Pitan: Nigeria Must Invest Adequately in Youth Education

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The Managing Director, Bank of Industry, Mr. Olukayode Pitan, in this interview on Arise Television, a THISDAY sister broadcast station, stressed the need for the federal government to ensure that it focuses on the development of policies that would encourage the education of its huge youth population. Hamid Ayodeji presents the excerpts:

When President Muhammadu Buhari addressed the audience at the Nigerian Economic Summit, he tried to make a distinction between prosperity and wealth. Can you shed more light on this because he said wealth in Nigeria is concentrated in five states and the FCT?

This is one of the ironies of life. It is like you have a lot of wealth in a few hands. So, when you are talking of Nigeria, for instance, you look at our foreign reserves, the gross domestic product (GDP), the population of the country, so you might have a lot of money, but you have to share it with a lot of people and then the per capita income is not large. When you are talking about wealth in Nigeria, there are people that are very wealthy, but what of the close to 90 million poor people who are considered poor. Yes, you can have a lot of money, but when you divide that money down to the people that have to share it, it may not be as much. As a country, what we should try to do is to spread prosperity to everybody so the president was right.

How much is the presidency doing towards spreading prosperity and what have been the challenges you have faced since you took over as Managing Director of Bank of Industry?

The BoI is the oldest development finance institution in the country. This year, the Bank would be 60 years old. The Bank has done very well for a government-owned institution. Our two major shareholders are the Central Bank of Nigeria (CBN)and Ministry of Finance. The Bank is profitable and we have been able to reach to different part of the country. Looking at some of the programmes we do, we start from young graduates when they are in the NYSC camp. We have facilities for them such as the GEEP programme where they can borrow up to N2 million if they have good business ideas and the security for that facility is the certificate from their university. Also we have developmental programmes for entrepreneurs who are young, ranging from ages 18 to 35 years. They can borrow up to N5 million and also the security for that is two guarantors, the level of assistant manager in a bank or its equivalent. We have facilities for SMEs as well as large companies and over the years we have seen some progress from small companies to large companies from all over the country which lead us to put them in our hall of fame. If you go to Kano, you would find Ruby Sacs which was a small company, but now they have thousands of employees and also Innoson Motors in Nnewi that it has grown with about 5,000 employees currently. 

How correct is the notion that you have to know someone in the BoI before you can get a loan?

I would like you to speak to some of our customers. The Bank is not the way some people portray it to be. People say you have to know someone before you can get money from BoI. Many times at events people approach me to thank me for loans they have received from the BoI because we have a process in place. You do not have to know anybody in the new BoI to get money as things are done transparently, some of the processes are online, and if they are documents we require we would let you know. We run a programme for the Nigerian Content Development Board of $2 million for oil and gas. It is end-to-end when you apply, we would see it at BoI as well as they would also see it and we have agreement in terms of timelines of when things would be done. But one thing people need to be aware of is that even though BoI is a government-owned bank, most of the funds we deploy are private funds. Being more specific, we do not get allocation from the budget. Last year, there was a provision of about N10 billion for the BoI to help de-risk lending to SMEs and last year we disbursed about N270 billion. 

So, how were you able to source the N270 that you disbursed?

We have to raise money at the BoI and I am glad to disclose that last year, we were very successful. For the first time, we were able to raise $750 million in the international market. For a government-owned bank to be able to achieve that, it was very good feat. We had the support of CBN and our ministry to do that. But the point is if the money we are getting comes from private banks, there are terms and conditions attached to the funds. So, when I hear people saying BoI should give us facilities and not ask for security or they should water down what they asking for, they are not being realistic. There are some conditions that we have had to meet to make reports. If that is not done, the sources of funding of BoI would be drained. As at now, we still do not have enough.   

In real terms, how many businesses can the BoI support with single digit-loans and at the same time how many financial institutions like BoI are we going to need to cover the amount of SMEs in Nigeria right now?

That question is a bit technical as it depends on what they are asking for and how much money we have. If I were to rephrase the question to what type of funding gap do, we have in the SMEs space? From my own calculation done by KPMG, their numbers were about N900 billion funding gap annually in the country. We have the BoI, we have the Development Bank of Nigeria and a few other ones. But, even both institutions and a few others in this business with us, are not enough to scratch the surface of what is needed. Yes, we can do a lot, in terms of numbers and that is determined by how much they are getting. If we are giving out thousands to people, then we are talking of reaching millions. From the statistics we have, there are roughly about 41 million MSMEs in Nigeria and they contribute to about 70 per cent of employment and about half of the GDP, which is a high number. Thus, we need more banks like that. People talk about single-digit borrowing. However, there are so many factors that make it difficult. For instance, the inflation rate in Nigeria is over 10 per cent. When you are getting money at less than inflation rate the money is subsidised. So, the question is, where do you get subsidised funds? Everybody knows it makes sense to take money at 10 per cent. So, we have more demand on BoI than it is able to provide because it makes sense to borrow from BoI.

The focus at this year’s National Economic Summit was about year 2050 and how Nigeria can prepare for its fourth industrial evolution. By that year, Nigeria’s population is expected to be about 400 million people. Also, there was a lot of emphasis on having a competitive private sector. Why is that important?

There has been a lot of debate about the year 2040, 2050, and Nigeria going from 200 million in population size to about 400 million. The question is, if it is a blessing or a curse, which depends on how we prepare for it, and the time to start doing something about it is now. Many of those estimated 400 million people are the youths. So, we have to be able to identify the kind of youths we are generating now and what kind of education do they have? That is because when you look at it, a lot of other countries that are more advanced and developed actually need more people due to reduction of reproduction. Then, you ask what kind of people do they need? Hardly, would you see a family in Nigeria whereby there is not one member that has travelled or relocated to countries overseas. This foreign developed countries, due to the fact that they have a system for selecting the Nigerians they allow into their country, they select our best. They are taking the ones amongst you that have money to invest. So, we are losing our best and what we need to do is to invest in the youth of today so that they can be competitive tomorrow, and we can export them which becomes a good thing for the country. But sadly, we do not invest in these youth. The 400 million people in 2050 you are talking about would be a scary proposition because we may have a lot of uneducated people and high unemployment rate. So, you can then imagine what would happen. 

The future is a digital world which means we have to invest in things such as robotics Artificial Intelligence, which is what the future is talking about –  the fourth industrial evolution. Nigeria has been blessed. Take a look at the telecommunications industry, we were able to leapfrog. So, other sectors can do same. But, we must be able to adequately invest in our educational system, rigorously analyse the type of courses our students are being thought in schools. Taking a look at entrepreneurship, it is being taught in universities in theory rather than more practical and oriented ways, which would prepare the students for the workforce environment while they are still students and also to give them an added value when they eventually graduate. Surely, the private sector can help, but in trying to attract foreign capital which goes to countries, it is welcome. Rule of law is very important. That is, having a level playing field for the players in the industry. Having the infrastructure to bring the sustainable development needed is also very important because nowadays when the foreign or local companies want to come into invest they have become government of themselves as they have to generate their own water, power, transport system, logistics, housing for staff and different kind of things of which those costs makes us less competitive. The Africa Free Trade Continental Area Agreement, if we are able to harness some of these things that we are looking at now and reduce the cost of doing business, then Nigeria can be a country that exports its natural resources. So, there is still work to be done because now the burden is on the private sector with multiple taxation. Even sometimes when we want to give out loans to some people and we ask for security of that property, we would have to be writing to the state governors to get them to sign Certificate of Occupancy. So, when you hear there is a delay, it is not necessarily the BoI, the documents that are required are delayed. So, private sector needs to work with government. I think what private sector can do is that they need to be able to second more of their staff because sometimes we have a capacity problem in government. In developed countries, most of the best personnel work in government. We should let Nigeria get to that level of having the best working in government then the laws would be different. When we go out of the country to negotiate we have to send our brightest in order to experience positive change. So, there is still a lot to be done between government and private sector, but I think the private sector needs to step up to fill in for the government if they are not doing so.

What are the collateral requirements of the BOI and how do you manage the risk of non-performing loans, what is the ratio of bad debts at the Bank?

We have loans in all categories starting from the small ones. Like I mentioned, we give millions to graduates, we also have facilities that we give out working in partnership with state government which we call matching funds. How that works is we go to Kano State or Kwara State for instance, telling the state government that if they give us N1 billion, we would match it with another N1 billion and we would lend that money out within the state. The idea is to also let the state government be a part of what we are doing. The truth is that most of those matching loans have not worked out very well because the average Nigerian thinks facility from BoI is part of their own national cake because the Bank is owned by the government. So the payment history on those type of facility, sometimes we have lost all the money, sometimes 70 percent which is why over the years we have evolved and said to ourselves we must ensure that we do not concentrate our risks in the area so that we don’t lose all the money. When you look at the portfolio of the Bank in terms of how much money we are giving to that sector, that is very risky. We make it about 20 per cent, most of our loans are to the SMEs and large scale enterprises; where 80 per cent are concentrated and those loans are well secured. Usually, we ask the commercial banks to give a bank guarantee before we disburse the money and we tell them the major value we provide is that we are able to give you loans at single digit. Secondly, we are able to do so with a longer tenure. Most of the commercial banks, their deposit is between 60 and 90 days while we can extend facilities to about six to eight years. Looking at it, you are now asking in total, how bad are the books? Concerning our non- performing loan ratio, we have a very good book. On the average, NPLs are less than five per cent and we have been subjected to financial ratings by Agusto & Co which were all ‘A’ plus ratings, In fact, the loan that we took last year from Afreximbank which was $750 million, one of the conditions of the loan was that our NPL would not exceed five per cent. 

Are there schemes that have failed over the years?

Over the years, the BoI has learnt from its predecessors. For instance, banks like People’s Bank, NIDB, all of these institutions packed up. So, we have learnt lessons from why they failed and we are working to ensure that we do not repeat those mistakes. The Bank of Industry today is profitable and it can compete with the private banks. Our balance sheet is about N1 trillion; we have NPLs of about five per cent.

Nollyfund has been one of the major areas of focus for the BoI in the last few years and we learnt that you have set aside up to $8 billion to support the creative industry in Nigeria. But on this programme, we have asked several creatives from Nollywood about the support from BOI for their projects and they do not seem to have any clue about the money or either they doubt the legitimacy. So what is the level of engagement between the BoI and Nollywood, and if they are success stories can you share some of them?

The biggest friend of Nollywood in Nigeria today when it comes to financing is the BoI. Many years ago, we realised we had a lot of creative Nigerians who had good ideas, had written scripts and were looking for funding on how they could produce these scripts for the world to see and enjoy. However, there were challenges, so we decided to engage some experts like Joke Silva and the others who were working for BOI on part time bases. So, when these scripts come, they were the ones who would select which of the scripts have prospect and we would now fund the production of those scripts. Most of the films you watch are funded by the BoI; our portfolio in the creative industry is over N15 billion. The largest risk area in that sector is content because they do not have any other security apart from the script they have done. I am happy now that other commercial banks have come in to fund the likes of Mo Abudu and others who are success stories now. Most of the cinemas you go to watch films are financed by us. So, people who are in the industry know that the BoI is the biggest supporter of the creative industry today. We believe that as a country we need to do more because that sector has the potential to give gainful employment to a lot of Nigerians. Any one that wants to know what we do and how we do it should visit our website or the Bank.

The BoI won the best development bank award, financial inclusion award and that was given for your work with the Government Enterprise Empowerment Programe (GEEP) which includes trader and market money. You must have heard the criticisms of these schemes whether they are political or practical. Some people say they do not believe it, can you try and sell it to those that say they do not buy it, and has it managed to reach its target of meeting one million beneficiaries per year?

Under the government programmes that are being managed by the BoI, the GEEP programmes – we have the market money, farmer money and trader money – which is most likely the most popular because that is N10,000 that we give out to people in every state. People could say that is not a lot of money. But like you said, before, if you look at the structure of Nigeria, N10,000 for some people is a lot of money. As at date, about two million people have benefited from these programmes we were winning awards because even the speed of roll out was activated with  fintech because we wanted to be able to reach two million people in a year. Lives are being transformed. If you go to the site of some of these programmes, you will hear testimonies of some people who have been transformed.

If you look at the work force of the BoI currently, it seems to be dominated, including the executive management, by persons from the South-west,is that a business decision or you just found the situation like that?

When you look at the BoI, like any of the federal government institutions, there are policies in place on how staff come in. So, before you can say the Bank is dominated by a particular sector of the economy, we need to have our full staff list. Until you look at our whole staff list to know the regions the staff come from what you have just said cannot be confirmed. From where I sit, what you are saying is not correct. Not only that, the people that work there up to the General Manager level basically come through the ranks unless you are recruited to fill a particular spot, other ones are government appointed. One of the things that have kept the BoI today for 60 years, looking at the country today, the DFIs we have now, many are working. Government has gotten the issue of BoI right. All the MDs that have been at BoI were professionals.