Author: Olukayode Pitan, Managing Director, Bank of Industry
July 15, 2022
For any nation, industrialization is the foundation for job creation, poverty reduction and economic growth. As Nigeria’s premier development finance institution (DFI), Bank of Industry (BOI) has a mandate to finance the country’s emerging industrial sector. By providing long-term financing and counter-cyclical loans diversified according to sectors, the bank plays a central role in the socio-economic development of the country.
This is essential at a time when the country is determined to diversify sources of income and improve economic production to stimulate the growth of other sectors such as building and construction, manufacturing, agriculture and renewable energy. In fact, there is a broad consensus that for Nigeria to achieve long-term prosperity, it must reduce its overreliance on the oil and gas sector which remains volatile and has repeatedly plunged the country into recessions when world oil prices fall.
To achieve the goal of being the heart of industrial development in Nigeria, BOI has built a formidable capital base in recent years. Over the past five years, the bank has raised more than $3 billion in the international debt market. These include a syndicated medium-term loan of $750 million in 2018, a syndicated loan of $1 billion in March 2020, a syndicated loan of $1 billion in December 2020 and a 750 million euro ($787 million) senior Eurobond in February this year. BOI was the first African DFI to successfully issue a senior Eurobond, which was also oversubscribed.
We already have plans in place to visit the international market again shortly as the COVID-19 crisis gradually begins to ease. The overwhelming interest from our international investors over the years is a clear indication of their confidence in the bank’s ability to fulfill its development finance mandates.
By building a solid capital base, BOI has today strengthened its financial capacity to lend to the real economy. Since 2017, the size of the balance sheet has grown from $1.7 billion to $4 billion in December 2021. During the year, the bank saw an impressive 75% increase in profitability to $151 million. , compared to $85.8 million in 2020.
Having a strong capital base not only means that the bank is well positioned to promote Nigeria’s industrial growth, but also ensures that the bank continues to be highly rated by global rating agencies. The BOI’s ability to raise funds in the international debt markets has, to a large extent, been bolstered by both its good ratings and the backing of the Central Bank of Nigeria and the Federal Government. Last year, Fitch affirmed the bank’s long-term default rating at “B” with a stable outlook. Moody’s also affirmed BOI’s long-term issuer ratings of B2 and changed its outlook from negative to stable.
The BOI continuously strives to work with key partners to improve job creation opportunities and reduce poverty. Although a public institution, the bank is a limited liability company. This gives the bank its autonomy and protects it from undue interference. Since the BOI was rebuilt in 2001 from the Nigerian Industrial Development Bank which was incorporated in 1964, it has supported businesses in several sectors such as agribusiness, creative industries, engineering and technology, fashion, renewable energy, healthcare and pharmaceuticals.
BOI also offers products that specifically target the youth population. The Youth Entrepreneurship Support Scheme, for example, is uniquely aimed at tackling the worrying phenomenon of youth unemployment in Nigeria. The product is designed to encourage young minds and fund their business ideas. It also enables young people to acquire the skills and knowledge necessary to become independent by creating and managing their own business.
Over the past six years, the BOI has disbursed approximately $3.57 billion to more than four million companies, creating more than seven million jobs. It should be noted that the bank’s support to micro, small and medium enterprises (MSMEs), which are the engine of the economy and job creation, has been phenomenal. During the period, a total of $861.9 million was specifically directed to MSMEs. The impact has been the creation of approximately four million direct and indirect jobs.
A growth platform
BOI recognizes that operating in a country where poverty is still widespread is a herculean task. It is for this reason that the bank is implementing its medium-term strategic plan 2022-2024 entitled “Sustaining Purposeful Growth”. The plan is designed to build a stronger and more resilient bank. But more importantly, it serves as a guide to increase its impact on lending, especially in sectors such as agriculture, manufacturing, infrastructure, export and import, and real estate, among others. that will define the future of Nigeria which will be characterized by less dependence on oil. and gas.
As part of our strategy, the bank recently launched the Growth Platform, the largest executor of MSME interventions in Africa. The plan enables the BOI to partner with governments, international organizations, private sector actors and non-governmental organizations to execute large-scale programs that support the growth, development and recovery of businesses and households in different stages, regardless of existing limitations. Through the platform, BOI leverages emerging technologies such as big data analytics, agent networks and financial tools to profile and fund over four million Nigerian businesses. So far, the bank has managed to deliver $472 million in interventions through the platform.
Over the past six years, the BOI has disbursed approximately $3.57 billion to more than four million companies, creating more than seven million jobs.
Although access to credit and grants has been essential, the platform has been instrumental in promoting financial inclusion. The BOI recognizes that bringing more people into the formal financial sector is a sure way to fight poverty. This is important for Nigeria, where around 60% of the rural population does not have a formal bank account. The fact that the platform has facilitated the creation of more than one million mobile wallets and the opening of approximately 350,000 bank accounts demonstrates that the bank is on the right track in terms of increasing financial inclusion.
As DFIs, our operations are based on global best practices. The bank recognizes the challenges facing society and integrates them into its efforts to champion development on all fronts. Accordingly, BOI has integrated sustainability into its operations. One of the bank’s operating principles is to support businesses that are likely to be profitable, competitive and sustainable and have a substantial development impact. For BOI, the sustainability strategy is anchored on the responsible transformation of lives and businesses through sustained interventions in economic development, environmental protection, social impact, ethics, governance and partnerships. The ultimate goal is to improve the world for future generations.
As part of its role of securing the future, the bank ensures that the companies it supports do not engage in activities that are harmful to the environment or to the cohesion of society. BOI has reinforced its commitment to sustainable development by becoming an official signatory of the United Nations Principles for Responsible Banking. The Principles provide the primary framework for ensuring that banks’ strategy and practices align with the vision society has set out for its future in the United Nations Sustainable Development Goals and the Paris Climate Agreement.
A network for change
Although a local DFI, BOI operates in a competitive market and Nigeria has become a preferred investment destination for other global DFIs. This is evident given that in July last year, G7 DFIs and multilateral partners pledged to invest over $80 billion in the private sector in Africa over the next five years. In addition to global DFIs, the local commercial banking sector has also shown interest in financing the real economy. Although the BOI recognizes that it cannot reach all of the country’s 40 million businesses, the bank is currently deploying the technology to broaden its reach and serve businesses more effectively and efficiently. Through this, we offer end-to-end processes and on-the-ground infrastructure for transparent profiling and provision of finance to MSMEs.
The bank is able to achieve this through a network of 22,000 field agents, leveraging the power of digital identity and biometrics, including extended data capture, partnerships and integration with financial institutions and fintech platforms. In particular, by working with fintechs, a thriving industry with over 200 active fintechs, BOI has been able to explore new areas of business opportunity in areas spanning payments, savings, e-wallets , remittances, mobile and online money services, wealth management. , merchant services, card trading, investments and insurance, among others.