Stakeholders across various sectors of the economy have expressed varied opinions on the proposal by the Senate to scrap the Bank of Industry, BoI, in favour of the establishment of a Development Bank of Nigeria, DBN.
Although a policy initiated by the former President Goodluck Jonathan’s administration, the DBN is conceived as a development, finance institution, DFI, expected to bridge the gap between the BoI and other commercial banks.
This will not only expand government’s financial inclusion policy, but also to meet the funding needs of the Small and Medium Enterprises, SMEs, which the legislators feel is not properly captured under the BoI’s briefs.
The Senate had posited that, “There are areas of the economy involving SMEs that are not addressed by BoI. BoI is limited in activities, you don’t get involved in mining activities, and some other sectors are not in your portfolio. We are looking to put a framework together that will carry all these sectors of the economy needed to carry us out of this mode along.”
The proposed DBN is supposed to be an amalgam of all the existing DFIs, with an initial take off capital base of $323million.
However, many, who have spoken on the subject, preferred that the Federal Government pumped more money in the Bank to make it financially stronger and able to deliver on its mandate, in addition to strengthening its governance issues.
An analyst, Biodun Adedipe, argued that “what BOI needs to be strengthened in terms of funding and also, we look at the governance structure.”
Similarly, General Secretary, National Union of Textile Garment Workers of Nigeria (NUTGTWN), Issa Aremu, insisted that the BoI should stay, but “be strengthened for further activities that will add value for small scale enterprises and even medium scale enterprises with a view to creating jobs.”
Although the NDB Bill has passed a second reading last week, but those who spoke in favour of retaining the BoI, cautioned against the legislators indulging in a hasting decision that could backfire, especially as the NDB is largely seen as a duplication of existing development finance institution.”
Representative of the Manufacturers Association of Nigeria (MAN), Ajayi Kadiri, noted that the BoI is already a product of merger of the defunct Nigeria Industrial Development Bank, NIDB; National Economic Reconstruction Fund, NERFUND, and Nigeria Bank for commercial and Industry, NBCI, in 2001 and should not be merged again.
He said: “For practical purposes, this merger has been consummated and the BOI has been functioning and delivering on its mandate within the available funding capacity and we know that they have had funding challenges and MAN has been in the forefront of advocating for the recapitalisation of the bank.”
Contributing, the Vice President, Trade Union Congress, TUC, Olusoji Salako, advised that BoI be restructured if it is experiencing legal or structural issues.
However, The Chief Executive of the Nigeria Economic Summit Group, NESG, Laoye Jaiyeola, who refused to support the trade unions in canvassing the retention of the BoI, however, urged government to be cautious in setting up the NDB.
According to him, “The Development Bank we are looking to set up should be able to bring bigger money than even what the Central Bank has. Whatever it takes to make it work, let us make it work.”
He also chided against undue influence of governments, noting that one of the reasons DFIs have not done well is poor governance.
The Acting Managing Director, BoI, Waheed Olagunju, while speaking at the public hearing in the Senate last week on the impact of undue government interference, had noted that this is not the case in other climes like South Africa.
He said: “The CEO of IDC of South Africa goes to parliament to brief them on the operations of IDC and questions are asked and answered, and this only happens once in a quarter. But here, you are having multiple repetitions from different committees from the House of Representatives and the Senate, and if we are to answer to all these calls, it would affect the type of service that we are going to render to our customers.
Rather than subjecting the bank to another round of mergers, he maintained that the BoI can exist independent of the new NDB, as the Nigerian system supported multiple DFIs.
Besides, he noted, such a merger would upset the bank’s balance sheet, as was the case in 2001, when it was merged with NBCI and NERFUND, and it wasn’t until 2004 before it could break even again.
“In 2004-5, we turned blue with a profit of N105million, but by 2006, we made a profit of N1.3billion. By 2007, it went up to N1.8billion and it has been in billions since then. Last year, the operating profit, excluding exceptional item, was about N12billion. As of this year, our half-year financials shows that we are more profitable in 2016 than we were in 2015.”
Against this backdrop, the Association of National Accountants of Nigeria, ANAN, Chartered Institute of Bankers of Nigeria, CIBN, Nigerian Association of Small & Medium Enterprises, NASME, and a host of others canvassed that BoI should be left out of the new NDB.
As First Vice President, CIBN, Uche Olowu, put it, “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. If you do consolidate them, the liabilities will further depress the financials.”