Towards sustainable finance By Dr Adesola Adeduntan, CEO of First Bank of Nigeria,

 

I meet Dr Adesola Adeduntan in Edinburgh where 
he has been invited to give a keynote address at 
the Edinburgh School of Business to speak about 
the role of financial institutions to drive financial 
inclusion. As one lands in Edinburgh, you are greeted 
by billboards from different investment funds under-
lining their credentials in investing in a responsible 
and sustainable manner and how environmental, 
social and governance (ESG) considerations underpin 
their activities. 
With economists and politicians questioning cap-
italism and the Western liberal model, today the 
emphasis is very much on stakeholder capitalism 
whereby the growth and prosperity is more equally 
attributed. Sustainable investment has become de 
rigueur in the corporate jargon of 2019.
Dr Adeduntan, a veteran in the Nigerian bank-
ing and corporate world, is at ease with whatever 
is thrown at him. In his answers, both during our 
meeting and also during the various talks he gives 
that day – at the Business School but also at a law 
firm talking about the Nigerian opportunity and the 
future of banking on the continent – his main mes-
sage is the importance of doing good if you are to 
succeed in Nigeria.
First Bank is the oldest bank in the country, not 
to say the continent. Last year it celebrated its 125th 
anniversary and, for Adeduntan, longevity is a tell-
ing sign: not only does it prove the Bank’s resilience 
but it shows that it has the right structures, in terms 
of governance, and right model, with the country’s 
development at its core. 
Although it lags behind some of its competitors 
when it comes to profitability, First Bank is the big-
gest bank in Nigeria in terms of assets and branch 
network, and the second biggest in terms of tier 
one capital. However, like investment trends prior 
success is never a guarantee of future glory. And 
it is the future that Adeduntan wants to focus on: 
how do you seize the opportunity that the country’s 
unbanked population presents – financial inclusion 
has increased from the low 20s to approximately 40% 
in Nigeria over the past seven years and is expected 
to double to the mid-80s within the next five years
Is he worried that non-financial companies will 
be entering the banking sector following a change in 
regulation by the Central Bank? He is confident that 
his bank has one of the best defined strategies when 
it comes to financial inclusion and that they have the 
largest digital banking network in Nigeria. Much of 
this has been developed through what they call First 
Money agents, with over 40,000 agents representing 
the bank across the country, and 8.5m customers 
Interview
transacting on their USSD platform (mobile phones, 
both smart and analogue ones) in addition to 3 million 
customers transacting on the FirstMobile platform.
The agent network, the biggest of its kind in the 
country, enables the bank to provide banking services 
to the most rural communities, and because they don’t 
need to have an extensive branch network it means 
that they can supply these services at a fraction of 
the cost of a “legacy” banking model.
Adenduntan, in his talk and our conversation, uses 
the word financial deepening when talking about the 
unbanked and the real opportunity this presents. For 
him financial deepening is when financial inclusion 
starts playing an important role in economic develop-
ment. It’s about layering additional products on the 
current agency banking network, services such as 
micro-credit, micro-insurance and micro-pension, 
providing value-added services whilst at the same 
time increasing the savings rate, critical to drive 
investment rates and one factor behind Asia’s rapid 
growth.
Last year saw a boom in venture capital investment 
into Nigeria with $400m being invested in a number 
of fintechs during the month of November alone. Is 
he worried that these fintech players are going to take 
the majority share of the pie when it comes to ser-
vicing the unbanked? He says that’ll only be the case 
if the banks do not manage to reinvent themselves. 
In Edinburgh, he actually spent a number of hours 
visiting tech hubs around the university in the city 
and speaking to fintech companies. 
The bank, according to Adeduntan has a number 
of partnerships with fintech as well as its own Digital 
Laboratory, developing new solutions for the bank. 
Like many senior bankers, he firmly believes that 
the “legacy banks” will still continue to play a very 
central role, especially in this part of the world where 
banks are quite dominant and they have significant 
buying power. And given the role that banks play, in 
terms of settlement and deposits, he sees many of 
these new players as partners they can work with, 
even if in some cases they will be competitors. 
Scope for growth
Adeduntan sees massive scope for growth for the 
banking sector in Nigeria. He points out that none of 
the country’s top banks make it in the Top 10 Banks 
in Africa despite Nigeria being the continent’s larg-
est economy. Coupled with the signing of the African 
Continental Free Trade Agreement, he feels we are 
entering a very interesting period for the banking 
sector, not only in Nigeria but Africa in general. 
Does he expect further consolidation? “Within
certain thresholds,” he answers. “Anything that would 
allow the strengthening of the entire banking sector, 
knowing how the Central Bank Governor thinks, I am 
sure he would be positive about it.” 
We move on to the regulator and the role of the 
Central Bank. Does he find that it is too intervention
-
ist, dictating how much banks should lend, where it 
should place its assets. As you would expect, he won’t 
be drawn into criticising his regulator, with whom 
he says he, and other bank CEOs, have a strong re
-
lationship. But he will say that the role of a central 
bank in the development of an emerging economy is 
clearly different from the role of a central bank in a 
developed economy. 
“It is not unusual that the central bank intervenes 
in critical sectors allied to the loan to deposit ratio. 
It’s about economic growth; it’s about development; 
it’s about channelling credit in sectors that are very 
important for the national economy. Let us take agri
-
culture - again, we are one of the biggest lenders into 
that sector. We found the Central Bank intervention in 
some of those critical sectors extremely useful and not 
just for us as a bank, but for the country as a whole. 
“Again, when you look at intervention in agricul
-
ture, you have to put it in the context of the size of the 
population. Nigeria as a country, we are 200m people 
today. Like I’ve always said to many people, the business of feeding 200m people is a strategic business. 
Everything that is being done to ensure that at least 
we are self-sufficient in food production is strategi
-
cally important. We find Central Bank intervention in 
those areas quite useful and of national importance.”
Like most Nigerian businessmen investing in the 
country, he is quite optimistic about the future. He 
appeared excited with the economic advisory council 
the president has put in place, credible business lead
-
ers and economists he says. And despite reports that 
the government is not economy-minded he thinks 
that it is a pro-business government. 
Contributing to development
It is nearly 10 in the evening when we finish our 
talk, his day having started at 7.30am with a prese entationat law firm Shepherd and Wedderburn. 
We go back to sustainability and the role of fi
nancial services to make sure they are lending to 
institutions that are ethical about their business 
and operating in a sustainable manner. He says 
that the journey has started even if it is still 
early days. 
“But ultimately,” he says, “this is where we 
are headed. The Nigerian Sustainable Banking 
Principle speaks to this particular question. It 
is something that we are working on and it is a 
requirement of the Central Bank that we are all 
working towards. I think it’s evident from the 
points that I’ve made today, you can say that First 
Bank is a bank that is happy to forego a few basis 
points in terms of its net margins if that means it 
is contributing to development in a more ethical and sustainable way. We’ve always made a point that profitability is very important for us at FirstBank 
but economic growth and national development is 
equally very important and speaks to the sustainability question.”