko”. Oba is the Chairman of FBN Holdings Plc, the major owner of First Bank of Nigeria Plc. He is one of the most respected bankers in Nigeria. During the presentation, Dangote noted that “there was nothing we did not try”. In other words, Dangote had come a long way, learning along the way and figuring out what worked and what was not working. I knew the day they launched his failed bank in Port Harcourt. I was an intern and I represented the company I was doing internship. The bank was named Liberty Merchant Bank. It has since folded.

When Dangote could not find success in banking and some other areas he journeyed, he returned back to building industrialized conglomerate which according to him was “what we know best”. He quickly figured out that he could succeed by expanding the industrials over competing in banking and other sectors he was not doing well.  One of those key areas he focused was cement production. Today, Dangote Group has totally transformed Nigeria’s cement sector.

The Dangote Group Evolution

Upon the realization that industrials were going to anchor his vision, he pursued it with vigor. From 2007 till now, he moved into the phase of consolidation and diversification. Essentially, he deepened his capabilities by expanding his empire while consolidating to make it nearly impossible for competitors to challenge him through strategic moats. He also diversified and then began the modern Dangote business. Today, Dangote Group plays in agriculture, petrochemicals, agro processing, and many other sectors.

The evolutionary process also saw enormous strategic vision. This is part of the accumulation of capabilities and building moats which make it harder for competitors. By improving efficiency across all segments of its operations, even in a region where there are challenges with infrastructure, a competitor cannot easily find things to improve upon. With its scale, you cannot find any area to improve and have lower cost advantage. In other words, if Dangote Group can efficiently move items, you cannot come in and use that element to compete because the efficiency attributed to transportation in the conglomerate has been built into product costing. Dangote listed some areas he deepened capabilities to improve his business processes as follows:

• Building a strong transportation network: A conglomerate makes items and building a strong transportation business is a key part of the Group. So Dangote invested heavily in that space.
• Local sourcing of raw materials: The company invested in sourcing materials locally. That helped it to reduce cost as well as preserve foreign exchange
• Partnership with GE and Saipen: He worked with the best possible partners as he built different parts of his business.
• In-house academy (now turning it into a university): The Group invests in developing local talent it needs to run its business. This is a very critical part of its success in a region with challenged educational programs.

The Industrialization Challenges

During his presentation, Dangote noted two things which he observed were affecting industrialization in Nigeria. He listed the following:

• Inadequate electricity: He did note that lack of adequate electricity in Nigeria is a major problem in the nation’s quest to industrialize. He has a solution to that problem. (I have noted that building such structures is one of the reasons why Dangote is successful)
• Government Policy: He did note that government does not create jobs. Rather, government only facilitates jobs by providing enabling environment. He did note that working with government to improve some of its policies to advance the capacity of businesses to drive job creation and industrialization is one of the things he does. Dangote understand the importance of working with government.

Consolidation

As Dangote Group accumulated capabilities in the industrials, he quickly became an industry-leader in each of the sectors where he operated. As he gained from the strength and economies of scale, he began massive consolidation in the industrials. In cement for example, from the numbers Dangote recited, there is no way any competitor can break in easily. The consolidation is massive as he built a vertically integrated business with top-grade operational quality.

The Emerging Dangote, Totally Diversifying

From 2013, I will think that is when we have a new Dangote Group from the presentation. With the consolidation of the sectors where he has won, he then began a push to diversification. This diversification goes beyond sectors to geographical diversification. At the moment, the Group is working to invest billions of dollars in U.S. and EU markets to give it geographical spread from Africa. Today, the firm is totally diversified with sectors that include the following among others:

• Petrochemicals / Refinery: Dangote believes that his refinery will fix Nigeria’s gas shortage problem. That will ensure that power plants get the gas they need to operate. His sub-sea gas pipeline provides a perfect solution to the incessant destruction of energy infrastructure by militants in the Niger Delta
• Agriculture/Agro Processing: The Group is committing at least a billion dollars to invest in rice and other crop production
• Fertilizer production: Dangote will commission its fertilizer plant next year. The good thing about this plant is that Dangote Group will be its biggest customer since the company is investing heavily in farming. So, it will be buying its fertilizer. That reduces any investment risk therein.
• Sugar processing: The Group runs the second largest refinery in the world
• Coal mining: The firm is investing in mining
• Cement production: Dangote is an African leader in this business.
• Power generation: Dangote Group generates at least 1,300MW of power mainly for its business operations (Nigeria’s total distribution capacity is around 4,000MW). He did note though that he sells power to the government of Senegal

Message to African Entrepreneurs

Dangote noted that “Africa is a land of opportunity” and “any resilient investor can overcome African challenges”. He did note that he survived the time when banks could only give him a 90-day loan at nearly 40% interest rate. He urged African entrepreneurs to make products which customers will need. In other words, entrepreneurs need to setup companies that make products that many people will need to use. He noted that those that think big, even when starting small will win. He challenged the entrepreneurs to be prudent and wise in their spending. Also, they should not be afraid to fail. In that failure one, he listed names of some very prominent global business leaders like Bill Gates, Jeff Bezos (Amazon), and Henry Ford on how their initial business attempts ended in disappointments. For Ford, he noted that the man nearly ruined his reputation with failures with his automobile passion until he got it right.

As part of motivating African entrepreneurs, he dropped some hints on what he reads: China now controls about 36% of global billionaires and plans to get to 50% in the near future. Mr. Dangote does hope Africa will have more players like him in that list very soon.

The Tenets of Dangote Success

Throughout the 15-minute presentation, I picked the following as some of the major pillars of Dangote success:

• Quality partnership: He really invested in getting the best possible partners around him. By partnering with elite brands at the beginning, he was able to establish a mark of quality in the market
• Downstream to Upstream: You need to accumulate capabilities in your business and use them to transition from the downstream to the upstream level where you can find more value. He began at the downstream, trading, but quickly built capabilities and moved to the upstream. That upstream provides him more margins as there are fewer players. Also, upstream is where governments supports can be easily obtained. Besides, that is where influence on government policy can be more effectively exerted. Dangote Group can push for help in a refinery business but fuel stations may not necessarily get such supports because the biggest pain points are in the upstream level. Governments understand that and offer support to companies that fix market frictions inherent in the upstream.
• Define Your Battle: It is always easy to think that you can take any fight you want. But Dangote shows that it may be smarter to define your battles. He did poorly in banking and exited because it was not working. The lesson is that you need to quickly understand what you do best and focus on that.
• Dominate Your Domain: Once you have noticed what you do well, the key is dominating that sector. That means, using resources, process quality and excellence in execution to become the industry-king. Dangote came into sugar and quickly won. He did the same in cement, and other sectors. That dominance is how he gets great margins. By dominating, he takes over territories, and competitors exit. Then, he defines the new rules of the markets.
• Customer-Centricity: The big lesson is to identify what customers want. He noted that he was always looking for opportunities where many people would buy the products. People will always need cement, sugar, flour and fuel. That is how he defines the battles and markets he wants to participate

The Dangote Way

I summarize by noting the following as the core elements of Dangote business philosophy and operational capabilities.

• Take Action: You need to find a way to begin, even if small. But make sure, you are always planning big.
• Market Scanning: Scan markets by exploring opportunities. See the ones that are picking up and then massively scale those promising ones. Dangote tried banking, noodle making and other things but gave up to focus on things that were working
• Accumulate Capabilities: The value is always at the top. Find ways to accumulate skills and competence to compete and win at the top. Dangote moved from trading to manufacturing. That was possible because he had amassed so many capabilities in his business
• Consolidation: Consolidate on the areas where you are winning. This is the typical Art of War principles. Fight and take over a territory, consolidate your win, then move to another territory to conquer
• Diversification: That another territory is diversification. You need to keep diversifying in sectors and geography. Where possible, win the new areas as you diversify. If you do that, the empire continues to grow.

To all the great African entrepreneurs, I want to thank you all for the standing ovation after my plenary talk during the Tony Elumelu Foundation Entrepreneurship Forum. As we continue to celebrate African entrepreneurship, I want to challenge every one of us to continue to dedicate for our generation to “cure” extreme poverty in our beautiful continent. A land where hunger will not be found in a community of farmers. A land where optimism will rule in the homes of makers. A community that is hopeful and vibrant with boys and girls growing with hope and aspirations unbounded by hunger. Let us continue to Believe. Thank you for giving me a moment.