Bank of Industry (BOI), headquartered in Lagos, Nigeria, is recognized as the country’s “oldest, largest and most successful” development financing institution. It commenced operations as the Investment Corporation of Nigeria (ICON) in 1959, was incorporated as the Nigerian Industrial Development Bank (NIDB) in 1964 and was later reconstructed into Bank of Industry (BOI) in 2001. As NIDB, it maintained close ties with the International Finance Corporation, its largest equity-holder. BOI has evolved since its restructuring to become an indispensable partner to the country’s industrial sector, providing long-term financing to numerous companies of all sizes and types. Today, the government bank is primarily owned by Nigeria’s Federal Ministry of Finance and the Central Bank of Nigeria. BOI’s vision is “to be Africa’s leading Development Finance Institution operating under global best practices”. Its customer base is narrower than that of many banks but crucial to the health of the nation’s overall economy and thus the welfare of the population. As BOI explains, “We provide access to funds for startups, SMEs, and large enterprises. And by access, we mean that we facilitate the entire process, right from pre-loan application.” BOI’s financial assistance undergirds the establishment of promising new projects as well as the “expansion, diversification and modernisation of existing enterprises”. In undertaking daily operations, its staff is guided by BOI’s core values (SPPIRIT!): Service, Professionalism, Passion, Integrity, Resourcefulness, Innovation, Team Spirit. For a development bank, these values couldn’t be more valuable.
Mr. Pitan, thank you for joining us today….
The bank’s stated development orientation is towards supporting “quality projects with high developmental impact such as job creation and poverty alleviation to enhance the socio-economic standard of Nigerians”. Do you have any statistics from the last few years that underline this orientation—for example, the number of jobs created as a direct result of your initiatives?
Indeed, BOI’s developmental mandate is geared towards supporting projects with the capability to generate considerable multiplier effects, such as business linkages, job creation and poverty alleviation, which would positively impact the socio-economic condition of Nigerians.
Over the past few years—2015 to 2018—BOI supported 4,908 SMEs (small and medium-sized enterprises) and large enterprises across the country with ₦529.4 billionin loan disbursements. We have also developed youth-centric products—Youth Entrepreneurship Support Programme (YES-P) and the Graduate Entrepreneurship Fund (GEF)—and trained 14,000 youths in entrepreneurship and other business-management modules. A total of ₦1.8 billionhas also been disbursed to 726 beneficiaries under these programmes.
BOI has also partnered with the federal government to implement various social-intervention programmes. As a result, we have facilitated the disbursement of ₦29 billionto 1,550,000 beneficiaries nationwide under the Government Enterprise and Empowerment Programme (GEEP) and ₦15.34 billionto 199,989 beneficiaries under the N-Power Programme.
All of these efforts have led to the creation of an estimated 4,000,000 direct and indirect jobs.
Bank of Industry recently signed a partnership agreement with All On to finance the Niger Delta Off-Grid Energy Fund. What are the main aims of the partnership, and what do you hope each partner will bring to the table?
One of the key constraints of enterprises and economic development in Nigeria is power. The Niger Delta is one region that is significantly plagued by an energy gap, where the majority of the population reside in rural areas and only 34 percent have access to reliable grid power. As a result, SMEs and households in the region use expensive and inefficient diesel and petrol generators, increasing their operational costs. The objective of the fund is to improve livelihood and stimulate economic activity by providing access to clean, affordable and reliable power solutions to households, SMEs and communities.
For this reason, BOI and All On have responded by jointly creating a ₦1-billionNiger Delta Off-Grid Energy Fund to provide local-currency debt financing towards the deployment of energy solutions by access-to-energy companies in the region. Both institutions are equal contributors to the fund, which BOI operates at favourable terms of 10-percent interest rate per annum, one-year moratorium and tenor of up to seven years.
The bank has recently made clear its intent to play a major role in developing special economic zones within Nigeria. What do you see as being some of the main benefits, both to Bank of Industry and the country itself, of creating such zones?
One of the enduring challenges of sustainable economic development in Sub-Saharan Africa is the state of its infrastructural development. Nigeria’s business environment is rapidly evolving as we speak, yet there are a number of issues that are not being addressed or are at a slow pace. Special economic zones (SEZs) provide space where the business environment is at its optimal level. These zones can help provide the necessary conditions that businesses require to thrive or that investors may seek. These could include adequate infrastructure, an educated and skilled labour force, local input suppliers, tax incentives, etc. By encouraging manufacturers, suppliers, service providers and firms to co-locate, share common facilities and build well-developed industrial clusters, these and other industries are able to reduce overhead costs through economies of scale and raise innovation, productivity and global competitiveness.
The bank’s focus on SEZs is hinged on its mandate to support Nigerian businesses. This makes it easy for us to provide a tailored bundle of financial and non- financial services, including capacity building to MSMEs (micro, small and medium-sized enterprises).
Do you feel that Nigeria’s SME sector is being adequately supported by Bank of Industry? What are some of the most significant SME projects with which the bank has been involved in recent times?
As the foremost development finance institution (DFI) in Nigeria, we have come a long way in addressing our mandate. As you know, there are about 40 million MSMEs in Nigeria. We have supported thousands of enterprises and have facilitated the creation of millions of jobs. However, there is a lot to be done. Over the past four years, the bank has more than tripled the support for SMEs from ₦7.4 billionin 2015 to ₦32.8 billionin 2018, and we will do even more this year, 2019. One of our targets is to increase the share of our loan book in favour of MSMEs as opposed to large enterprises.
The enterprises we have supported over the years have cut across several sectors, from agro-processing to creative industries, engineering, technology, fashion, renewable energy, healthcare and pharmaceuticals. In the creative-industries sector, for example, we supported the likes of Filmhouse Cinemas, Silverbird Cinemas, Terra Kulture Arts and Studios Limited. Today, these companies keep growing so big and continue to provide employment for young Nigerians.
How much of a concern are non-performing loans/bad debts to the bank, and how does it go about ensuring that such debt is kept to a minimum?
Bad debt is a major cause for concern in any bank, including the Bank of Industry. Due to our development mandate, the bank is no stranger to taking risks as we often support sectors which are typically underserved by commercial banks given their high-risk nature, such as renewable energy, creative industries, healthcare, youth entrepreneurs, etc.
Towards maintaining an optimal loan book, BOI has developed a robust monitoring and evaluation framework. The bank also ensures that the communication lines with customers remain open at all times and has established early warning systems; as a result, we are able to deploy interventions in good time. Some of these interventions include extending the moratorium period on credit facilities, restructuring loans to make it easier for repayment of loans, providing working capital finance for operational-expense needs, amongst others.
In 2018, the bank introduced a quarterly interactive session with MDs/CEOs, treasurers and chief risk officers (CROs) of commercial and merchant banks in Nigeria towards improving our relationships and strengthening the Nigerian banking system. One of the key benefits of this forum was the improved monitoring of customers, given that our customers’ accounts sit with the commercial bank as we are not a deposit-money bank. BOI also recently organised a BOI/IFC (International Finance Corporation) capacity-building session for CROs and senior credit officers of Nigerian banks on risk-asset management and bad-debt management.
How does Bank of Industry bolster entrepreneurship in the country?
BOI’s mission is to transform Nigeria’s industrial sector by stimulating entrepreneurship. The bank does this by providing financial and business support services to enterprises in identified real and emerging sectors aligned to the broader national strategies, such as the Nigeria Industrial Revolution Plan (NIRP) and the Economic Recovery and Growth Plan (ERGP).
The Bank of Industry has developed several products and services—both financial and non-financial—to facilitate sustainable growth and development of the industrial entrepreneur.
- On the financial side, BOI provides business loans for the acquisition of equipment/machinery and working capital.
- On the non-financial side, the bank provides capacity-building and business-advisory services. For example, the bank provides online and in-class training on business management and entrepreneurship to youth prior to loan application under BOI Youth Programmes. The bank also has a partnership with over 200 business-development service providers to support MSMEs in developing bankable business plans.
- The bank has also set up a dedicated desk to particularly support women-owned and -led businesses.
Towards ensuring that we are easily accessible to current and potential entrepreneurs, we have offices in 24 out of the 36 states in Nigeria, with at least three offices in each of the six geopolitical zones of the nation. We also have a corporate office in the Federal Capital Territory, Abuja, with our head office located in Lagos State. Although we have yet to have offices in all 36 states in Nigeria, we provide finances for projects in all states.
In 2017, the bank managed to obtain the ISO 9001:2015 Quality Management Systems certification. What does this certification mean to you in terms of fulfilling the bank’s vision to become a leading development finance institution?
As you rightly stated, the bank obtained the ISO 9001:2015 Quality Management Systems certification in 2017 and maintained the same in 2018 following a surveillance audit.
Being a “leading DFI” to us means successfully stimulating sustained industrialisation and economic development in Nigeria. The bank has already established that the level of intervention required can only be realised if we are able to leverage key local and international partnerships; particularly in the area of funds mobilisation, knowledge acquisition and business advisory for our customers. Consequently, adhering to international standards and principles positions us as an institution that meets all business and ethical requirements towards initiating and enhancing these strategic partnerships.
We also keep seeking initiatives to ensure that the standards and principles of the ISO Quality Management System are entrenched into our corporate values and culture; and continue to pro-actively review, upgrade, automate, document and communicate our business operations and processes.
What do you consider to be the most challenging aspect of being MD/CEO of Bank of Industry? And similarly, what is the most rewarding aspect?
One of the biggest challenges I face as the MD/CEO is ensuring that the bank is adequately funded. When I joined BOI, I quickly realised that there was a need for the bank to become financially sustainable by being self-funding, given the fact that government resources are limited and the financial requirements of the Nigerian industrial sector are huge.
I am glad to say that we have made significant progress in this regard, as we were able to raise about $1.5 billion in the last 18 months. These include a $750-million syndicated loan facilitated by Afrexim Bank (African Export-Import Bank) and 15 other international financial institutions, $200 million from the Nigerian Content Development and Monitoring Board (NCDMB) for oil and gas businesses, $100 million from the Africa Development Bank (AfDB) and a N100-billion ($326-million) Industrial Fund from the Central Bank of Nigeria. We also recently signed a MoU (memorandum of understanding)with the Export-Import Bank of China for a $500-million line of credit to fund modular refineries. We are also in the process of finalising the conditions precedent to the drawdown on a $40-million line of finance approved for the bank from the Islamic Development Bank (IDB). Additionally, through our partnership with the Brazilian Development Bank (BNDES), the bank was granted a $20-million line of credit to support financing the purchase of equipment manufactured in Brazil by Nigerian companies.
I would say the most rewarding aspect for me is when you see how the support you have provided to enterprises helps them to grow. Our primary mandate as an institution is to provide financial support to enterprises that can then create more jobs and reduce poverty. When we do this, everybody is happy. Not only the customer but even the bank. People think as a bank, your primary concern is getting repaid. That is important, as if you do not get your loan repayments, you will not be able to fund other potential enterprises. But what is most important is that the intervention you have given is achieving the developmental goal that has been set. We try to do this as much as possible while remaining profitable—our net profit in 2018 was in excess of $100 million.
Your mandate is crucial for not only Nigerian businesses but also citizens, and you certainly seem to be achieving it successfully, Mr. Pitan. Thank you again for your time today.