The Bank of Industry which is Nigeria’s foremost traditional development finance institutions has over the years been in the forefront of providing adequate financing need required to drive lending to the Micro, Small and Medium Enterprises in the country.
As part of efforts to fulfill its mandate, BOI has gone beyond the shores of Nigeria to the international community to boost its funding capacity for small, medium, and large enterprises.
The sectors that are topmost beneficiaries of the BoI’s lending include manufacturing, agriculture, and technology which are seen as the key drivers of the economy.
Initially, the Bank in 2017 commenced raising funds on the international market with a $750 million AFREXIM loan. It subsequently raised $5 billion from the international capital markets through Eurobonds, loan syndications, and green finance instruments.
Fast forward to 2024, BOI under the leadership of Dr. Olasupo Olusi successfully raised N3.05trn (€1.879 billion) from international financial markets, marking a historic milestone as the largest amount ever secured by any Nigerian or African development finance institution (DFI).
How collaboration is driving MSME financing
According to BOI, the capital financing was achieved through a dual-layer guarantee structure, with collaboration and support from the Africa Finance Corporation (AFC) and the Central Bank of Nigeria (CBN) for optimal risk-sharing.
This structure allowed BOI to secure much lower interest rates than those typically applied to Nigerian debt instruments, resulting in savings of approximately 3.6per cent per annum (or an estimated N295.7 billion over the three-year tenor). These favorable terms will reduce the cost of borrowing for the real sector making it more competitive.
The syndication attracted considerable interest from a diverse array of international investors, with over 10 new participants, particularly from the Middle East and Asia.
Commenting on the remarkable feat, Managing Director/Chief Executive Officer of BOI, Dr. Olasupo Olusi, in a statement said that the favourable terms associated with this funding will facilitate access to low-interest, long-tenured loans for Nigeria’s burgeoning private sector, aligning with President Bola Tinubu’s vision for economic growth.
He said the bank’s “Enlarged balance sheet will boost its interventions and operations and ultimately enhance its developmental impact in bridging the current annual developmental financing funding gap of over $35 billion, support the implementation of BOI Strategy for 2025 to 2027 as well as enhance the capacity of BOI to deliver on its mandate.
“The new funds have substantially bolstered the bank’s balance sheet, increasing it from N3.9 trillion in 2023 to N7.1 trillion by the end of December 2024.This robust engagement underscores BOI’s reputation as a trusted partner in Nigeria’s industrialization efforts and highlights its growing appeal to investors from emerging markets.
“The favourable terms will reduce the cost of borrowing for the real sector, making it more competitive,” he explained.
How €1.879bn will positively impact economy
The Bank has explained that the fund raised would boost the bank’s interventions and operations and ultimately enhance its development through bridging the current annual development financing funding gap of over $35 Billion (BCG, 2024).
Similarly, it added that it will support the implementation of the BOI Strategy for 2025 – 2027. One of the key themes is to increase BOI financing along several areas to meet Nigeria’s developmental needs. This will further strengthen the financing capacity of the Bank and enhance the overall performance of Nigeria’s businesses.
In the same vein, it will address infrastructure challenges occasioned by the high cost of doing business on manufacturers in Nigeria.
Additionally, the confidence in BOI demonstrated by this historic transaction will enhance its ability to access additional sector specific funds particularly funds that are targeted at vulnerable sectors and segments like Gender, Youth, MSMEs, Agriculture, ESG and Sustainability etc.
Furthermore, the capital will enable the BoI to fund specific targeted programmes and fund impactful projects that will lead to Nigeria’s long-term industrial development on a transformational basis due to the flexibility and extent of funding available to BOI.
Consequently, the raised funds will help the bank with: Credit Risk: Higher/longer payback periods and leveraging our partnerships to de-risk Lending to MSMEs, Gender etc. and expand access to financing; Liquidity Risk: Build a strong funding base to support its financing operations; Market Risk: Inflation, foreign exchange and inflation stabilization and operational Risk: Help implementation of internal operational strategies including digital transformation
In addition, Green, Climate and Environmental Financing are also key considerations of BOI’s new strategic focus. The €1.879 billion fund raised would enable the bank to play more efficiently in this space.
Achievements of BOI through the Fund raised
Some of the achievements by BOI’s landmark fund raised include: largest single transaction done by BOI in its 65 years history, largest deal done by a Nigerian development finance institution, largest deal done by any Nigerian financial institution and largest deal done by any African development finance institution thereby setting a benchmark.
This also resonates with President Bola Tinubu’s New Year message as one of the major promoters of National Credit Guarantee Company (NCGC) will enable BOI to more securely deploy the huge resources that it continues to mobilize from the international financial markets by sharing risks with NCGC.
Having BOI loans, particularly to MSMES, guaranteed under the new scheme would enable the bank to safely disburse more loans to Nigeria’s private sector.
According to Tinubu, “the Company expected to start operations before the end of the second quarter is a partnership involving various government institutions alongside private sector entities and multilateral organisations,”
The President stated that the collaboration will enhance confidence in Nigeria’s financial system, expand credit access and support underserved demographics such as women and youth, ultimately driving growth and improving living standards across the nation.
How BoI stirred MSME growth in 2024
The year 2024 commemorated the 65th anniversary of the Bank’s empowerment drive in the economy, especially boosting industrial growth, fostering innovation, and contributing to the socioeconomic development of the country.
Dr. Olusi while highlighting some of the bank’s key achievements over time, said: “In 2007, BOI’s authorised share capital was increased to N250 billion to put the bank in a position to address its mandate better; this was subsequently increased to N500 billion in May 2023.
“In recognition of the pivotal role of MSMEs in national economic development, the bank, in 2014 engaged 122 SME consultants and entered strategic alliances with 10 SME-friendly commercial banks. Today, we have over 300 Business Development Service providers supporting SMEs nationwide. The bank also has a robust on-lending program with various financial institutions, including microfinance banks and fintechs.
“In 2015, BOI commenced a national footprint expansion by opening eight state offices. This drive has continued through the years, and I am proud to say that today, the bank has a presence in 33 states nationwide.”
He noted that one key thread in achieving these milestones through the years is through partnership.
“BOI has established strategic partnerships with key local public and private institutions, as well as global financial and multilateral institutions to enable the bank to fulfill its mandate effectively.
“BOI partners with State Governments, and Foundations to establish the “Matching Fund” scheme. We also have partnerships with trade associations, such as the National Association of Small and Medium Enterprises (NASME), Nigerian Association of Small-Scale Industrialists (NASSI) and Manufacturers Association of Nigeria (MAN), to deepen real sector financing.
“BOI recently signed a partnership agreement with SMEDAN to provide Nano and Micro Enterprises in Nigeria with a N1 billion fund at a single-digit interest rate. We have partnerships with several other public agencies like NCDMB, to support specific sectors,” he said.
He added that “In November 2023, the Federal Government of Nigeria appointed BOI as the executing agency for the N200 billion FGN MSME Intervention Fund, which includes a N50 billion Presidential Conditional Grant Scheme (PCGS), a N75 billion Manufacturing Sector Fund, and a N75 billion MSME Intervention Sector Fund.
“This programme is currently being disbursed and there are numerous stories on the impact on private enterprises.”
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