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Published On: Mon, Aug 7th, 2017

BOI : Inside Nigeria’s biggest industrial loans supermarket

EMEKA EJERE|

The Nigeria Bank of Industry (BoI) last month revealed plans to raise N1trillion to fund industrial activities across all sectors of the Nigerian economy.
The Managing Director, Mr. Olukayode Pitan who revealed this at the inauguration of the governing board of the bank in Abuja, said the band is already working with other financial institutions in the country and international development Association.
Mr. Pitan said the bank would continue to support industrial activities in all sectors of the economy by providing necessary support financially and otherwise.
“Our mandate is national, part of our programme for this year is to increase the amount of money we make available, so, we plan in the next 12 months to raise about N1 trillion and work is already advance in some,” Pitan said.
If there is anywhere entrepreneurs can get cheap or single-digit funds (often at nine percent lending rate), it is from the Bank of Industry This development finance institution (DFI) has been rated by many local and international agencies as one of the best managed banks in the world.
Nigerian industrial sector which is the primary domain of BoI, is faced by myriads of challenges and problems which have greatly affected the pace of industrialization in the country and subsequently economic growth and development.
Consequently, the Federal Government of Nigeria has tried to intervene over the years in certain sectors of the economy to accelerate the pace of industrialization and subsequently economic development.
The intervention processes have been done by the Federal Government using funds, policies or generally through providing enabling environment.
The various interventions are done through the use of its agencies such as Central Bank of Nigeria, Bank of Industry, Bank of Agriculture, NEXIM, SMEDAN amongst other MDAs.
The mandate
Established in October, 2001, BoI is largely a state owned DFI charged with the responsibility of promoting the emergence of a virile industrial sector. In other words, BOI was conceived to catalyze the transformation of the real sector.
The bank has a mandate of providing financial assistance for establishment of large, medium and small enterprises; as well as expansion, diversification and modernization of existing enterprises and rehabilitation of ailing industries
Its 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 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.
Inaugurating the bank’s governing board, the Minister of Industry, Trade and Investment, Dr. Okechukwu Enelamah, said BoI is strategic to the country’s development as it has earned the trust of key agencies and institutions of government.
“The bank has effectively collaborated with the ministry in the area of project financing and that the ministry is delighted in working with the bank and other development institutions such as the Industrial Trust Fund (ITF), Small and Medium Scale Development Agency (SMEDAN), and the Nigerian Export Promotion Council (NEPC),” he said.
The facilities
The BoI has a number of funds that entrepreneurs of all levels can access. First is the Graduate Entrepreneurship Fund (GEF), which is meant for serving members of the National Youth Service Corps (NYSC).
Candidates are allowed to submit their business ideas, which are then reviewed by a team of experts. The NYSC members whose ideas are marketable and bankable are then selected, trained for four weeks and then given between N500,000 and N2 million.
There are also the Cottage Agro Processing (CAP) Fund for small and medium agro processors; Nolly Fund for players in the Nollywood industry, as well as Fashion Fund for designers and other players in the value chain.
The bank also has other matching and managed funds, including a fund for the automotive industry. Through 122 business development experts, entrepreneurs can access funds easily. It is also easy to access some of the bank’s products through its website.
The bank has a N5 billion fund from Africa’s richest man Aliko Dangote to finance SMEs at a single digit rate.
“We want to continue to create opportunities for Nigerian entrepreneurs and support the industrialisation efforts of the government,” said Waheed Olagunju, former acting CEO and MD of BoI, at a forum in Lagos in 2016.
Accessing the funds
The bank of industry is set up to encourage industrial production and value creation by manufacturing and processing activities of businesses. The objective is to provide the industrial sector with finance as well as business support services.
Target sub-sectors include Agricultural and Agro-allied businesses, Solid Minerals, Oil and Gas, Manufacturing and any business which operates in any of these value chains and uses equipment to carry out processes that add value.
The bank does not finance raw materials, nor working capital, nor lands and building. It is principally set up to finance industrial equipment. So for a primary agricultural producer, for instance, what the BoI will finance is the equipment that he needs to produce his goods. That could be combine harvesters, dryers, freezers, or any other such machinery.
The bank does not disburse the loan to the borrower but rather to the vendor of the equipment that the loan is intended to finance. The bank will carry out all necessary due diligence to ensure that the quotation from the vendor has been vetted for genuineness.
It will want to ensure that the price quoted is reasonable for the type of equipment being quoted for. While the bank will not necessarily finance the lowest quotation, it will want to confirm that the purchase is indeed value for money.
Where possible and applicable the bank will encourage borrowers to first investigate sourcing their equipment from local manufacturers that can be identified through the Federal Institute of Industrial Research Oshodi (FIIRO). This ensures that spare parts and support maintenance are locally available at prices that are immune from exchange rate risks.
Many prospective borrowers are put off by the requirement for collateral to back their borrowing. Obtaining a Certificate of occupancy (C of O) for landed property in many parts of Nigeria is a herculean task and this has prevented many a business from accessing finance.
This is one of the usual concerns that most borrowers have. The good thing is that the BoI accepts collateral other than landed property. They also know about the difficulty in obtaining C of O’s and actively embark on advocacy to the states affected.
Other forms of security they accept include: All assets debenture on existing and future plant and equipment and raw materials subject to a cover of 2.5 times the loan amount; bank guarantee; performance bonds from any one of ten accredited insurance companies; Advance Payment Guarantees.
BoI does not provide working capital finance but has a network of participating banks with whom it has negotiated SME friendly financing terms. On application to the Bank of Industry for equipment finance any interested prospective borrower can also apply to the Bank of Industry to be connected to one of the participating banks.
The two loans (equipment finance and working capital finance) can run concurrently although the terms will of course differ.
Whereas the BoI in its general risk acceptance criteria requires a prospective borrower to have been in business for at least three years with a good track record of sales and profit margin, it can also lend to start-ups on a case by case basis.
A start up wanting to apply for a bank of Industry loan would need to provide proof of cognate experience in its business area. They would need to have a highly experienced and qualified management and operational team with a verifiable pedigree and sound management structure.
Some prospective borrowers may have financed plant and equipment from other sources using more expensive funds or in some cases short term funds and may be looking for re-financing. The Bank of Industry does not re-finance loans even if they are for plant and equipment.
From submission of a complete loan application package to approval can take as little as two weeks, and not longer than four weeks. The bulk of the time in applying for a loan is actually spent in writing the business plan and meeting the requirements.
BoI is not just concerned with providing finance. It is very much interested in the success of a business. Its concern starts from wanting loan applicant to have the very best chances of having his loan request granted, and extends to ensuring that he generates enough sales and profits to meet his business objectives as well as repay his loan.
In order to assist all prospective loan applicants the bank has appointed Business Development Support Providers to assist in every step of the way.

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