Who Wants to Kill BOI?

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Tajudeen Kareem

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By Tajudeen Kareem  |

THE Nigerian Senate last week opened a public hearing on its intention to harmonize the functions of development finance institutions in the country towards the establishment of an apex finance house, the National Development Bank of Nigeria.

The lawmakers are considering a bill to establish the National Development Bank of Nigeria. The drafter of the bill wants the proposed bank to provide loans to small, medium and large industrial enterprises with five to 10-year maturity, with a grace period of one to three years depending on the enterprise. The bank will also provide working capital loans to eligible enterprises where projects are unable to secure a loan from the banking system; the loans could be in naira or foreign currencies depending on the source of available funds for the requirement of the eligible enterprise or project.

The House of Representatives, acting the same script, has raised a committee to examine the modus operandi of state-owned development finance institutions, DFIs. Listed for periscope are the Bank of Industry, Bank of Agriculture, Nigeria Export -Import Bank, Nigeria Export Promotion Council, Small and Medium Scale Enterprises Development Agency, National Economic Reconstruction Fund and Federal Mortgage Bank.

At the inauguration of an ad hoc committee to review the activities of these agencies, the deputy speaker, Yusuf Lasun, hinted that the National Assembly was desirous of addressing inefficiency in the system to “achieve their mandate and responsibility”. Committee chairman, Chukwuma Anohu said, inter alia, “we are confident that the current economic recession being experienced in the country can be reversed within the shortest possible time if the DFIs are made to live up to their statutory mandates, herein lies the impetus and imperative of our extant assignment”.

The foregoing may be described as diversionary and a cheap avenue to make the lawmakers look serious in tackling the economic challenges facing the country. The National Assembly ought to think out of the box in suggesting better strategies to revive the economy, create jobs and make the young, vibrant population more productive.

While the lawmakers beat about the bush, the performance of BOI this year speaks volume. The records can be interrogated across the country. Before we look at the specifics, this financial year, international and domestic rating agencies have upgraded the bank, to affirm its viability and effectiveness in discharging its core mandates. Specifically, Moody’s upgraded the bank from Ba3 to Aa1 while Augusto & Co rated it AA- up from A+. Two years running, BOI has maintained AA+ in FitchRatings.

Experts have interpreted these ratings to be a measure of confidence in the viability of BOI. John Akigbe, a development economist said: “The bank is recognised as being able to meet its commitments to its lenders. They expect it to be in business for the long haul. It is rated as a stable institution because of the likelihood of government support.”

So what are the facts behind the ratings of BOI?

The Buhari Administration has identified agriculture and solid minerals as templates to diversify the economy. The diversification space thrown open by the administration in agriculture, solid minerals and petroleum resources industries has the capacity to overhaul the ailing economy to accomplish the job creation vision of government if well managed.

In the past one year, the BOI has aggressively and consistently stayed on the right track, providing financial leverage in creating or energising large, medium and small enterprises; as well as expansion, diversification and transformation of existing enterprises; and rehabilitation of ailing industries.

The bank, to restate, is mandated to motivate local entrepreneurship and restore indigenous economic activities where comparative advantages can be harnessed to generate employment and foreign exchange.

Despite the down turn in the economy, and dwindling resources, BOI has remained steadfast in keeping to that task of complementing government on policies that bother on job creation and business support as conceived by the Buhari administration.

At its 56th annual general meeting, the acting managing director of BOI, Waheed Olagunju unveiled plans to disburse N212 billion to support job creation in 2016 alone, focusing on financial viability, developmental impact and social development of the country.

The bank also pledged to support businesses that add value to local raw materials through value chain strengthening, generate employment for the youth and unemployed and create wealth while supporting products for export.

Indeed, the bank has partnered various local and international development organisations and many states, assisting them with acquisition of cognate skills and capital to realise their business goals and attain its national development goal.  A few weeks ago, it sealed an MOU with Laurel School of Mines to train 1600 entrepreneurs in gemstone cutting and polishing; a move that will engage the youths and create many jobs at the local level.

Through its Youth Entrepreneurship Support programme, YES – Project, the BOI launched a N10 billion grant in 2016 to assist youths to start and aid their businesses. The project was part of the federal government’s youth employment scheme, a platform from which about 36,000 jobs were mapped out to be created annually.

The YES scheme is exceptionally friendly. Unlike what is obtainable in the commercial banks, it offers participants up to N10 million loans at single digit interest rate with three to five years repayment tenure.

In collaboration with the National Youth Service Corps, BOI has a scheme for serving corps members for its Graduate Entrepreneurship Fund (GEP – Project). The initiative is a special N2 billion empowerment programme for serving NYSC members to draw loan facilities of between N500,000 and N1 million at nine percent interest rate and it has three –  five years repayment plan with  six -12 months moratorium. This is a deliberate effort to encourage serving graduates participating in the NYSC to venture early into business and become employers of labour.

Pursuing its agro-based support mandate, the BOI, working with the federal ministry of agriculture and rural development, in 2014, unveiled the N5 billion Cottage Agro Processing Fund. It also supported the ministry with N13 billion  as Rice Intervention Fund for the establishment of 10 integrated rice mills and six cassava mills across the country.

And to resuscitate ailing industries, the Kaduna State Governor, Nasir el-Rufai recently disclosed that the state was partnering with the bank to create jobs. The bank has supported the state to take controlling shares in Peugeot Automobile Nigeria.  In a bid to promote self-reliance and production of locally made products, the bank staked N.6.6 billion on the ultra-modern steel complex of Kam Industries Limited, Ilorin, Kwara State, under the Central Bank of Nigeria’s Intervention Fund. This is one project destined to boost commercial activities and socio-economic development of Kwara State even as it creates no fewer than 750 jobs.  As emphasised by Olagunju, for Nigeria to domesticate the production capacity of its economy, the iron and steel sector has a very crucial role to play because the plants and machineries used in the sector are all imported.

Last August, the Gombe State committed N360 million for the deployment of pay-as-you-go solar home systems in selected rural communities in the state.  Gombe is one of the states that benefitted from the first phase of the BOI and the United Nations Development Programme rural electrification programme involving one community in each of the six geo-political zones across the nation.

At the Senate hearing, Olagunju, emphasised that the bank as currently constituted is living up to its mandates which he said were not different from the objectives contained in the proposed bill. Instead of scrapping BOI, he wants the federal government to inject more capital to enable it further support the real sector instead of duplicating functions by creating a new outfit.

“We are of the opinion that BOI as presently constituted is fulfilling the mandate envisaged in the proposed legislation by supporting genuine entrepreneurs. Therefore, it should be left to continue its operations as it is. The merger envisaged in the proposed bill has already taken place.

“BOI should be provided with more capital to be able to further support the real sector instead of duplicating functions by creating new DFIS, bearing in mind the failure of similar DFIs in the past such as NBCI, NERFUND, People’s Bank and Community Banks.

“We advise that the National Assembly support industrialisation by enacting legislations that would help create an enabling environment for business to thrive such as an amendment to Land Use Act, tax incentives for SMES, establishment of industrial parks. This would substantially address the demand side challenges of financing SMEs in Nigeria as vagaries of the business environment has been making the sector unattractive to private and public lenders,” Olagunju said.

There is no denying the assertion by Olagunju that BOI has carved a niche as a brand that commands domestic and international confidence. “It is not in the best interest of the country to dissolve an institution that we have built over the years. It is not good to leave known for unknown”, he submitted.

That is a wise counsel for our lawmakers and all policy makers.

—  Dec 19, 2016 @ 01:00 GMT

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