During the maiden visit of the President of the African Development Bank, Dr. Akinwumi Adesina, who met with key government officials and chief executives of the Nigeria’s development finance institutions, THISDAY had an encounter with the acting Managing Director, Bank of Industry (BoI), Waheed Olagunju, who spoke on strategies to exit the prevailing economic situation, the essence of the nation’s premier development finance institutions – which metamorphosed from the Nigeria Industrial Development Bank in 2001- its achievement and future plans. The interview was conducted by Kunle Aderinokun
Just a few days back, the African Development Bank President was in the country, where he had consultations with some officials of the government. What is your assessment of the meeting? Also, we understand that there were some takeaways, in terms of interventions for the country’s development, especially the one given to BOI. Can you let us into this?
Essentially, as one of the founding members of the Africa Development Bank (AFDB) which established in 1964. We are also one of the largest shareholders and AfDB’s mandate is to support the economic development of the continent through member nations. It does not comprise Africa states only, we have also our development partners from Europe, Asia and America and they contribute to the financial resources which they make available to African countries for development.
They deal with government and also private sector. Specifically, the Bank of Industry (BoI) was given a line of $100 million for on-lending to the real sector in Nigeria, mainly export-based Small Medium Scale Enterprise (SMEs). It will be the second line of credit to the institution; the first line of credit was to NIDB which was the precursor institution of the BoI in 1989. The BoI operations are in line with the ADB’s High 5s initiatives.
Light up Africa is one of them, feed Africa, industrialising Africa, integrate Africa and improve the living standards of Africa. These are the envisaged development impacts of the ADB’s initiatives.
We lend heavily to the manufacturing industry in Nigeria. We have a partnership with the United Nations Development (UNDP) under which we are supporting solar power product in Nigeria.
Our interactions with AfDB is such that they are going to be supporting BoI and the country more in order to fulfil their mandate on the continent. The consultations went quite well with the public and private sectors and development partners. This visit is coming at the time when the country needs development partners. The economic is in recession and we need all the support we can get from our development partners to get the economic back on track.
Going forward how do you intend to implement the fund that you have been given by the AfDB?
Like I said, it is a $100 million line of credit meant to support export-based SMEs. The whole essence is to help in diversification of the economy. We have depended on oil for several decades; we are a mono-economy. We have been trying to diversify into agriculture and solid minerals. When we are going to export, we are talking about adding value to our natural resource endowments.
Since independence, we have been exporting crude resources. This does not fetch really much in terms of the value and in terms of trade. But when you add value, and process, you command more prices. The terms are better when the considerable value addition. We will be using the money to support MSMEs where we will helping them to prepare machinery which will be used in processing agricultural produce into finished product or input for other industries.
Also for solid mineral beneficiation and at the same time for the oil and gas sector. The whole essence is for them to have dollar cash flow, to enable them repay the loan in hard currency because the lines of credit are dollar dominated.
Apart from your normal operations, now that the country is in recession, what are the deliberate strategies, which BOI has in helping Nigeria get out of the quagmire?
One of the ways of getting out of recession is to increase investment to boost production and development. Jobs will be created especially, if it’s commodity-based industrialisation.
Any project that can be viably promoted in the recessionary period means the project must have constantly de-risked.
The project promoters are operating against under worst case scenarios. If they are able to survive now, their chances of sustainability becomes higher. Economics move in cycles, we are now in the U-shape; we can only afford to go up.
Companies that are able to do well when the economy is in crisis can do better when the economy improves. We are working very, very hardwork to support entrepreneurs with viable proposals at this time, especially rehabilitation of ailing industries because brown fields are easier to turn around and their development impacts manifest quicker than green fields.
It takes about 18months to feel the developmental impacts of a green field. For a brown field (an existing company) that needs to be rehabilitated, it takes a shorter time. Therefore they are less risky to support. We are trying to be more flexible to enable us support entrepreneurs more at this particular point in time.
We have been in this environment for quite some time. The Bank of Industry owns its origin to ICON, which was established in1959. Later, it was reconstructed into Nigeria Industrial Development Bank in 1964 and into Bank of Industry in 2001. We have been operating as BoI for the past 15 years precisely on the 5th October. In this market, we know the industry, the terrain and understand the market, this is why we are able to operate efficiently and effectively.
Today, we are the biggest and most successful DFI in Nigeria. We are rated internationally by Fitch, A+; Moody’s, BA3; and A+ by Agusto & Co. We operate in line with global best practices.
A very solid foundation was laid for BoI when it was established in 2001. The pioneer management did a lot in restructuring the erstwhile NIDB into BoI. The AfDB also supported that process because knowing we cannot continue to depend on our shareholders for funding. The reason we had always wanted to be a self-financing institution, so at the inception of BoI in 2001, 2002, and 2003, under the leadership Amb. Zakari Ibrahim, who was the chairman of the Board and Dr. Larry Osa-Afiana, who was the managing director, we approached the AfDB for a line of credit. Chief Ogunjobi, who was Vice-President of Operations at that time, sent a team to look at the BoI. They felt the stages were then we could not be given a line of credit. Instead of abandoning us, they said they will help strength and restructure BoI. So they went round regional members of the ADB and they got the Swedish government to commit $300,000 in grants, for the restructuring of BoI.
At that time, it was a tight facility; they got a Swedish firm known as Swedish Development Advisers. It was headed by a man called Leonard Cunnington, who used to work with the International Finance Corporation and in his days in IFC he also did some works in Nigeria. Also his company was given that job to restructure. They began the work in November, 2004 and they finished it in July.
It was a six-volume report, which covered operations, corporate governance, legal and administration. It laid a very solid foundation for BoI’s take off because it was a diagnosis study and they came up with far-reaching recommendations which Dr. Osa-Afiana began to implement immediately the report was submitted. When Ms Evelyn Oputu was appointed, she also continued in implementing the report. In fact her first trip abroad was to visit the AfDB in February in 2006.
At that trip, I was with her, because I was in charge of Strategy and so I linked with the Swedish advisers who came from Stockholm. We met in Tunis, AfDB office and we continued implementing the report of the Swedish advisers, so that laid a very solid foundation for BoI and it was AfDB that assisted in that respect. So we have to give them the credit for the support.
It was under Chief Ogunjobi that we achieved all these feats. We also pledged to operate under global best practices by undertaking studies of development initiatives across the globe. In the US, we visited the SBA, in the United Kingdom, we visited their equivalent as well. We also visited Asia countries such Malaysia, Indonesia, Thailand and Bangladesh where we studied the operations of some institutions there including Grameen Bank. We visited international Development Corporation (IDC) of South Africa. We also sent two of our staff on attachment to the various DFIs and business partners in 2006 and 2007. The business partners we met them during that studies that conducted by the development advisers.
Those two staff who went on attachment were the ones leading the bank’s SMEs and Large Enterprise Operations. So regarding the issue of Global best practices, we kept in touch and in tune with development partners around the world in order to know the latest trends in development financing. We are still in touch with the BNGS of Brazil, and KfW in Germany.
So we have our ten years Memorandum of Understanding (MoU) with IDC of South Africa which signed in 2006 and hope to renew in 2016. It covers capacity building and technical support. When we organised the mining conference last year, there was somebody that came from the IDC of South Africa- the head of the mining department in South Africa, because they are very strong in that area- who was one of the resource persons that came.
Those are the successful factors working with our foreign and domestic development partners- UNIDO, UNDP. And then, locally, we have a target of working with all the 36 State Governments. Presently, we have entered relationship with 20 and we will continue to engage the remaining 16.
You were talking about brownfields. Granted, we are in recession, as a DFI, which is reputable for development in Nigeria, you also focus on greenfields, I’ll like to know what your interventions have been across board in different sectors to date and even in states?
The Kaduna State Governor was there when we launched the YES Programme in March 2016 at the Hilton in Abuja, we invited all the governors and he attended. We have a state variant of the YES which is the KADSTEP (Kaduna State Entrepreneurship Programme). There are different components, we ask youths to submit business ideas online. They are evaluated by the BDSP- Business Development Service Providers -that we appointed.
When they review them, there is also classroom section. After the classroom section they prepare their business plans, and those that are potentially viable, we will support their plans. At the end of the classroom section, they will apply for loans and we process. The third batch of KADSTEP that is what we are on. At the national level, we are also second batch of the YES programme.
The first batch that applied in March, submitted business ideas, they were evaluated, those that scaled the first hurdle, went for the ten weeks online programmes. These people within the ages 30-35 in the greenfield and brownfield categories. Those that went through the online training sessions are now going the classroom sessions.
There are 2,500 undergoing the classroom session now in 20 locations in the six geo political zones. It’s a five-day programme, so we are expecting that when they finish they will turn in their application. We are expecting that we will be able to process about 10,000 in one year.
We are looking at 2,500 per quarter and we believe that 150,000 direct and indirect jobs will be created. In the second year, we will increase that amount from 10,000 to 20,000. This enables the number of potential jobs in excess of 300,000 jobs will be created. So these are some of the initiatives we are embarking now that are aimed at addressing youth unemployment in the country.
We have developed about forty clusters in line with our commodity-based industrialisation strategy. We are saying that we should promote projects that will add value to our natural resources endowment. We are highly endowed in agriculture, same thing for solid minerals and of course, we know of petroleum. The multiplier effect per unit of investment and developmental impact in the agriculture sector is higher than in other sectors.
Therefore, we are paying attention to the agricultural sector, that was why we entered into an MoU with NIRSAL, under which we will guarantee up to 75 per cent exposure in the agricultural value chain, where necessary primary production, value addition, processing, packaging and those who render services to them along the value chain including transporters (those who move raw materials from the farm to the processors and the finished products) from the producers to distributors along the distribution chain; those that will impact the process positively, we will support them as well and jobs will be created along the line.
In terms of solid minerals, 44 of them have been identified in commercial quantities. We are working with a lot of professional bodies and industry groups and we are acquiring competence and skills in this area. At the moment, four of our staff are in IDC in South Africa. They are acquiring trainings in IDC. IDC have been able to support many mining projects and it is the oldest DFI in the world. It was established in1940, it predates the Bretton Woods institutions. Therefore that is an area we hope to play an actively as well. There are a lot of potentials. If you consider all our natural resources endowment, if we are to add value to them, we will not have enough manpower to do so.
That is why I’m saying unemployment in Nigeria is artificial, it is only those who insist on white collar jobs that are unemployed but anybody who wants to engage in production. And if they need enablement, that is why we (BoI, SMEDAN and others) are here. The BoI appointed 200 SME consultants across the country to partner and we are engaging enterprise development centres of the tertiary institutions in the country because almost all the universities and polytechnics have entrepreneurship development centres.
We are supporting and working with them, so that we can identify potentials entrepreneurs in the 36 states of the federation because there was a study conducted by the Raw Material Development Council (RMDC) the body was headed by Prof. Bamiro, the former Vice-chancellor of the University of Ibadan. They were able to document the raw materials available in all the 774 local government across the country. Most people are not aware so it is part of our efforts to enlighten Nigerians on the areas they have comparative advantages. There are some agricultural produce that just grow they don’t need fertilisers and every local government can support viable SMEs. We know that there are a challenge which is why we are discussing with UNIDO and other development partners.
We are talking about getting light and equipment that can be powered by solar power to address the infrastructure challenges we have for now, while steps are been taken in the medium and long-term to increase the available of public power supply in the country. That is why we are deepening our collaboration with UNDP and even AfDB, because Light up Africa is one of High 5s of AfDB and they have assured us a lot of support in this area. We are encouraging the formation of industrial hub, because when industries are localised in location where business and structure are provided.
It reduces start-up cost, operating experiences, promote synergy, sharing of knowledge and skills, the output of work can be input for the others. When they are localised, it makes credit administration easier. Financial institutions can relate to many of them at the same time. Even the service providers can also relate to them in helping them to build their capacities rather than when they are scattered in different in locations. It is more expensive and a logistics nightmare covering so many MSMEs in many locations and there are a lot of them.
Therefore we are encouraging the establishment of industrial parks especially by state government and also asking our development partners to help in this regard. Having industrial parks and special economic zones where the basic infrastructure will be provided is the way to go for now. That will make them more efficient and more competitive.
For 15years of the BoI existence, what have been the challenges and looking forward, the prospects?
I’m an incurable optimistic when it comes to Nigeria progress. There are not many countries in the world more endowed than Nigeria. From our geographical locations, we are not landlocked, we take things for granted because we have access to the sea, which means that you can import and export. Secondly, we are highly endowed in terms of natural resources. We don’t have natural disasters we can farm all year round.
The huge population is an advantage. Huge population can be productive and an access. If it is productive, it is an asset, if it is unproductive, it becomes a liability. But the idea is to get more Nigerians productive, so that when they are productive, the potentials of a huge market will be more realisable because huge population translates to huge market. They have to be fed and given their basic needs. All these areas, where we have gaps they are opportunities for potential investors.
The housing deficit is put at 17 million, there are also transportation challenges and these are opportunities for investors who are going to take long term positions in Nigeria. So there are a lot of gaps to be filled. Anybody who get his or her business model right in Nigeria will make money.
According to UNCTAD, we are rated number four in the world in terms of return on investment with about 35 per cent. How many countries in the world that you have 10 per cent return on investment? That was why in the first half of this decade, we attracted a lot of FDIs. Nigeria ranked No.1 in Africa in terms of attracting FDIs and more foreign investors are willing to come to Nigeria because the market is quite vibrant. So these are opportunities for BOI to finance. These are deal flows and we are trying to ring fence SMEs around large corporate, to build SMEs in their supply chains. When they are linked up it helps to overcome the challenges we have in our environment as. For instance, we could organise domiciliation of payment through their large corporates that they are hooked with.
They could provide some pre-guarantees for those SMEs. For instance those who produce cassava flour can supply cassava to flour mill industries. While those who produce cotton can supply the textile industry. The value chain is so extensive, vertical and horizontal. From here you can export to the US, duty free under AGOA and the export time and the distance is shorter between Lagos and the US compared to the countries like Kenya, who are in East Africa.
So, we are at an advantage. That was why Andrew Young, the US former ambassador to the United Nations, said at one time that Nigeria is the only country in the world, which can replicate the American miracle.