BoI: Leveraging stronger balance sheet for industrial development

Bank of Industry, Headquaters, Abuja

Bank of Industry (BoI), Nigeria’s maiden development financial institution (DFI), was established in 1959 with the singular mission of transforming Nigeria’s industrial and private sectors by providing financial and business support services to enterprises of any size.

For many reasons, there were high expectations about the coming of the institution. First, the country was transiting from a colonial outpost of the British government. It, thus, needed to start building its independent financial infrastructure to drive its economic growth and independence as it were.

Also, Nigeria was at the cusp of the industrial revolution with a huge hole in financial services. Back then, the few available financial institutions were controlled by foreign investors who were not very keen onsupporting indigenous enterprises.

These made the coming more like a child of necessity. But for some years, it was like a stillborn, struggling to break through certain endemic constraints that held the growth of the local financial market. But in recent years, the bank has found its feet and coasting home not only as an enabler but as a formidable institution judging by its performance.

Indeed, it has continued to make socio-economic impact – creating jobs, supporting industrial growth and reviving businesses with single-digit interest funding – backed by its sound financial management system. This is seen in its consistent trend of appreciable growth in major financial indices year-on-year.

Last year, the bank surpassed its earlier superlative financial performance as it hit a total asset of N2.38 trillion in 2022 as against the N2 trillion mark set in 2021.

The growth indicates a 39.2 per cent growth when compared with the preceding year. This was achieved despite the macroeconomic headwinds that impacted the performances of many business organisations in the past two years.

This significant leap came on the wings of a successful conclusion of three landmark capital-raising transactions in the year. It raised €1.85 billion (about $2 billion) from the international financial markets – a seeming vote of confidence in its financial stability.

The key transactions include, the bank’s $750 million Eurobond, €1 billion guaranteed senior loan facility and €100 million line of credit from the French Development Agency (AFD).

Through the senior loan facility transaction, the bank raised its liquidity and diversified its funding sources by attracting new lenders, despite the restrictive monetary system that has been an albatross for many businesses.

The credit facility afforded the bank expansion of its financing interventions in environmentally friendly and green projects, while a grant of €2.5 million was also included in the deal to support capacity building for both its staff and customers.

Last year also, the bank’s gross earnings grew by 15.4 per cent to N212.96 from N184.55 billion in 2021, surpassing the performances of many of its peers.
At the same time, interest income jumped by 21.1 per cent to N212.96 billion, from N175.83 billion recorded in 2021. Income from both customer loans and investments have become a major driver of the bank’s recent growth.

The topline performance impacted its improved bottom line with its profit before tax climbing by 15.6 per cent to N71.99 billion compared with N62.28 billion it posted in 2021.

The impressive bottom line was a decent consolidation of the 2021 performance. Then, the company’s profit before tax was 75 per cent higher than N35.54 billion it recorded in the COVID-19 year.

The remarkable growth in interest income and other income lines and the reduction in impairment charges are key metrics working for the bank in its financial ascendancy.

Its total equity is also growing at a very rapid speed. Last year, it rose by 11.7 per cent from N384.85 billion in 2021 to N429.83 billion just as loans and advances inched up by 3.2 per cent to N805.46 billion.

BOI has also played an appreciable role in improving the business environment by channeling funds to investments that have improved economic well-being. The bank, in its developmental impact, disbursed N210.7 billion to 418,436 beneficiaries in 2022 through both its direct and indirect lending windows as well as through funds that it manages on behalf of its strategic partners.

The bank’s intervention programmes in the year, which traversed several sectors and segments of the economy, also contributed significantly to economic recovery and job creation.

It also empowered businesses, especially micro, small and medium enterprises (MSMEs) giving some lifeline to continue to create jobs and contribute to economic growth.

Speaking on the bank’s recent performance, the Chief Executive Officer and Managing Director, Olukayode Pitan, said BoI has been playing an appreciable role in improving the country’s business environment by channeling funds to investments that have improved the state of infrastructural development.

He said one of the enduring challenges of sustainable economic development in Sub-Saharan Africa is the state of its infrastructural development where the bank has made critical interventions in the past few years. Pitan pointed out that Nigeria’s business environment is rapidly evolving. Yet, several issues are not being addressed or are at a slow pace.

He also spoke about the Special Economic Zones (SEZs), which he said, provide space where the business environment is at its optimal level. He said the bank’s focus on SEZs is hinged on its mandate to support Nigerian businesses, especially as these zones can help provide the necessary conditions that businesses require to thrive or that investors may seek.

According to Pitan, these could include adequate infrastructure, an educated and skilled labour force, local input suppliers, tax incentives among others.

“By encouraging manufacturers, suppliers, service providers and firms to co-locate, share common facilities and build well-developed industrial clusters, these and other industries can reduce overhead costs through economies of scale and raise innovation, productivity and global competitiveness.

“The bank’s focus on SEZs is hinged on its mandate to support Nigerian businesses. This makes it easy for us to provide a tailored bundle of financial and non-financial services, including capacity building to MSMEs,” Pitan stated.

The President of the Nigerian Employers’ Consultative Association (NECA), Taiwo Adeniyi, commended the impressive financial performance of the bank, saying it stems from superior managerial supervision. He said the BOI is one of the few federal government agencies that know how to use its mandate to promote enterprises and job creation.

Fitch Ratings, in 2022, affirmed the BOI’s long-term issuer default rating (IDR) at ‘B’ with a stable outlook and national long-term rating at ‘AAA (nga).’

“BOI’s long-term IDR is driven by potential support from the Nigerian authorities, as reflected in BoI’s Government Support Rating (GSR) of ‘b’. It is equalised with Nigeria’s sovereign rating and the Stable Outlook on BOI’s Long-Term IDR mirrors that on the sovereign,” Fitch stated.

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