If you’ve ever done business in Nigeria, or had cause to seek bank financing, you’ll know that the struggle is really real.
We found this piece written by Jason Njoku, the CEO of IrokoTV, and we knew we just had to share. The business owner wrote about how becoming a father influenced his decision to make certain lifestyle changes. With this decision, he needed funding… and that was where the story got really interesting!
Here are some excerpts from the article on Medium.
On how it started
So I relented. I’m a grown up, a father in fact. I have to do the right thing. So I told her to find a house in Lagos. Let me go find the financing. Contrary to what most people think, the Njoku’s are absolutely not rolling around in dollars. That $40m raised was for Iroko. Iroko does not = Njoku. I am a founder, CEO and shareholder, and still have to negotiate my salary with my board etc. If they see fit to not increase it, they can 100% refuse to. But granted, I am not complaining. I’m pretty well paid and would sit in the top 3% of salaried earners anywhere in the world. If I lived in London or NY or Paris, I could pretty easily get a $1m mortgage without too much effort. (this isn’t me bragging, it will be apparent shortly).
So she looked in Lekki/Ikeja etc. This is 2014 so ~N167 = $1. We found a few places we liked. N130–150m. ($778-898k). We had some savings so we ‘only’ needed N100m. Again. Globally, I earn in the top 3%. In Nigeria I am pretty certain I am in the 0.01% of salaried earners.
On corporate governance and separating self from business:
So I went to my board and asked if I could borrow the money from Iroko. Inasmuch as they wanted to be supportive, CEOs borrowing money from companies is usually a big fat red flag for corporate governance. So they suggested I do a small secondary and sell some Iroko shares to fund the new house. With much regret, I did just that. In the end, I didn’t buy a house. I bought some land and am plotting how to construct my glass house upon it. Those shares have obviously gone up in dollar value since then. The hope is they will go up significantly more over the coming decades. I hate selling equity. Opportunities in value creation, gone.
On Iroko’s needing more than just ATM services:
We were great customers, I guess. That was until we asked them for a couple of facilities. You know. Beyond ATM and Internet banking.
We were great customers. Until we required them to add value.
N10m overdraft – sometimes it takes time to import and exchange dollars. If I remember rightly, they asked for an equivalent of $100,000 cash collateral to cover the facility. Which is kinda besides the point. So we never even progressed with that*
We had secured a 5-year low interest N500m (at N10.4m/month) loan for content, but needed a bank guarantee (we are long Naira debt) in order to access it. Remember, we passed through N645m and $2.25m through their accounts last year. Zenith Bank refused. They needed collateral. Cash or assets. They needed N600m equivalent in cash or land. My account officer literally told me he needed ‘Something tangible’
Tangible — ˈtan(d)ʒɪb(ə)l/
noun
a thing that is perceptible by touch.
“these are the only tangibles upon which an assessment can be made”
On the role of Nigerian banks with small businesses:
The Nigerian banking system for me is like Nigeria. It has basically failed. If I could, I would keep my money under the bed. I would get the exact same return on interest. I would probably be able to access it more readily. And finally, I wouldn’t have to put up with the BS marketing campaigns about supporting Nigerians in fulfilling their dreams. Rather than marketing about how supportive they are, they should go ahead and be supportive. If you are a top 100 company, they kneel at your feet. If you are one of the hundreds of thousands of regular SMEs (irokotv.com Nigeria is an SME) then you’re on your own.
I actually don’t need the Nigerian banks. But many, many others do. They don’t have the opportunity to tap international capital. They are stuck with the Nigerian banks.
Nigerian banks don’t support. They suffocate.
Read the rest HERE.
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Are you a small business owner or a professional just trying to improve your quality of life? Can you relate with Jason’s experience?
Here are some reactions of TwitterNG to Jason’s article:
On a lighter note, see how one bank did not want to get caught in the crossfre:
Of course #MenAreScum entered the matter…. somehow
You gotta love Nigerians! Anyway, back to serious matters. How can we thrive under the current economic climate without the banks?
Painful reading the pains of a fellow Enterpreneur Jason Njoku. As a startup in Nigeria funded 100% out of pocket with not even N20 naira in loan facility from a bank, I can tell you Nigerian banks are simply deposit houses. Asides of the POS fees they obtain from SMEs and useless monthly surcharges, they offer absolutely nothing in return.
It is shameful in a country where a politician running for local government chairman or house of assembly can obtain N500 million in cash loans where a fast growing startup serving a market of N170 million in a green field space can’t obtain N500,000. Ironic how a church can obtain a loan in excess of N2Billion, but the likes of a business like House of Lunettes with steady cash flow can’t obtain a facility.
Painful enough is the non-stop visits from bank marketing staff asking you to open accounts with them with the promise of making 5 POS devices available to you per store. Banks only want a ready made business or yet will gladly support a corrupt enterprise. I am tempted to disclose a list of banks in Nigeria notorious for this but I will be calm. Forget the silly posters and ad marketing where they pitch SME business funding, it’s all marketing.
I am challenging Social Media Managers from all top banks to reply my thread and list startups or emerging entrepreneurs they have funded without these silly collateral or cash deposit requirements. Afterall we know what banks or investors funded most startups.
#whodidyoufund #whodidyoufund #whodidyoufund #whodidyoufund
As an enterprenuer in Nigeria, understand that the odds are stacked against you. The same way you provide your own borehole, electricity or barb wired fenced is the same factors being experienced in the business sector.
He spoke nothing but the truth here… Like Nigeria, everything else in Nigeria, banks are a failed state
What’s the name of that community effort which people do, where everyone pays a certain amount (let’s say N100,000 each) into the pot every month, and then people take it in turns to withdraw the full amount in the pot for personal or business projects? There’s a term I know was used for it in Port Harcourt but I’ve heard people from Lagos call it something else.
BN, that was to answer your last question re alternatives to banks. It’s a risky way of getting money if you’re thinking of financing the kind of business Jason does but has some benefit to smaller ventures looking for an injection of funds, without relying fully on banks.
Ajo
Mz Socially Awkward – Ajo. Osusu. “Microfinancial capital accumulation.”
I think in ph its called Akawo.
Thank you. Esusu. @Fabulicious, I haven’t heard of akawo…. But it’s evidently very popular in many languages. Goes to show how much people rely more on each other in our society, than on institutions.
@Mz Socially Awkward its called “esusu”. Running a business in Nigeria is mind draining. I don’t even know where to start.
How can someone pay 20% interest rate on a mortgage? That is madness! Complete madness!
Lol. 20% is low sef. Diamond bank offered me 50% on mortgage and also said I should go and bring 50% equity. Clowns.
The cheapest is StanChart at 19%. Everybody else is in he mid 20s/30s.
I believe what you are referring to is ‘Ajo’! I do that will colleagues and friends! Cool way to make at least a million! People can also apply for the LSETF loan too! visit lsetf.ng to find out more.
Same old sad story. They stifle genuine business people and then enable the “fraudsters.” Those Etisalat people will just walk away like that?
The banks have failed small businesses because of greed and lack of innovation. Their management is ridiculed with cronyism, its amazing how clueless they are even with the world becoming a global village. There is no excuse whatsoever ever for banks not to evolve and innovate . Its all about the immediate cash flow for them. I understand that the lack of structure and weak legal institution has made them weary of offering loans to SMEs. That is still not an excuse because that same bank will turn around and offer one senator or big man that loan without the stress.
A major problem with the banks is the leadership. They have stayed for too long and have not evolved quickly. These leaders have instituted bad practices ,encouraged the exploitation of the female and male folks with their outrageous targets, I mean how can someone have a target of 1billion? that’s insane in a country in Nigeria where some LGA don’t even get that much allocation . Promotion is based on who is in bed with who, sexual harassments is the in thing even guys are being exploited by the big madams. You employ someone as a lawyer and then you are asking the person to bring in Funds I don’t GERRIT.
Lol. They can’t provide finance to sme’s na. How will their ED’s and board members finance their fat paychecks and bonuses?
Nigerian banks need to be careful, disruptions are happening everyday and everywhere. Just yesterday I was reading about a borderless account which allows for buisnesses and freelancers to hold/transfer money accross multiple currencies…that made me think we may not need “domicilliary account” to get paid or pay for our telemedicine/tele-rehab services as it kicks off. Interesting.
That said, is it true that you must use a loan to grow a business? I sometimes think its a school of thought that needs to be challenged. This esusu/ajo/co-operative financing just may be the way to go for those who need lump sum of cash.
Na here I dey siddon dey look.
It’s called “AKAWO”
Hmmmm, it’s frustrating what Nigeria banks make you go through as a budding entrepreneur.
What about bank of industry?
Has anyone had dealings with them?
I need to fund my tomato puree business abeg
top 3% earners but he pays filmmakers $25,000 then takes all their rights! Shameless! It is called karma Jason. Karma!
How very convenient to blame the banks. Who will give you loan without repayment structure? No collateral? Does Nigeria have a database? What if you went awool how would you be traced? Until Nigeria reforms itself don’t expect its sectors to work in the way and manner their counterparts in advanced countries do. Passing huge some of money through your company accounts does not guarantee you a personal loan. P.S nobody forces you to do bullshit in the name of keeping your job unless you want to. At he end of it all everyone always has a choice no matter how good or bad it is still a choice so get ready to deal with the consequences.
this is so apt. even a big company like Iroko couldn’t get what they wanted. Entrepreneurs need a pat on the back. you guys are tough and should be celebrated for trying in such a terrible business climate.
Take a look at Nigeria ‘so leaders since 1966 and say no more!
Bunch of visionless group.
How can anything work?
Next, please!
Nigeria’s. ..
This is not encouraging I’m planning to move back and i know nothing about the banking industry..