The Bank of Industry was created by the Federal Executive Council in January 2002 with the sole purpose of promoting and encouraging small and medium scale industries in Nigeria by providing long term financing to the industrial sector of the Nigerian economy. It was formed by the amalgamation of three already existing development financial institutions comprising: The Nigerian Bank of Commerce and Industry (NBCI), The Nigerian Industrial Development Bank (NIDB) and The National Economic Reconstruction Fund (NERFUND) (Ojo, 2011).
This makes it Nigeria’s oldest, largest and most successful development financing institution (BOI, 2012).
This paper seeks to explore and identify the organization of the bank; its functions and roles as well as its performance so far. ORGANIZATION: In 1964, the Nigerian Industrial Development Bank (NIDB) Limited was incorporated, with an authorized share capital of 2 million (GBP). The International Finance Corporation then produced its pioneer Chief Executive; and held 75% of its equity along with a number of domestic and foreign private investors.
In 2001 the bank was reconstructed and this gave rise to the establishment of the Bank of Industry Limited (BOI).
Authorized share capital of the bank was initially set at N50 billion during the reconstruction into BOI; this was later increased to 250 billion in order to put the bank in a better position to address the nation’s rising economic profile in line with its mandate. The current share holding structure is as follows: Share Holding Structure Ministry of Finance Incorporated (MOFI)| 58. 86%| Central Bank of Nigeria (CBN)| 41. 12%| Equity held by 43 private shareholders| 0. 2%| | 100% | Source BOI (2012) Supervisory authorities over BOI include the Central Bank of Nigeria (CBN) and the Federal Ministry of Commerce and Industry.
The bank currently has a Board of directors made up of – a Protem Chairman, a Managing Director ;amp; Chief Executive Officer, three Executive Directors- Executive Director (Corporate Services), Executive Director (Operations), Executive Director (Business Development), and two other Directors. Below is a chart representing the Bank’s Corporate governance system as provided by BOI (2012).
Board of Directors based mainly on institutional representation | Executive Directorate | | Managing Director ;amp; Chief Executive Officer| 1| Executive Directors| 2| Sub Total| 3| | | Non –Executive Directors | | Ministry of Finance Incorporated| 1| Central Bank of Nigeria| 1| Federal Ministry of Commerce and industry| 1| Manufacturers Association of Nigeria| 1| Non – institutional representatives| 2| Sub Total| 6| | | Executive Management Committee| | Managing Director ;amp; Chief Executive Officer| 1| Executive Director (Corporate Services)| 1| Executive Director (Operations)| 1|
General Manager (Operations)| 1| General Manager (Management Services)| 1| General Manager (SME)| 1| General Manager (Strategic Planning/Corporate Communications ;amp; Corporate Secretariat) | 1| Sub Total| 7| | Offices: The bank has its head office at Marina, Lagos, with six zonal offices in the six geo-political zones of Nigeria- Abuja, Aba, Akure, Maiduguri, Kaduna, and Asaba. Subsidiaries: There are four subsidiary organizations of the BOI, these according to BOI (2012) include: * Leasing Company of Nigeria Limited. * Bank of Industry – Investment and Trust Company. Industrial Development Insurance Brokers Limited. * BOI Micro Finance. Leasing Company of Nigeria Limited (LECON) Leasing Company of Nigeria Limited, formerly Commonwealth Development Corporation (Nigeria) Ltd. was established in 1970 and later incorporated as a limited liability Company in 1986. The company is a subsidiary of Bank of Industry Limited whose objective is to contribute to the nation’s economic development, by the financing of capital assets through leasing. The main aim of establishing LECON then was to augment the activities of BOI by providing ancillary facilities to loan beneficiaries of the bank.
Nigerian Maritime Administration and Safety Agency (NIMASA) (formerly The National Maritime Authority (NMA)) came in as shareholder in order for LECON to participate in the ship building and ship acquisition fund. Bank of Industry – Investment and Trust Company (BOI-ITC) The company was established as a wholly owned subsidiary of the Nigerian Industrial Development Bank Limited (NIDB) now Bank of Industry Limited (BOI) in 1987. BOI-ITC provides diversified services in the money and capital markets with a view to expanding and improving the quality of services in those sectors.
According to BOI-ITC (2012) the company is the second trustees to be established in Nigeria. It is registered with the Securities and Exchange Commission (SEC) as a Capital Market Operator to function as Trustee, Registrar and Fund/Portfolio Manager; and with the Central Bank of Nigeria (CBN) as a finance company. Both registrations are current and valid (BOI-ITC, 2012). The company is also a registered member of the Association of Pension Fund Managers of Nigeria and Association of Corporate Trustees. Industrial Development Insurance Brokers Limited (IDIB)
This subsidiary company of the BIO provides a wide range of insurance services. They analyze the activities of organizations and individuals, and identify those risks that are likely to disrupt their operations and also, advise on ways to reduce or possibly eliminate them, while transferring whatever risk is left to a reputable Underwriter. The services provided do not attract any additional cost to the various clients, as they normally get remuneration from the underwriters in the form of commission. BOI Micro Finance
The BOI Microfinance Bank Limited is a Unit Microfinance Bank licensed by the Central Bank of Nigeria to operate within Lagos State. As a subsidiary of BOI, the bank was established to provide entrepreneurs with unique, people oriented, technology driven, value added products and services delivered by a well trained and motivated workforce in a sustainable and profitable manner for the economic benefit of the stakeholders. The bank is run by a board made up of a chairman (executive director operations BOI), MD/CEO and five directors. FUNCTIONS AND ROLES
The major functions of the BOI are reflected in its vision, core mandate and mission which are thus: * The bank’s vision is to be a leading self-sustaining Development Finance Institution, operating under sound management and banking principles that would promote the emergence and development of a virile competitive industrial sector in Nigeria. * The core mandate of Bank of Industry (BOI) is to provide financial assistance for the establishment of large, medium and small projects; as well as expansion, diversification and modernization of existing enterprises; and rehabilitation of ailing industries. The bank’s mission is to transform Nigeria’s industrial sector and integrate it into the global economy by providing financial and business support services to existing and new industries to attain modern capabilities to produce goods that are competitive in both domestic and external markets. According to Ojo (2011), the Bank of Industry is specifically expected to assist in resuscitating ailing industries and promoting new ones in all the geopolitical zones in the country.
To this effect it has been mandated to identify and assist projects that have large transformation impacts by way of creating forward and backward linkages with the rest of the economy, utilize domestic inputs by adding value to raw materials, generate employment opportunities and produce quality products for the market. BOI TRIPLE ROLE: Products and Services. Financier| 1. Lender-Long and medium term loans, structured working capital. 2. Investor-Equity Financing 3. Finance Arranger-Co-Financing/Syndication 4. Fund mobiliser- Management of specialised Funds 5.
Grant-maker 6. BOI’s Subsidiaries: Leasing, Trustees, Insurance, Microfinancing, etc. 7. International Operations/Trade Services| Partner:| 1. Catalyst-Facilitating business’ access to market, technical resources etc. 2. Agent 3. Development facilitation 4. Infrastructure Development/Cluster Facilities| Advisor| 1. Advocacy 2. Business support services to entrepreneurs/companies 3. Capacity building ;amp; training 4. Support for Research and Development 5. Industrial Policy analysis and Formulation 6. Development Information | Source Oputu (2012).
The BOI is eminently positioned to manage foreign grants and aids that are given to facilitate attainment of the nation’s developmental aspirations, the implementation of the National Economic Empowerment and Development Strategy (NEEDS), the realization of the Federal Government’s sustainable pro-employment of 10% economic growth rate per annum and the Millennium Development Goals. BOI was established to function in economic development by assisting: * Small, medium and large enterprises, excluding cottage industries. * New or existing companies, seeking expansion, modernization or diversification. Credit worthy promoters who will be required to prove their commitment to the project by contributing at least 25% of the project cost excluding land. * Borrowers whose management capability, financial situation (including availability of collateral and guarantee), character and reputation are incontrovertible. * Clients with demonstrable ability to meet loan repayments. * Borrowers with no record of unpaid loans to erstwhile development finance institutions and other banks. BOI considers industries that meet the following criteria: Capacity to substantially add to industrial output. * Projects that use largely domestic raw materials. * Industry in which Nigeria’s comparative advantages could be converted to competitive ones. * Ability to promote the expansion of exports through the production of high quality products that are attractive to domestic and export markets. * Niche projects that produce for worldwide consumption. * Projects that create both forward and backwards linkages, with the rest of the domestic or regional economy. * Ventures that promote inter-state or regional integration. Small and medium enterprises (SMEs) that have linkage with large firms, belong to clusters and operate under franchise. * Enterprises with high employment generation capacity. * The project must be technically feasible, commercially viable and economically desirable. * Projects that are environmentally friendly. * Enterprises that have good management set-up and proper accounting procedures. * Enterprises promoted by women entrepreneurs. The following industrial sub-sectors are also accorded priority in the project selection: * Agro-industries, textile and leather Polymer –based industries * Solid minerals * Foundries * Information communication technology (ICT) services In order to ensure that the money is used for what it is purposed for, the Bank of Industry has put in place the use of quotation for the supply of equipment rather than giving their customers raw money, equipment are purchased whether locally or abroad (Ojo, 2011). Role via its subsidiaries: The Bank works hand in hand with its subsidiaries aligned towards accomplishing Nigeria’s development aspirations, the vision 20:2020 and the millennium Development Goals.
Through BOI’s subsidiaries, the bank is able to provide the following financial services: * LECON: the financing of capital assets through lease options best suited to the needs of the lessees; as well as achieve high yield from operations and satisfying high returns to shareholders. * BOI-ITC: as Trustees, carry on the specialized business of trust services including Private and Public Trust, Employment Retirement Benefits, Trust Fund Management for both private and corporate bodies, Estate Administration under trust, Executorships among others; also provide Secretarial and other ancillary services to companies.
The gains and impact of its paradigm shift, launched in January 2006, in favour of more support to micro, small and medium enterprises (MSMEs) coupled with its consistent profitable operations year to year earned the bank in 2007 the prestigious African Banker’s award as the Best Development Bank in Africa. Through home grown reforms and adherence to global best practices in developmental financing, BOI has in over ten years built a strong, dynamic and flexible development finance institution (DFI) that proactively responds to the needs of entrepreneurs all across the six geo-political zones of the nation.
By sheer management sagacity, the bank’s Profit/(Loss) Before Tax (PBT) improved from a loss of N953. 07 million in 2001 to N2. 493 billion in 2010. The cumulative loan value grew exponentially from a mere 0. 31 billion in 2001 to N175. 68 billion as at April, 2012. These were achieved without compromise to asset quality as the bank’s Portfolio at Risk (PAR) consistently improved over the same period from 85% in 2001 to 15. 78% as at April 2012- which is well below the industry average of 32. 8% (Oputu, 2012).
Over the last 19 years of operation, LECON has provided support facilities through leasing to a number of existing BOI projects. The lease portfolio rose from 2 projects valued at N23. 3 million in 1989 to 228 projects valued at over N1. 5 billion as at date. The Portfolio covers areas of manufacturing (textiles, plastics etc), Agriculture and Services (farm implements, hotel and office equipment), Marine (trawling, dredging etc). Telecommunications (cable satellite) and Transportation and Haulage (Mass transit buses and road haulage trucks for dry and wet cargo) (BOI, 2012).
REFERENCE Bank of Industry NIGERIA (BOI), 2012. Retrieved from http://www. boinigeria. com on May 10, 2013. Ojo T. , 2011. The Mandate of Bank of Industry . Retrieved from http://economicconfidential. net/new/features/845-the-mandate-of-bank-of-industry on May 10, 2013. Oputu, E. N. , 2012. The role of bank of industry in the growth and sustainability of the industrial sector of the Nigerian economy. A lecture delivered at Bells University on May 9, 2012. Retrieved from