Thumbs Up for Bank of Industry

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Evelyn Oputu, CEO, BoI

Bank of Industry looks back at its 12 years of existence and how its operations have registered positive impacts on the key sectors of the national economy

By Anayo Ezugwu  |  Aug. 26, 2013 @ 01:00 GMT

IN ITS 12 years of existence, the Bank of Industry, has provided financial assistance worth N517 billion to key sectors of the economy under the federal government’s intervention programme. Some of the sectors where interventions have been made are manufacturing; power; aviation; cotton; textile and garment; agriculture; automotive industry and cement

Joseph Babatunde, general manager, operations, said the intervention had helped in the establishment of large, medium and small projects as well as expansion, diversification and modernisation of existing enterprises; and rehabilitation of ailing industries. He noted that the bank had also assisted in transforming Nigeria’s industrial sector, integrating it into the global economy as well as in producing goods that were competitive in both the domestic and external markets. He said the government in the last few years had been very proactive in the area of addressing the dearth of long term investible funds required by the manufacturing sector. “There are several sector-specific intervention funds and schemes in Nigeria today more than ever before in the history of our nation,” he said.

A breakdown of the interventions shows that out of the N235bn Central Bank of Nigeria’s Refinancing/Restructuring Fund of commercial banks’ loans to the manufacturing sector, about N229.18bn had been disbursed as at the end of the first quarter of 2013 with over 525 companies benefiting from the scheme. The Manufacturing Sector Fund given out at an interest rate of seven per cent, with a 15-year repayment period, has the objective of refinancing commercial banks’ exposures to Small and Medium-scale Enterprises as well as enhance the liquidity of commercial banks and facilitate more credits to the real sector.

According to him, the intervention led to a 50.4 percent increase in direct employment by beneficiaries from 86,513 to 130,143. In addition, the scheme has helped to generate 802,210 indirect jobs. For the N300bn Power and Aviation Fund, which was established to fast-track the development of the aviation sector by improving the terms of credit to airlines, the bank said about N208.21bn had so far been disbursed

“The total power generated by assisted projects is put at 747.7 megawatts, which represents about 18.7 per cent of the current power generation of about 4,000MW. The scheme has been able to leverage private investment into the Nigerian power sector. Beneficiaries have been able to increase their investment in other assets or expanded their revenue base as a result of the lower debt obligations.”

On the federal government’s N100bn cotton textile and garment development scheme for the revival of the ailing cotton textile and garment sector, he said about N60bn had been committed to 52 companies in the sector. “Over 60 per cent has been committed to 52 companies in the cotton, textile and garment industry. The re-opening of the United Nigeria Textiles Limited in Kaduna is one of the numerous positive impacts of this scheme. A mid-term evaluation of the CTG industry commissioned by BoI/UNIDO to evaluate the impact of the scheme reveals that over 8,070 jobs have been saved through the intervention. Capacity utilisation for most beneficiaries has increased from below 40 per cent to about 61 per cent. Over 50 per cent of those making losses have started reporting profits,” he said.

For the federal government’s N10bn Rice Intervention Fund, he said N2.88bn had been disbursed. The fund, which was initially designed to assist 10 pre-qualified companies to set up 17 model rice processing mills in the country, had been used to establish four rice mills, it stated. He said N8.39bn had already been disbursed from the National Automotive Council Fund in respect of which the BoI received N16.9bn and through the scheme, it said the bank was helping to build the technical capacities of auto mechanics and auto electricians to be able to service modern cars.

On the N9.5bn Cement Fund for the development of the cement sector, he said N8.479bn had been disbursed to five companies within the cement value chain. However, he said the absence of credible and reliable credit, business and information that served the needs of both the potential borrowers and financial institutions was a major challenge for the bank.

Other challenges, according to him, are low level of trust and confidence in the nation’s credit system; dearth of bankable projects in some parts of the country due to poor entrepreneurial skills; and limited human capital. “The prevalence of insincerity and poor loan repayment attitude among loan beneficiaries’ promoters usually seem to be unaware of or oblivious of the obligations and responsibilities they have toward capital providers, and the need to acquire or seek support for technical services like accounting, management, marketing, strategy development and establishment of business linkages,” he added.

Babatunde noted that the bank placed emphasis on prudent project selection and management, adding that resources were directed to support commercially viable and economically desirable projects with high developmental impact such as value addition to local raw materials, job creation and poverty alleviation.

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