Proposed BOI Scrapping: NLC, MAN, CIBN, Others Warn of Dire Economic Consequences for Nigeria

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By Chika Amanze-Nwachuku

The Nigeria Labour Congress (NLC), an umbrella organisation for trade unions in Nigeria, the Manufacturers Association of Nigeria (MAN), as well as the Chartered Institute of Bankers of Nigeria (CIBN) have warned against the current move by the Senate to scrap the Bank of Industry (BOI).

A bill for an Act to establish the National Development Bank of Nigeria (NDBN) to replace the BOI and other development finance institutions was sponsored by Senator Ibrahim Gobir (APC, Gombe-East).

Specifically, the bill, which has passed second reading at the Senate is seeking the merge of the BoI, the Bank for Commerce and Industry and the National Economic Reconstruction Fund, to form the NDBN.

Gobir had explained that the rights, interest, obligations and liabilities of the three development finance institutions would be assigned to and vested in the new bank (NDBN).

However, at a public hearing organised by the Senate Committee on Banking, Insurance and Other Financial Institutions on the establishment of the NDBN, the NLC kicked against the scrapping of the BOI, citing its immense contribution to Nigeria’s economic growth and stability, particularly the development of small and medium enterprises (SMEs), the main engine of economic growth and development.

A member of national executive council of the NLC, Comrade Issa Aremu, who spoke on behalf of the Congress, posited that rather than scrap the BOI, an institution with proven record of performance, the bank should be strengthened to perform better.

‘’It is important that we have a bill to strengthen these institutions rather than doing away with them. So from the point of view of labour, when we hear of dissolution of BOI, it is a bit scary and you know there are a lot of frustration in the land, Aremu said.

He said: ‘’I want to bear witness today that BOI has been thinking outside the box to help intolerance of our industries including the small scale industries. I say so because I am also from textile industry which we know is facing a lot of challenges. There was a time in Nigeria in which we used to be third largest producer of textile in Africa, today we are beaten to it by small countries like Mauritius, Kenya because they are adding value to cotton value chains creating more jobs, but I know that with the effort of BOI, we have been making effort for recovery and talking of thinking outside the box.’’

He recalled that the biggest textile mill possibly in West Africa, UNTL, which is based in Kaduna was closed down in 2007 owing to issues ranging from smuggling, lack of electricity and financing, which was a critical issue. He said there wasn’t long term funding for the industry because the commercial banks believe in short-term lending at multiple interest rate.

According to him, the BOI in conjunction with UNIDO United Nations Industrial Development Organisation worked out a long time financing for the industry.

He said: ‘’It was initially N100billion and the attraction of this fund was that it was single digit interest rate 5-6% and long-term repayment. On account of this financial intervention, UNTL came back in 2010 and with direct jobs of about 1,500 jobs, it’s still in existence today. Now many other factories also took advantage of that and when we did the validation assessment of this effort, close to about 10,000 jobs were saved, not only saved but few other jobs were also created.’’

He reasoned that for an institution like the BOI that has been tested over the time, the right thing to do is to make the law that will strengthen it further and not to scrap it.

‘’I want to recommend here that whatever the discussion will be like I think we should try and recapitalise BOI further to make it more effective to do more further interventions.

I think it is important that we strengthen it further for further performance and I think from the point of view of labour our submission here is that, let the BOI stay and let it be further strengthened for further activities that will add value for small scale enterprises and even medium scale enterprises with the view of creating jobs, which I’m very sure this government is gladly committed to.’’

Speaking in the same vein, the Vice President of the Trade Union Congress (TUC), Comrade Olusoji Salako faulted the move to repeal the bank.

He recommended: ‘’If there are issues with the BOI why don’t we do a restructuring or strengthen it, or if there are legal issues why don’t we correct them rather than dissolve them. Do not change a winning team that ye not be responsible for subsequent travails.’’

On his part, a representative of the Manufacturers Association of Nigeria, Dr. Ajayi Kadiri noted that the BOI has been functioning and delivering on its mandate within the available funding capacity. He said the bank has had funding challenges and MAN has been in the forefront of advocating for its recapitalisation.

‘’Going through the proposed bill, we can hardly see any value addition to be derived or achieved by the NDB that is not already being rendered by the BOI; neither is there any difference from what the BOI is licensed to carry out. The BOI has so far carried out these services to the satisfaction of stakeholders, including the business community.

Similarly, the First Vice President, CIBN, DR. Uche Olowu declared that the BOI should be allowed to continue to function as a separate entity.

‘’We have reviewed the act; our view lies on the facts that in a football team you don’t change a winning striker, it is our view that BOI should be allowed to function the way they are because they have been tested and done properly especially in the retail space and therefore should be allowed to function and also the fact that if you do consolidate them, the liabilities will further depress the financials and like the BOI Acting MD noted, because of the way they have performed their ratings especially the Moody’s and Fitch ratings has kind of given them that attitude to maybe raise some funds, that will also emit them in the International space.

Earlier, the acting Managing Director of BOI, Waheed Olagunju, who highlighted some of the bank’s interventions as well how the bank has been able to mobilise resources domestically, said, the Bank has continued to wax stronger such that it was appointed to manage the CTG fund of N100billion.

He said: ‘’State governments too started to partner with BOI; we have raised over N18billion under our partnership with state governments. The private sector too; Alhaji Aliko Dangote, the richest man in Africa, he does not play with his money. If BOI were not a well-managed institution, he wouldn’t have gone into partnership with BOI to establish a N10bn MSME Fund. And recently, the Ooni of Ife too, he’s a shrewd businessman.’’

He added: ‘’Based on the quality of our financials, we entered into N1bn partnership with him whereby he has made N500million available to BOI and we also matched it with N500million, which we will lend at concessional rates.’’

He also stated that the bank is jointly financing solar power projects in Nigeria and is also involved in mining activities.

The BOI was rated by Fitch (AA+ last year, which was affirmed this year); Moody’s also assigned the bank Ba3 last year and this year, on the strength of its balance sheet and quality of corporate governance. Agusto assigned also assigned the BOI A+ last and this year, upgraded it to AA+.

The Pan-Yoruba socio-political organisation, Afenifere had last week warned the Senate against going ahead with the proposed plan to repeal the BOI and other development institutions- the Bank for Commerce and Industry Act and the National Economic Reconstruction Fund Act.