Assessing BOI’s Financial Scorecard

The Bank of Industry put its best foot forward in 2022 and the result is a remarkable financial score card, writes Dike Onwuamaeze

President Muhammadu Buhari expressed his confidence on the board and management of the Bank of Industry (BOI) when he approved the reappointment of Mr. Aliyu AbdulRahman Dikko and Mr. Olukayode Pitan as the Chairman and Managing Director/CEO of the BOI respectively on March 11, 2022.

Their reappointment for another term of five years that started counting from May 27, 2022, was communicated in a letter that was signed by the Secretary to the Government of the Federation, Mr. Boss Mustapha, and dated March 11, 2022.

Expectedly, the duo did not disappoint the confidence showed on them by President Buhari. This was clearly testified to by the BOI’s 2022 financial score card, which revealed that the total assets of the BOI’s Group hit N2.38 trillion and delivers a profit before tax of N71.99 billion in 2022, despite the microeconomic headwinds experienced within the year under review.

The BOI also made a bold development impact in 2022 by disbursing N210.7 billion to 418,436 beneficiaries.

A detailed study of the score card showed that BOI delivered yet another outstanding financial and developmental performance result in the year that ended on December 31, 2022, despite the slow, albeit sustained economic recovery, following the COVID-19 induced recession in 2020.

The bank sustained its consistent trend in reporting appreciable growth in major financial indices on a year-on-year basis, thus consolidating its position as Nigeria’s largest and most impactful development finance institution.

For the year under review, the group’s total assets crossed the N2 trillion in 2022 to N2.38 trillion, indicating a 39.2 per cent growth when compared with the preceding year. This significant leap was achieved following the successful conclusion of three landmark capital-raising transactions in the year, worth €1.85 billion (about $2 billion) from the international financial markets.

The bank’s financial statement showed that gross earnings grew by 15.4 per cent to N212.96 billion in 2022 from N184.55 billion in 2021. In the same vein, interest income from both customer loans and investments improved by 21.1 per cent in 2022 to N212.96 billion from N175.83 billion in the previous year. This growth was attributed to income from both customers’ loans and investments.

Also, profit before tax rose by 15.6 per cent to N71.99 billion in the year, from N62.28 billion in 2021 due to remarkable growth in interest income and other income lines; alongside the reduction in impairment charges that facilitated the achievement of the appreciable growth.

Total equity grew by 11.7 per cent to N429.83 billion from N384.85 billion in 2021, while loans and advances improved by 3.2 per cent to N805.46 billion from N780.48 billion in 2021.

In its developmental impact, the bank disbursed the sum of N210.7 billion to 418,436 beneficiaries in the year, through both its direct and indirect lending platforms, as well as through funds it manages on behalf of its strategic partners.  

The three key capital-raising transactions in the year from the international financial market included the bank’s maiden Eurobond of €750 million, which was concluded in February 2022. It was the first of its kind in several ways to the bank, the country, and Africa. The deal was the bank’s first Eurobond transaction, as well as the first Euro-denominated Eurobond transaction in Nigeria.

The transaction was also the first Eurobond transaction that was covered by Nigeria’s sovereign guarantee and also represents the first of its kind by a national development finance institution in Africa.

The transaction earned the bank the Agency Bond Deal of the Year award at the 2023 awards event of the Bonds, Loans, and ESG Capital Markets in Capetown, South Africa.

The second was the €1 billion guaranteed senior loan facility, which was concluded in August of 2022. The deal also represents the first of its kind, by any Nigerian financial institution, both in terms of its size and structure.

Through the transaction, the bank was not only able to raise liquidity but was also able to diversify its funding sources by attracting new lenders, even though the international capital markets were prohibitively expensive and shut to many borrowers at the time.

A €100 million line of credit from the French Development Agency (AFD) was also concluded in August 2022. Through the credit facility, the bank expanded its financing interventions in environmentally friendly and green projects. A grant of €2.5 million was also included in the deal to support capacity building for both staff and customers.

According to the bank, its intervention programmes in the year, which traversed several sectors and segments of the Nigerian economy, did not only contribute significantly to national goals of economic recovery and job creation but also empowered Nigerian businesses, especially micro, small, and medium enterprises to remain in operations sustainably.

The 2022 financial score card has also shown that the BOI is living up to its stated development mandate that is orientated towards supporting quality projects with high developmental impact such as job creation and poverty alleviation to enhance the socio-economic standard of Nigerians.  

Indeed, BOI’s developmental mandate is geared towards supporting projects with the capability to generate considerable multiplier effects, such as business linkages, job creation and poverty alleviation that positively impact the socio-economic condition of Nigerians.

The BOI is also playing appreciable role in improving Nigeria’s business environment by channeling funds to investments that could improve the state of infrastructural development. According to Pitan, in his interview with the International Banker, one of the enduring challenges of sustainable economic development in Sub-Saharan Africa is the state of its infrastructural development.

He said: “Nigeria’s business environment is rapidly evolving as we speak, yet there are a number of issues that are not being addressed or are at a slow pace. Special Economic Zones (SEZs) provide space where the business environment is at its optimal level.

“These zones can help provide the necessary conditions that businesses require to thrive or that investors may seek. These could include adequate infrastructure, an educated and skilled labour force, local input suppliers, tax incentives, etc.

“By encouraging manufacturers, suppliers, service providers and firms to co-locate, share common facilities and build well-developed industrial clusters, these and other industries are able to 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 (micro, small and medium-sized enterprises).”

The good financials of the BOI did not come as a surprise to key stakeholders in the Nigerian economy, especially in the manufacturing sector. The President of the Nigerian Employers’ Consultative Asociation (NECA), Mr. Taiwo Adeniyi, who is also the managing director of Vita Foam, told THISDAY in an interview in 2022, that the BOI is one of the few federal government agencies that know how to use its mandate to promote enterprises and job creation.

Adeniyi said: “We cannot say that totally we are not doing well in some areas. I will tell you a small story. In 2010 an organisation that I had worked for wanted to establish a factory in Sierra Leone. It approached the BOI for N750 million. The BOI requested a bank guarantee from the organisation. That organisation went to one of its banks and requested for a bank guarantee but its request was turned down. The organisation went away disappointed because the money did not come out.”

However, the narrative changed following the constitution of a new executive for the BOI by President Buhari’s administration. When the organization went back to the BOI many years after it met the new executives at the bank that facilitated its loan request.

According to Adeniyi, “the same organisation went back to ask for loan from BOI. The personnel’s of BOI guided the organisation in putting its documents together that by the time it got to the bank it will not be rejected.

“The BOI became intentional and were ready to give out the money. The organiation ended up getting N4 billion against the initial request of N750 million.

“I know a number of other organisations that have also benefitted from that because the government was deliberate about it by changing the governance structure in BOI and measuring the bank based on the number of loans it granted to support industries.”  

Adeniyi’s view was corroborated by the chief executive of the BOI who said that as the foremost development finance institution (DFI) in Nigeria, the BOI has come a long way in addressing its mandate.

Pitan said in 2019 that “there are about 40 million MSMEs in Nigeria. We have supported thousands of enterprises and have facilitated the creation of millions of jobs.

“However, there is a lot to be done. Over the past four years, the bank has more than tripled its support for SMEs from ₦7.4 billionin 2015 to ₦32.8 billion in 2018, and we will do even more in 2019. One of our targets is to increase the share of our loan book in favour of MSMEs as opposed to large enterprises.

“The enterprises we have supported over the years have cut across several sectors, from agro-processing to creative industries, engineering, technology, fashion, renewable energy, healthcare and pharmaceuticals.

“In the creative-industries sector, for example, we supported the likes of Filmhouse Cinemas, Silverbird Cinemas, Terra Kulture Arts and Studios Limited. Today, these companies keep growing so big and continue to provide employment for young Nigerians.”

On September 14, 2022, Fitch Ratings affirmed the BOI’s long-term issuer default rating (IDR) at ‘B’ with a stable outlook and national long-term rating at ‘AAA (nga).’

Fitch said: “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.”