International Banker is joined by Mr. Olukayode Pitan, Chief Executive Officer and Managing Director, of Bank of Industry to discuss the bank’s work with Micro, Small & Medium Enterprises, the African Continental Free Trade Area and the bank’s transactions in the Eurobond market.
Today, International Banker is joined by Olukayode Pitan, chief executive officer and managing director of Bank of Industry, and we’re going to discuss the bank’s work with micro, small and medium enterprises; the African Continental Free Trade Area; and the bank’s transactions in the eurobond market. Really good to have you here, Olukayode.
Thank you very much. I’m pleased to be here.
Now, BOI has accessed over five billion dollars through the international capital market over the last few years. What would you say has been the single most significant factor in the bank’s favour that enabled it to access such a substantial sum?
Thank you very much. The Bank of Industry—it’s not as young as most people think. The bank is over 60 years old. It is the largest, the most successful DFI in Nigeria. And then the government backing is very strong. We have two major shareholders: the federal government through the Ministry of Finance Incorporated and the Central Bank of Nigeria. These two major shareholders have assisted us with bank guarantees. Most of the…what we have done in the last few years, we’ve had federal government or central-bank guarantees. At the same time, we have been very innovative in the structuring of those facilities. The bank itself locally is rated by Fitch and the local rating agency as a triple A, even though we share the same rating as the country when you’re talking of raising money internationally. So, this is a bank that is well run, is profitable. On the average, we make about a hundred million dollars profit annually. The balance sheet has grown. We’re about five billion US dollars in balance-sheet size. The corporate governance is very good. And we have banks in Europe and America who have been like a club of banks, who have supported us over the years. So, when you put all of these factors together—good management, profitable, nonperforming loans are very low, support of government, good corporate governance—then it explains why we have been successful in all our outings.
Now, I mentioned the eurobond market in my introduction, and in February, BOI concluded a debt-raising transaction of 750 million euros in the eurobond market. The bank’s maiden eurobond transaction and the first successful transaction of its kind by any national development finance institution in Africa. So, what were some of the key milestones in achieving this landmark? And for what specific purposes within Nigeria’s industrial sector were the funds eventually used?
Thank you very much. Like you said, that was the first euro eurobond transaction coming out of Nigeria. Why was it so successful? About three or four major factors. Number one, it was backed by the Sovereign. To have the backing of the Sovereign, it’s an elaborate process. Number one, the Federal Executive Council has to approve it, with the president in council. At the same time, you have to get the approval of the National Assembly, both the Senate and the House of Rep. So, for you as an institution, owned by the government, to have gone through all those processes and to have all the approvals, it means one, there is trust, and there’s confidence of the government in how you run your institution. Because they are backing you up. So, that’s very important. Secondly, the bank has gone to the market before doing syndications that have been successful. So, the bank is not an unknown entity. It’s just that we had not accessed money through the eurobond. This year is not the best of years to go to the eurobond market to raise money. So, the benchmark was 500 million euros. But at the end of the day, it was oversubscribed, so there was a tap, and we raised 750 million euros. The bank itself is doing well, and it was well packaged, and the support of the government was there. We have a club of banks that believe in the bank, and it’s the first Europe benchmark for the country. So, there are many firsts with that transaction. We went to the market in a very turbulent time, and we came out, it was successful. So, those were the things that happened. The second question you asked: What are you going to do with the money? Now, the Bank of Industry is a DFI. Basically, we help in terms of the manufacturing area, the small, medium enterprises in the country. We’re a bank that gives out facilities on the average in single digits. So, most of our loans don’t exceed 10 percent per annum in a country where inflation is about 20 percent. So, basically, we are putting the money to use in the areas of emphasis of the government: healthcare, manufacturing, small businesses. Especially after COVID-19, many of them have not been able to come back to life, and some needed some levels of support. So, the default agreed processing, technology, basically in all sectors of the economy, and particularly light manufacturing, solid minerals, many areas where we put money—that’s what we use the money for. General purposes.
I also mentioned the launch of the African Continental Free Trade Area. How does this agreement impact on BOI’s overall strategy, if at all? And what are some key ways in which the bank can best support enterprises to capitalize on this free-trade agreement across the continent?
The agreement, it’s a landmark agreement, because what has happened is that now you have created a market for about 1.3 billion people. In times of opportunities and what you can have annually, maybe about three to four trillion dollars. So, that’s a big market. Most African countries don’t trade with each other. So, it’s a big market. But then if you have this big market, and you want Africans to trade with each other, somebody has to manufacture or produce the goods that are needed. So, where we come in is that we’re going to help Nigerian enterprises to build the capacity to expand production to be able to produce for that big African market that has been created. So, it’s a win-win for African countries, and we want to save money and to grow internally. It’s a big market that definitely any forward-looking African enterprise should look into that market to play in it. It’s a big three-to-four-trillion-dollar market.
And thinking of enterprise kind of job creation seems to be a very key part of BOI’s mandate when deciding to lend to Nigerian enterprises. Is it an absolute necessity that the borrowing enterprise has created jobs or is, in fact, planning to create them in the near future in order to obtain funding from the bank? And what about during the recession when enterprises might be forced to trim their workforce?
You’re right. There are many things we consider before we finance a project. We look at, for instance, where do you have, where do your raw materials that you require, where are they coming from? We prefer that you have your raw materials coming from within the country. Why is that? Because then we don’t have to spend extra foreign exchange importing the inputs that you require. No, we like projects that what you produce can be exported. Why is that? So, you can bring in foreign exchange to the country. We love projects that definitely create jobs. It’s one of the mandates that we have. Because we have a teeming youth population that we need to create jobs for. Even during the pandemic, 2020, 2021, we disbursed over a billion US dollars, creating about 1.3 million jobs. In the last five years, we have disbursed about 3.3 billion US dollars to roughly about 4 million enterprises.
Now, you’ve got something called the growth platform, which sounds like a particularly effective solution for providing credit to underserved and underbanked microentrepreneurs. Can you very briefly describe how this solution works?
Now, we have what we call the BOI platform. Essentially, what do we do? We use technology, big data, and then we have people on the ground, where we’re able to do end-to-end solutions. Because there are many Nigerians who don’t have bank accounts. We have government. For instance, during the pandemic, they wanted to give out money to people in different parts of the nation, many of them without bank accounts. So, this platform that we have was able to help the government to do that. Using that platform, over two million Nigerians were reached. That same platform, the World Bank recently came, and it’s been approved. There’s a programme, NG-Cares. It’s one of the programmes of the World Bank to help countries recover from COVID. It’s, for Nigeria, it is a 750-million-US-dollars programme called NG-Cares. And there are 36 states in Nigeria. Out of those 36 states, 30 of them already have appointed BOI as implementing partner for that NG-Cares. So, using our platform in the last few years, we have been able to reach over four million Nigerians. It’s a platform that has won awards as one of the biggest platforms in Africa that’s able to do end to end using technology and big data to get things done.
Now, as I understand it, BOI recently signed a memorandum of understanding with the Nigerian Exchange (Group), and I’m going to quote from it. “To deepen capital-market reach, build the capacity of stakeholders through financial literacy, facilitate market-advocacy initiatives and, importantly, promote listings.” How significantly do you envisage such a partnership helping enterprises of all sizes within Nigeria?
That’s a very important partnership. Why is that? When you look at the universe of Nigerian enterprises, and you ask yourself: How many of them are over 50 years old? Very few. Why? Because many of them, as soon as the main promoter dies or something happens to him, the company is no longer on the map. Now, we are encouraging them to have better corporate governance. Because before you can be listed on the exchange, you have to have proper corporate governance. It allows the companies, many of them, to outlive their founders. Not only that, they are able to raise capital from that market. So, it’s not only the debt market you rely on. So, we are now, from the point of view of BOI, the people that we are financing, we are telling them that there are advantages to having your companies listed. We have an interest in that. One, it deepens the market in Nigeria. The market is not very deep now. We can deepen it. There are many companies that can be listed. So, we help them to have the capacity to be listed, and we encourage them to do so. So, for the stock exchange, they get to have more companies. And for us that promote entrepreneurship in Nigeria, we begin to see Nigerian companies that can outlive the promoters, the initial entrepreneurs. And, ultimately, it is good for the country. So, it’s a win-win.
It’s kind of creating a sustainable model to attract more people into the market.
Oh, yes, it is.
The federal government appointed BOI as the implementing partner to manage its 75-billion MSME Survival Fund. This initiative, which has already supported more than 1.2 million beneficiaries, provides grants for vulnerable MSMEs to meet their staff obligations and secure jobs within the MSME space, despite the adverse effects of the COVID-19 pandemic. So, a question for you: How does the bank identify and define vulnerable MSMEs?
First of all, the Survival Fund that you mentioned, 75 billion roughly, depending on the exchange rate that you use, between 160 million to 180 million US dollars. It was one of the programmes of the federal government of Nigeria during COVID to say, “Look, how do we identify and support vulnerable enterprises or individuals?” And, for instance, they look at the schools. Some of the schools were shut. The students were at home. The proprietors of these schools could not pay the teachers. So, we had one of the things under that programme was payroll support to help pay the teachers while they were at home, not really working to sustain those schools. So that after COVID, schools could get back to normal. They were artisans, they were transporters—those are the type of people that the government chose, because many of them were daily paid people. They got paid if they worked that day. Now, if there was COVID, and they were not getting paid, there were no jobs, they were vulnerable. So, we had people on the ground who had to do, go around. They had associations, for instance, if you are an organiser. They had associations if you’re in the transport business. They had associations. So, we had people on the ground who went across the whole nation. We have agents, the agents, who will take their biometrics, BVN, of those that have bank accounts and things like that. So, we could identify in every state, depending on how much money the government wanted to spend in each state. And we had people, about 22,000 people, that were recruited to work in 36 states using big data. We had the system developed for this, their biometrics. And picking the sectors that the government had picked. Like I said, people that were vulnerable. People that were selling things went to the markets. So, that was how those people were captured. At the end of the exercise, like you said, over, about 1.3 million people were touched, got the money. And it was, like I said, end to end, the money went to their bank accounts. So, it was very successful.
And supporting this kind of approach, I guess, in October 2021, BOI became an official signatory of the United Nations Principles for Responsible Banking. This is a single framework for a sustainable banking industry developed through a partnership between banks worldwide and the United Nations Environment Programme Finance Initiative. In doing so, what responsibilities are required of the bank?
Well, first of all, we’re the first DFI that got that one signed in Nigeria. When you talk of responsible banking, basically it’s aligning some of the objectives of the bank with that of the country and with the SDGs. Basically, this is what the country wants to achieve. You are looking at the Paris Agreement on climate change and everything. What type of projects do you finance? What do you do? How do you bring down that carbon emission and everything? Ultimately, how do you make the world a better place for the future? How do you…basically, in summary, it’s what it says: How do you do banking in a responsible manner, taking into account the SDGs, the Paris Agreement, making it fair to all? And having the corporate governance to ensure that all that you say you’re going to do, that you are doing it. So, that’s what it’s all about. And we are part…we are happy to be part of it.
Through its corporate social responsibility program, the bank is supporting the establishment of several technology hubs across the country. How is this particular initiative progressing?
It’s going very well. First of all, as part of a corporate social responsibility, we said to ourselves, “We’re going to make the hubs available, at least one hub in every, one hub by states”, which means we’re going to have at least 36 of those hubs. It’s a good place for the young ones. Nigeria has a lot of youth. Some of our people are very clever. And we are saying, “The world is IT. It’s going IT. What can we do to have a place to incubate these young ones?” And some of the Nigerians, they started out small. And if you look at, about three or four of them became unicorns that are worth over a billion dollars. And they started out small in Nigeria. “Can we develop more Nigerians to do that?” So, we are looking at university campuses in some states. We are looking at areas where we have a lot of youths who have computer literacy. We are providing these hubs where they can do their businesses, where they have fast internet. And they’re able to create. And sometimes we bring people to train them. And we’ve done about 10 thus far. They’re about four that are works in progress. But ultimately, we’re going to have at least 36 in the country. It has done, it has done very well, and we plan to do more of such. It’s basically bringing out the best of our youth and trying to see how we can get more of them into the world market. They can create products, and we have seen products that were created in Nigeria, software apps from Nigeria, that are now worth over a billion dollars.
Now, as chief executive officer of Bank of Industry, do you have any unique philosophies for banking leadership that you wouldn’t mind sharing with the rest of us? So, what advice would you give to anyone looking to embark on a career within the banking industry, either in Nigeria or globally?
I have been in banking and finance now for slightly, about 30 years. And if you ask me what are those things that you need to have, the skills to survive in this industry and to thrive, be successful, you need to understand that banking is a trust business. So, anyone who plans to have a long-term career in banking must be honest, must have integrity. You must work hard. But more importantly, also, you have to be innovative. Banking is changing. Anybody that wants to go into banking now, if you come to me and ask me for advice, I will tell you that your IT skills are very important. Because of the fintechs, they have come into banking. You will see more of artificial intelligence in banking in the future. So, anyone that wants to be in that space for the future must be such that, I think, you…numbers, you have to be good in numbers. And you have to think widely. You have to be innovative to structure transactions. For instance, some of the deals that we have done in Bank of Industry, the last one we did in August of this year, we wanted to get a good rate for the bank, but we knew we couldn’t get a better rating than the Sovereign. So, we had to look for other banks to wrap around BOI for us to be able to enjoy that. It was innovative, and we were able to save a lot of money. Going forward, you have to be able to do those kinds of transactions. Definitely, people will talk of turbulence, but in turbulence, that is where you make the most money also. So, the bottom line is, if you’re going to be in banking and be successful, you must be honest, you must have integrity, you must keep your word, be innovative. That’s what I would say to the people coming after us.
Olukayode, thank you very much indeed for your time today and those great insights you’ve shared with us.
Thank you very much.