By Emeka Okoroanyanwu
and Adewale Sanyaolu
Since its inception 15 years ago, the Bank of Industry (BOI) has provided the needed oxygen for Nigeria’s small and medium enterprises. The bank has through its various intervention funds, made unimaginable developmental impact in the country’s industrial landscape. It has through its various interventions achieved substantial successes in both core and emerging sectors of the economy, disbursing about N83.5 billion to over 776 enterprises that generated almost 400,000 direct and indirect jobs, a feat no agency of government has been able to achieve so far.
The bank’s most striking achievement in its credit operations was the disbursement of loans that amounted to N5.7billion to micro small and medium enterprises(MSMEs) in 2015 alone.
This represented 205 per cent increase over the average annual run rate of N1.7 billion to MSMEs in previous years.
The bank’s financial position in 2015 based on key financial parameters also showed marked improvements compares to 2014. The three fold increase in loans disbursed to MSMEs in 2015 was due to the establishment of separate directorate for small and medium enterprises in late 2014, thus creating an efficient ecosystem for SMEs.
To improve efficiency, the bank brought its services closer to current and potential customers, by increasing its offices to 21, from seven. New offices were established between 2015 and mid 2016 in Awka, Anambra State, Ibadan in Oyo State, Minna in Niger State, Oshogbo in Osun State, Port Harcourt in Rivers State, Calabar in Cross Rivers State, Gombe, Kano, Sokoto and Kastina.
The number of business development service providers who were appointed to help SMEs package their loan applications were also increased to 200 from 122 in the course of 2015. The bank also leveraged technology to automate its processes and develop five digital products. They include SME Mobile App, SME Loan Application and Tracking System, SME Accounting App and the SME Customer Portal where about 700 customers now advertise their products on BOI’s website.
Equally, an SME clustering strategy was rolled -out in 2015. Under its first phase of 40 SME clusters that cut across major business sectors of the economy have been identified and financial products programmes with single -digit interest rate strategy has enabled tailor made products to be developed for various business segments. The clusters include, adore (tie ad dye)/ aso oke, animal feeds, fish farming, bakery, blocks and interlocking stones, ceramics and tiles, cosmetics / hair products, diary and digital printing/ multimedia publishing. Others are e -commerce/ICT, fashion and garmenting, fish s moking /drying/cold storage, food processing, foundries/ metal fabrication/3-D printing, furniture/wood processing, gemstones, greenhouses, grocery packaging and a host of others.
Other sector – specified products of the bank are the N5 billion Cottage Agro processing (CAP) Fund for agro -allied based SMEs . The product targets 1,000 cottage mills across the country with 20-30mills per state including the FCT; BOI Nollyfund, a collateral-free fund of N1.0billion for the entertainment industry practitioners, N1billion Fashion Fund was also launched to support the fashion chain.
The bank also signed up seven micro finance banks under the N5 billion Bottom of Pyramid Scheme towards on-lending to Micro-enterprises.
Towards enchanting its lending capacity, the bank obtained $100m line of credit from the African Development Bank to specifically fund exports -based projects. BOI’s developmental initiatives are in also in tandem with AfDB’s High 5s. They include Solar Power Programme that its implementing in Partnership with United Nations Development Programme (UNDP).
They include Solar Power projects executed in Nigeria’s six geo-political zones in the following communities: Bisanti village in Niger State: Onibambu/Idi Ita in Osun State; Kolwa in Gombe State; Onono in Anambra State; Obayanto in Edo State and Charwa/Chakun in Kaduna State.
The bank recently launched a N10 billion Youth Entrepreneurship Support – Programme aimed at equipping young people with the skills and knowledge to be self employed by starting and managing their own businesses. The beneficiaries will be trained under the bank of Industry’s (BOI) Entrepreneurship Capacity Building Programme and thereafter provided with funding to start up or expand existing businesses based on concessional lending terms and conditions.
The objective was to make the young aspiring entrepreneurs self employed and become employers of labour, creating at least 4-5 jobs per beneficiary. About 10,000 businesses are expected to benefit from the fund in the first year and expected to grow in 25,000, 50,000 and 100,000 in 2017, 2018 and 2019 respectively.
The N2 billion Graduate Entrepeneurship Fund (GEF) was launched in the second half of 2015 in partnership with the National Youth Service Corps. The scheme is a special fund set up to encourage young Nigerian Graduates who are currently undergoing the NYSC programme to start up new businesses, as well as the expansion of existing ones. The fund aims to reposition the mind-set of young graduates from that of job seekers to being self employed and becoming employers of labour.
The CBN Intervention Funds, specially for both the Power & Aviation industry and the Refinancing and Restructuring Facilities being managed by the bank has a current balance of N443 billion having disbursed to over 600 companies. The Central Bank has also designated the bank to manage the processing and disbursement of the N50 billion CBN Intervention Fund for the Textile and Garmenting Sector.
Other funds being managed by the bank include the matching Fund Partnership of about N11billion was recently signed with 2 additional states.
BOI upgraded its core banking application in the year to a more robust version with more functionalities . This include the Disbursement Availment Ticket Process, Credit Application and Tracking Process, E-BILLSPay and Staff Travel Management.
What BOI has going for it is its strong commitment to professionalism, strict adherence to global best practices and competent management and staff.
For instance, the bank’s risk management profile is equal to none as it has continued to achieve high loans performing ratio, even as many tottering and dying small scale industries have been revived through its concessionary loan disbursements. Last year alone, BOI’s ratio of non-performing loans scaled down to 3.84 per cent as at September 2016 from 3.87 per cent it was in June 30, 2015.
While loans to medium and large enterprises went to the real sector of the economy such as agro processing, food processing, solid minerals, gas value-chain, engineering and technology and light manufacturing, loans to small and medium enterprises were disbursed to companies in the various SME clusters such as fruit juice, cassava processing, fish farming, bakery, furniture, among others. Such loans alone created over 90,000 jobs in 2015.
Over the years, BOI has transformed into an efficient, focused and profitable institution that is well placed to effectively carry out its primary mandate of providing long term financing to the industrial sector of the Nigerian economy.
And in realisation of its mandate of providing financial assistance for the establishment of large, medium and small scale industries as well as the expansion, diversification, modernisation and rehabilitation of existing ones, BOI has restructured its products and services into eight broad and independent areas.
They include the Cassava Bread fund, Cottage fund, Cement fund, Bol/CBN intervention, FGN Special Intervention Fund for MSME (NEDEP) National Programme of Food Security, Rice and Cassava Intervention Fund, Sugar Development Council Fund.
The bank is equally into partnership with 19 states under its Matching Fund Initiative.
Because of a strong showing in 2015, the bank posted an impressive profit for the year. This is despite a negative micro-economic environment accentuated by the global fall in oil price, unstable power supply as well as high foreign exchange volatility.
The bank grew its profit before tax by 232 percent from N5.710 billion at the end of 2014 to N47.230 billion in 2015.
Its profit after tax was also up by 761 percent year-on-year. Profit after tax rose from N5.190 billion at the end of the year 2014 to N44.696 billion in 2015.
The bank’s financial statement for the year ended December 31, 2015 showed that it grew its operating income by 161 percent to N70.765 billion in 2015 from the N27.108 billion it reported for the comparative period.
The bank’s operating results are underpinned by strong growth in its Balance Sheet, improvement in the Non-Performing Loan ratio from 18 per cent in May 2014 to four per cent in December 2015, and efficient cost management which saw the growth in operating expenses limited to only 12 per cent in 2015.”
BOI also obtained ISO 9001:2008 Quality Management System
Certification in 2015.
With a strong financial showing coupled with robust risk management profile, BOI has expectedly attracted international accolades from different global financial institutions. Its rating has soared very high as Fitch, an international rating agency applauded BOI by re-affirming its AA+ ratings of the bank describing its outlook as stable, even as it downgraded the support ratings of other banks.
Fitch had last year downgraded Nigeria’s Long-Term Local Currency Issuer Default Rating (IDR) to ‘B+’ from ‘BB-’, as a result of which it is now equalised with the Long-Term Foreign Currency IDR.
The rating agency, which downgraded other banks due to doubt in government’s ability to support them in foreign currency as a result of weakening and eroding foreign currency reserves/ revenues, as well as limited confidence that any available foreign currency will not be used to execute other policy objectives, noted that BoI’s AA+ ratings were retained because its operations are solely in local currency.
According to Fitch, the IDRs of BoI are driven by its SRF of ‘B+’ and reflect a limited probability of sovereign support.
“The IDRs of BOI, a state-owned policy bank, are driven by its SRF of ‘B+’ and reflect a limited probability of sovereign support.” It considered its 99.9 per cent state ownership, policy role and strategic importance to Nigeria’s economic and industrial development. It also considered the authorities’ stronger ability to support BOI than commercial banks, as BOI’s operations are solely in local currency.
BOI’s Long-Term IDR has a stable outlook, reflecting the stable outlook on the sovereign rating.
“BoI’s IDRs, SR and SRF are sensitive to a weakening in Nigeria’s ability to support the bank, which would be indicated by a downgrade of Nigeria’s sovereign rating. The ratings could also be downgraded if Fitch’s view of the state’s willingness to support the bank changes adversely, for example if there is a material change in the government ownership or a change in the bank’s policy role. This is not Fitch’s base case”, a statement from Fitch added.
As at today, BOI remains very strong and better repositioned to push the frontier of the nation’s industrial sector through its aggressive business financing and strict risk management practices.
On the rating of other banks, Fitch noted that it is monitoring the banks’ ability to meet maturing foreign-currency obligations.
“In the current difficult market conditions, Fitch believes the banks are face challenges to refinance existing obligations and/or obtain foreign exchange from the Central Bank of Nigeria to meet maturing obligations.
“The new foreign-exchange regime has provided limited respite in accessing foreign currency in the interbank market. FX forward contracts provided by the central bank since June 2016 have helped reduce large overdue trade finance obligations, which were either extended or refinanced with international correspondent banks”, it added.
Equally Moody’s Investors Service, (“Moody’s”), another rating agency assigned Aa1.ng/NG-1 national scale local and foreign currency issuer ratings to the Bank of Industry (BoI).
Last year Moody assigned BoI Ba3, which was in consonance with Nigeria’s sovereign rating. These latest ratings are underpinned by a standalone credit assessment of b2 and one notch of government support uplift, which results in a global scale long-term issuer rating of B1.
The Aa1.ng rating is the second highest of three national scale ratings (NSR) categories corresponding to BOI’s global scale ratings (GSR).
According to Moody’s, BOI’s national scale ratings capture the bank’s robust capital buffers, with an equity to assets ratio of 30 per cent as of December 2015; stable liability structure made up of long-term funding at concessional rates; and tangible improvements to governance and risk positioning in recent years.
It added that these strengths are balanced against its projection that asset quality will be increasingly pressured given the loan growth strategy that the bank is pursuing, particularly in the micro, small and medium-sized enterprises (MSMEs) segment, which may expose the bank to riskier assets.
Moody’s rating confirmed the bank’s similar ratings of AA+ by Fitch Ratings and A+ by Agusto & Co.
The Fitch’s rating of AA+, and Moody’s BA3 remain the best among the nation’s indigenous financial institutions. BOI also obtained ISO 9001:2008 Quality Management System Certification.
BOI is Nigeria’s oldest, largest and most successful development financing institution. It was reconstructed in 2001 out of the Nigerian Industrial Development Bank (NIDB) Limited, which was incorporated in 1964. The bank took off in 1964 with an authorised share capital of £2 million.
The International Finance Corporation which produced its pioneer Chief Executive held 75 per cent of its equity along with a number of domestic and foreign private investors. Although the bank’s authorised share capital was initially set at N50 billion in the wake of NIDB’s reconstruction into BOI in 2001, it has been increased to N250 billion in order to put the bank in a better position to address the nation’s rising economic profile in line with its mandate.