In recent times, the Bank of Industry has signed a number of business agreements with various ministries and organisations. Crusoe Osagie reviews these pacts to ascertain how many of them are underway
As Nigeria wallows in its worst economic mess in over 30 years, all pundits have pointed in one direction only for the giant African nation’s redemption and that is diversification of the economy from hydrocarbon to agriculture and manufacturing.
With a capital base of over N250billion, a vision to be Africa’s leading Development Finance Institution operating under global best practices and a mission to transform Nigeria’s industrial sector by providing financial and business support services to enterprises, the Bank of Industry (BOI), occupies a strategic position in the nation’s quest to reinvent its economy for survival.
The country’s earnings from crude oil have continued to decline with the rising militancy in the Niger Delta and the slump in the price of crude in the global market.
After half of the year 2016, the federal government last week, announced that it had received 50 per cent less revenue than it expected to have raised, indicating that the dependence on inflow from hydrocarbon is no longer a guaranteed means of funding the economy.
All these underscore the urgent need to quickly empower the real sector and make it a major driver of the economy, a task which will see the BOI assume much greater responsibility than it has ever did since it was set up in 1964.
This new reality therefore makes it necessary to review the operation of BOI, particularly all the agreements signed between the development finance institution and other public and private sector bodies for the purpose of energising the productive arm of the economy.
BOI Arrangement with Kano
The bank co-launched a N2billion Micro Small and Medium Enterprises (MSME) Development Fund with the government of Kano State.
The arrangement with Kano State brought the volume of micro small and medium enterprises (MSMEs) funds being managed on behalf of 18 state governments to N19.3billion.
The scheme, which was targeted, mainly, at the development of existing and new MSME in the state was expected to create new jobs and economic empowerment.
Under the Memorandum of Understanding (MOU), the BOI and the Kano State Government resolved to jointly contribute the sum of N1billion each for on-lending to mainly businesses that have high employment generating potentials and value addition to local raw materials.
Speaking on the state’s decision to fund the scheme during the signing of the MOU in Kano, the state governor at the time, Dr. Rabiu Kwankwaso, declared that his government was determined to encourage the promotion of entrepreneurship and the growth of MSMEs especially those engaged in the processing of agricultural and solid mineral resources as well as manufacturing.
The Governor had assured the bank’s management and citizens of the state that his administration would facilitate loans to entrepreneurs wishing to access such facility in the state especially graduates of the 23 institutes established by the state government to train and sharpen the skills of budding entrepreneurs in various vocations through well-structured capacity building programmes.
The BOI promised to help harness all efforts to ensure that more successes were recorded along the tomato value chain. The bank said it was determined to work closely with the 37 newly established micro finance banks in Kano towards supporting MSMEs, adding that it was also ready to work with the government and people of Kano State to harness the state’s huge agricultural potentials especially in the area of vegetable and leather.
Dangote, BoI sign N5bn for MSMEs
Dangote Foundation and Bank of Industry, BoI, also entered into a Memorandum of Understanding, MoU, to set up a micro, small and medium enterprises (MSMEs) with N5billion initial fund to create not less than one million direct jobs.
Chairman, Dangote Foundation, Aliko Dangote, said the fund, which is being distributed to operators of small scale businesses across the country is expected to grow to N20billion as it gains momentum.
According to him, “Dangote Foundation is committed to initiating policies and executing programmes and projects aimed at creating jobs and poverty alleviation in Nigeria. As an organisation, we have it as a matter of policy, to give back to the society where we operate. “To demonstrate our commitment to these goals, we have invited you here today to witness the signing of the Memorandum of Understanding, MoU, between Dangote Foundation and the Bank of Industry, Bol, to set up a micro, small and medium enterprises, MSMEs, Fund. The first tranche of this fund is N5 billion. We expect the fund to grow to N20 billion when it gains momentum. “In our MoU with BoI, Dangote Foundation will commit N2.5 billion to the Fund, while BoI will also contribute a matching fund of N2.5 billion, thus creating a total fund of N5 billion to launch the Fund, which shall be used for lending to identified groups in the informal sector of the economy in the six geo-political zones in the country as take off or working capital to support their businesses. The first phase of the project is expected to impact directly on up to 13,000 registered groups in the entire country. Each group shall have an average of 20 entrepreneurs, thus impacting the lives of up to 250,000 micro-entrepreneurs, through job creation, spreading across all six geopolitical zones in Nigeria. These micro-enterprises shall include but not be limited to cassava processors, aluminium artisans, poultry farmers, calabash carving groups, small traders, cattle rearing groups, vegetable sellers, market women, artisan groups etc. According to our agreement, BOI shall be the implementing partner with responsibility for appraising loan applications, disbursing loans and managing recoveries. It is important to stress that the size of the loan to be granted to each beneficiary, at zero interest, from our end, will vary based on the needs of the beneficiaries. However, for the purpose of this scheme, the DF-BOI Fund shall be utilised for the following activities: term loans, working capital loans, leasing of industrial/business equipment and trading and allied businesses. In line with our MOU, also, both partners shall put in place control measures to ensure that the businesses to be financed are viable, sustainable and profitable, while sourcing and identification of projects would be a shared responsibility.
As for BOI, the partnership for entrepreneurial and economic development idea “is to create entrepreneurs for the well-being of average Nigerian.
BOI and the Niger Delta
The troubled Niger Delta region with its people plagued by poverty also entered into investment arrangement with BOI to assist states in the Niger Delta area with aquatic resources to efficiently convert their comparative advantages into competitive advantage through the establishment of aquatic industrial parks and introduction of innovative agro-technologies, among others.
AFDB, BOI and NEXIM Bank
The African Development Bank (AfDB) signed two agreements for the provision of two sovereign-guaranteed multi-tranche Lines of Credits (LOCs) with the Bank of Industry (BOI) and the Nigerian Export-Import Bank (NEXIM). Under the programme that is designed to support export-oriented small and medium enterprises, boost job creation and diversify Nigeria’s economy, a $500million Line of Credit was approved for the Bank of Industry while a $200million Line of Credit was extended to the Nigerian Export-Import Bank.
The two Lines of Credit include technical assistance packages to strengthen institutional capacity at both BOI and NEXIM as well as at their SME customers.
The facilities are meant to support the establishment, modernisation and expansion of export-oriented small and medium enterprises’ (SMEs) that have high employment generation potentials.
The lines of credit would also allow SME beneficiaries to be more competitive, scale up their operations and ultimately create more jobs in Nigeria. The combined program will contribute to mobilise significant financial resources for Nigerian export-oriented SMEs, ultimately contributing to economic development, employment opportunities, foreign exchange and regional trade integration.
BOI Funds Nollywood
Also, the BOI established a N1bn fund for Nigerian film makers. This is different from funds earlier initiated by the federal government, being an initiative of the financial institution.
According to the bank, the special project tagged, ‘BOI NollyFund,’ will offer Nigerian film makers the opportunity to receive financial support to produce quality films and screen them through various platforms of movie distribution available, both in Nigeria and abroad.
“The NollyFund has an initial programme limit of N1.0bn and a single obligor limit of N50m for individual loans. The fund can be accessed by companies engaged in film production.
“Applicants are expected to provide commercially viable scripts and demonstrate a track record of successful movie productions. The producer is expected to sign up a reputable distributor who would issue a minimum guarantee and provide cash deposit of five per cent of the loan amount. “A minimum guarantee is a cash advance payable to the producer by the distributor in exchange for the exclusive rights to distribute a film in contractually-stipulated media in agreed sales territory.
“This is similar to the internationally accepted loan structures for movie production and will definitely provide a great boost to Nigeria’s Nollywood.” It adds that to ensure the integrity of the process, the bank has set up a NollyFund Implementation Advisory Group made up of, among others, two cinema management experts, one national film distributor, two production and post-production experts, and two film producers. Said to have been accredited are the G-Media, Filmone Distribution Company, Silverbird Distribution Company, Genesis Deluxe Distribution Company, Fans Connect Online Nigeria Limited, Kingsley Ogoro Productions Limited and 4Screams International Nigeria Limited.
BOI and Abia govt
Recently, Abia State Government signed a MoU, with the BOI, for the marching funds for SMEs in the state. Under the agreement, the Bank of Industry is to provide N1billion in Small and Medium Enterprises development fund.
In his remarks, shortly after signing the MoU, last week at the Government House, Umuahia, the acting Managing Director of the bank, Mr. Waheed Olagunji, explained that the MoU was designed to lend resources to genuine entrepreneurs in the state, especially in agriculture and other areas. According to him, SMEs are the major creators of jobs, pointing out that the implementation of the MoU would go side by side with capacity building. He however, advised the potential beneficiaries to pay back the funds and pledged to work with the state government to realise the industrial potentials of the state.
BoI Partner Ecobank
The BoI and Ecobank Transnational Incorporated (ETI), also signed a memorandum of understanding on promoting financial inclusion.
The partnership between the two banks is a roll out of an Africa-wide financial inclusion programme, initiated by Ecobank, to address lack of inclusive growth on the continent, which has resulted in lingering poverty and unemployment
Relying on BOI’s reputation as the best development finance institution in Nigeria, and seeing the country as an important market to execute the programme, Ecobank decided to partner with the Bank of Industry on the project in Nigeria.
During the signing ceremony at BOI’s headquarters in Lagos on Monday, the management of both banks said that they believe the initiative would give MSMEs in Nigeria and Africa some appreciable mileage.
$100m Local Content Deal
The Nigerian Content Development and Monitoring Board (NCDMB) and the Bank of Industry (BoI) signed a Memorandum of Understanding (MoU) on the utilisation of the $100 million Nigerian Content Intervention Fund (NCI Fund) to be managed by the bank.
The NCI Fund is a pool made available by the NCDMB to meet the funding needs of manufacturers, service providers and other key players in the Nigeria’s oil and gas industry.
In line with Section 104 of the Nigerian Oil and Gas Content Development (NOGICD) Act of 2010, operators in the oil and gas industry contribute one per cent of the value of every contract in the upstream sector into the Nigerian Content Development Fund (NCDF) from which the NCI Fund was created.
Speaking at the MoU signing ceremony in Lagos, the acting Executive Secretary of the NCDMB, Mr. Patrick Obah, said the $100 million fund was motivated “by the desire to re-engineer the operations of the NCDF; increase access and grow indigenous participation in the oil and gas industry.
“The fund shall be utilised to finance existing and intending manufacturers, oil and gas service companies and original equipment manufacturers (OEM) in the Nigerian oil and gas industry,” he added.
He identified areas of utilisation of the fund to include fixed assets; working capital, leasing of industrial and business equipment and marine vessels.
According to Obah, intending features of the fund include single interest rate of eight per cent; tenor range of one to 10 years, moratorium maximum of 12 months from the date of loan disbursement and speedy processing.
“Intending beneficiaries who have previously executed contracts in the industry must be up-to-date with the remittances to the NCDF). BoI will obtain this confirmation from the NCDMB before any application can be successful,” Obah explained.
The NCDMB boss added that the BoI would serve as the custodian and manager of the fund, stressing that the fund would be accessible to eligible players at the given single interest rate.
Obah said the collaboration of his agency and the BoI was based on the bank’s expertise and specialisation as a developmental bank created to speed up the industrialisation of the Nigerian economy.
Olagunju, said his bank had the capacity to successfully manage the fund.
“Our mission is to transform Nigeria’s industrial sector. We are not adding much value in the oil and gas industry as other OPEC countries. But today, we will begin to promote industrial projects in areas covered by the mandate of the NCDMB. We are glad that this collaboration is taking place,” Olagunju added.
Are the MOUs Productive?
With the varied agreements and partnerships entered into between BOI and varied organisations, many industry watchers have submitted different views in respect of the purposefulness and effectiveness of these agreements.
While some say a lot of progress is being made by the bank through the initiatives, others are not quite impressed with the progress so far made by the bank.
Small Scale Manufacturer of packaging materials and Managing Director of Cradle Peak Nigeria limited, Mr. Ikponmwosa Obano, noted that although his company is yet to succeed in receiving funding from the national development finance institution, he believed that its partnership were currently driving productivity with a lot of potential as well.
He said the documentation and other administrative requirements needed to receive funding from the various initiatives were major setbacks, stressing that small operators like him, cannot afford to pay the kinds of consultants with the skills to guide them towards successfully benefiting from these schemes.
Other operators however outrightly dismissed the initiatives of the bank, describing them as mere window-dressing and designed for only a select and privileged few.
According to an operator who did not want to be named, the bank seemed satisfied with cartering for only high net worth individuals and people with significant political capital, stressing that most of the programmes of the institution could largely be accessed with backing and recommendation for bigwigs.
The operator also stressed that there were too many rules that must be fulfilled to get funding such as: That your business should have capacity to substantially add to industrial output; Projects that use largely domestic raw materials; Industry in which Nigeria’s comparative advantages could be converted to competitive ones; Ability to promote the expansion of exports through the production of high quality products that are attractive to domestic and export markets.
There is also the requirement that the venture should be a niche projects that produce for worldwide consumption and also that projects should create both forward and backwards linkages, with the rest of the domestic or regional economy, among several others.
He noted that these many rules only provided cover for the bank as it uses its discretion to approve or reject funding applications as it wishes.
Also, a financial analyst said “between 2013 and now, the BOI has signed assorted MoUs with other organisations, but these business agreements have not yielded the desired results.
He said: In recent times, hardly a week passes without the news media reporting the signing of memorandum of understanding (MoU) between the BOI and a commercial bank or between the bank and a federal government ministry, department, agency, a state or one organisation or the other.
My worry is that these assorted MoUs are often mere wishes that cannot be achieved, given that they usually do not exceed paper signing.
“All you see on the pages of newspapers and in the televisions are all sorts of agreements singing, but you will never hear or see such projects come to fruition. What happened to the N4.3billion cassava bread initiative; what of the MoU on job creation, how many jobs have been created. These MoUs can be likened to what we see in the power sector. They don’t usually exceed paper signing.”