Mr. Rasheed Olaoluwa is the new Managing Director/CEO of the Bank of Industry, BOI. In this interview, the commercial banker turned development banker, shares his vision of how he and his management team will transform the BOI into a world class development financial institution over the next four years.
You are welcome onboard. What have you been doing since you took over the leadership of the BOI?
Since my assumption of duties on May 19, 2014 I have engaged with several other stakeholders in our development finance journey. These include organisations such as Manufactures Association of Nigeria, MAN, the United Nations Industrial Development Organisation, UNIDO; African Development Bank and the Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture, NACCIMA.
I have also engaged with relevant agencies of government such as the Nigerian Export Promotion Council, NEPC, the Industrial Training Fund, ITF; The National Automotive Council, Nigeria Export Import Bank, NEXIM, the Infrastructure Bank, the Presidential Advisory Committee on the implementation of the National Industrial Revolution Plan, NIRP, and the Small and Medium Enterprises Development Agency of Nigeria, SMEDAN.
How have BoI keyed into government’s Transformation Agenda vis –a-vis Agriculture and the recently launched NIRP, NEDEP?
The transformation Agenda of President Goodluck Jonathan, part of which deals with employment generation and wealth creation is the major focal point of our efforts at BOI.
As you are aware, our Minister at the Ministry of Industry, Trade and Investment, Dr. Olusegun Aganga, is leading the efforts to industrialise Nigeria and to create millions of job in the process. At BoI, we are passionate about these objectives. My meeting with the Minister of Agriculture and Rural Development, Dr. Akinwunmi Adesina, was very fruitful.
We discussed issues relating to various Agricultural Development Funds managed by the BoI as part of his ministry’s efforts to transform Nigeria’s Agricultural sector. We are in agreement that there is room for wider collaboration between his ministry and BoI, especially in the area of financing the Agricultural value chain.
Very recently, the Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, and me, saw it necessary to address the development agenda and the need for a robust intervention from the CBN.
What is the state of the managed funds for industrialising Nigeria?
In the recent past, BoI was very instrumental in the management of the following funds: *CBN’s Intervention Funds (N235 billion SME Restructuring and Refinance Fund, and the N300 billion Power/Aviation Intervention Fund).
*Various Funds by the Federal Ministry of Agriculture for the development of the Cassava Bread, Rice, Food security, Sugar and Automotive
*SME Matching Funds by eighteen state governments. These funds have enabled BOI to grant total loans of N672 billion to date, both directly and through interventions, creating close to a million jobs in the process. Although the BoI has become more active in recent past, there is still a long way to go when compared to similar development finance institutions in the developing/ emerging world.
The recent GDP rebasing exercise as a result of which Nigeria has now become the biggest economy in Africa further underscores the need for BOI to continue to take the lead especially when compared to similar institutions in South Africa, Egypt, Brazil, Malaysia and Indonesia.
Transformation of BOI has become a national strategic imperative especially in view of the National Industrial Revolution Plan, NIRP, and the National Enterprise Development Programme, NEDEP launched recently by Mr. President. In order for us to make an impactful contribution to the implementation of the NIRP, we estimate that BOI will require funding to the tune of US$5 billion over the next two years.
Although we are confident that our key shareholders-the ministry of Finance Incorporated, MOFI and the CBN will continue to support us with some equity injection, we take cognizance of the fact that there is a lot of demand on government’s resources. Consequently, we are exploring alternative modes of funding such as continuation of sector-specific intervention funds by the CBN, Ministries of Agriculture , Solid Minerals, etc; managed funds from various state governments and High Network Individuals (HNIs/ Foundations; long-term loans at very low interest rates from multilateral/ international development institutions, domestic and international bond issuance , and other sustainable annuity sources that may become statutorily imperative in the medium-long term.
Global Best Practices
In order for us to execute the forgoing funding programme successfully, we must adopt global best practices in the management of BOI. The management of BOI will be highly engaged in the pursuit of the following goals and objectives over the next four years: good corporate governance, sharp focus on core mandate; sound risk management and compliance; venture capital investments, partnerships and collaborations; customer service and responsiveness and linkage between innovation and industry.
Financing our country’s development agenda is a huge task. We do not claim to have all the ideas. We believe there are many Nigerians out there with creative ideas at heart that BOI can explore. To this end we have created a contact email address: ideas@boinigeria.com. We welcome submissions, not more than 1-2 pages. We undertake to consider all the ideas and act on those considered feasible.
You have been in commercial banking and now in development banking, what specifically are you bring on board, and secondly, BOI is a development bank and government owned, do you have the thick skin to withstand pressure and say No from the men above?
Thank you very much gentlemen; the questions are very interesting. I have in the course of the last 26 years interacted with several sectors both in Nigeria and outside Nigeria. I have interacted with development finance institutions both locally and internationally.
What is critical at this level is the understanding of the issues and the issues are very clear to me. There is always a development agenda that support the provision of long-term low interest rates to industries and to small scale enterprises with a view to helping to industrialise the economy and also to help in creating jobs. The issues are the same everywhere and I believe all the experiences I have gathered over the last 26 years will help me in good stead at BOI. You mentioned something specifically about being able to say No to pressure from government officials. I don’t think you meant to say No, just for the sake of saying No. but to say ‘No’, when there is a cause to say No and all I can say to you is that I have spent roughly about two months and I have not seen anything that is worth saying No, to, but if it get to that stage, if you check my background, you will realise I am a man that is able to stand up to superiors when they are wrong. So far so good, I haven’t had cause to do that.
You are seeking to raise $5 billion for projects financing. Which sectors are you looking at?
The US$5 billion I mentioned is an estimate and it is sector-focused. There is a NIRP which has identified four key sectors in which Nigeria has a comparative advantage. The first is the agro-allied processing sector, whereby we are looking at not just exporting crops from the farms but adding valuing locally, processing those crops before we consume them locally or export them. The second sector is oil and gas/ energy. I think we all agree we drive a lot of revenue from there but the value -adding to the oil sector in Nigeria is very low. Under the NIRP, we want to ensure that there is a lot of value –added by encouraging petrol chemical and fertiliser industry so that the value –addition ; also in terms of energy, gas infrastructure will be encouraged. When I met with the Governor of the CBN this is one of the areas we discussed. There is going to be a lot of emphasis on gas infrastructure. One of the reasons for gas shortages is because of lack of infrastructure to transfer the gas from the plant to where they are required in power plants. The third sector is Solid minerals and metals. By metals I mean steel, aluminum, etc. if we are talking about industrialising Nigeria, the metal sector is very critical. The recdently rebased GDP figures put our manufacturing sector ‘s contribution to the GDP at 6.8 percent.if you look at comparable countries like Brazil, South Africa and Indonesia, Malaysia they are in excess of 15 percent and the only way to do that is to add some processing to the solid minerals that we are mining in the metal sector. Lastly, we are looking at light manufacturing, in terms of Fast Moving Consumer Goods, FCMG. So these are the key sectors we have identified. In addition to the key sectors, the SMEs were also identified under the NEDEP and studies have shown that SMEs contributes more than 90 percent employment generation, and we must have a way to really crack that sector. There have been a lot of talks in the past by various stakeholders and what we need to do is to ensure we have concrete steps towards the sector.
On the issue of car loans under the automotive policy, what we are trying to do as a development bank is not to compete with commercial banks. BOI finances long-term industrial projects and if you are going to take car loans commercial banks are doing very well as far as car loans are concerned in Nigeria today. What is the nature of our intervention in the automotive industry? There are companies that are looking at local assembly; there are companies that are looking at manufacturing the vehicle components locally rather than importing them for instance, car seats, batteries, etc. These are people we are in discussion with; we can finance manufacturing of some of the car components. These are some of the interventions that we are looking at.
What did you find in BOI, for instance, Corporate governance issue?
I haven’t come to BOI to investigate BOI but I believe there are institutions that are empowered to do that and they are doing that. We are subject to supervision by the CBN , DFI departments. From time to time, they come and examine us and to issue their report. So we believe there is a process for ensuring that if there is anything untoward, they will be brought to the notice of the appropriate authority to deal with them. On corporate governance, the truth is that there is always room for improvement. It is not the best currently and that is what we are trying to improve upon and I don’t think it is best in many places and that is what we are trying to do, to keep improving; we are striving for best practices. It is a journey and we would keep at it.
Partnership with UNIDO ?
Essentially what UNIDO do is to work with governments to fashion out the right industrial policies to increase the level of industrilaisation in those countries. They have engaged with us on a number of sectors; what they do in their intervention is sector-specific for instance, in the textile sector we have done a study and realise that these are the issues and if you do this way you can do better and if you follow through, hopefully you will get results. Recently, they partner with Nigeria on Industrialisation and their inputs went into the NIRP and in fact, they have shortlisted two countries in Africa for investment promotions and they have chosen Nigeria and Ethiopia. So this is just to highlight how close the partnership is and they are looking at agricultural sector, industries and how to link agric to industries; how to link innovations to industries, and so on. As part of the effort to address the problems of industries, they also work on a concept which they call the mini –hydro power in some states of the federation even if it is 8,10 mw of electricity.
What is the level of your loan portfolio?
I admit, we don’t have the best loan process. But we are taking steps internally to overhaul our credit delivery process. We had a meeting recently to look at how we can accelerate the process and one of the things we alre looking at is , for the SMEs, our current practice of doing a whole gamut of credit analyses and a whole package, instead, can w e have a product programme, that is , this is the kind of product you want to do , a product that people can benefit from, what are the criteria, and you so that if company x satisfies the ten items on the checklist, he should get the loan automatically. We are looking beyond financial analyses and all those things. We believe this would result in a very efficient credit appraisal process. There is a development bank in Brazil that is very big, BNDs has a loan performing ration today at 2.2 percent. They are actually better than some of our private sector banks in Nigeria. That is the benchmark we are giving ourselves; yes, we are going to pursue social impacts, at the same time, we will be rigorous enough to ensure the loan portfolio remains of good quality. It is an ongoing conversation we are having within the bank.
Textile sector intervention/ business model you want to adopt to drive the bank?
Textile industry: the truth is that we have actually intervened in the sector. We have a Cotton, Textile and Garments, CTG fund on which today we have disbursed in excess of N51 billion to most of the textile companies but there are few issues here and there that we are trying to manage . We are intervening, we have intervened and we are hoping that the interventions can actually lead to the turn- around of the most of the players.
You mentioned the One of the initiatives we are looking at is that we want to deal with what we call Business Support Firms, BSF, and the whole idea is a large percentage of loan applications that come to BOI are substandard .That is the fact. There is a lot of back and front, issues are raised you have to go back, then ,come and go back; what we think is a good way out is, we will engage with what we call BSF, they will receive your applications and helps to review it ; they are professionals who understand what a bankable proposal should look like and they will be available in every states. They would sit down with the SMEs and help them to package their proposals. That is one element of our business model going forwards.
Manufacturers complain they are unable to access working capital loan from the bank. How are you going to address this?
Like I said earlier, we try as much as possible not to be in competition with the commercial banks but to collaborate with them. We are actually looking at a model whereby BOI partners with SMEs friendly banks so that as we are giving long-term project loans, commercial banks will also be giving short-term working capital facilities and that way we can work together to succeed in this sector.
