Irrationality 101: Killing A Thriving Reality, To Birth A Risky Unknown – JJ Omojuwa

A Nigerian lawmaker requested a loan of N130m from a well-known commercial bank. The purpose of the loan was to enable him pay off his loan with another bank and also have the balance to bridge an “urgent financial gap.” The lawmaker made a formal request for the loan on Tuesday, May 10, 2016, he got a letter confirming the approval of the loan by the bank the same week, precisely on Friday, May 13. The bank that granted this loan is well-known for its insistence on best practice and top-notch professionalism. But despite its heights of professionalism, the politics of influence and rampaging cronyism still was strong and able enough to conquer it.

If you find a genuine Nigerian business that gets to have such a loan advanced to it in such a short time, without a telling mutually beneficial relationship between it and the bank, you’d have found the secret to two of Nigeria’s biggest problems; the difficulty of accessing capital from private financial institutions and the cost of accessing same. Why is this story important? It is important because while an average lawmaker can get such a loan from an average commercial bank in Nigeria, it is impossible for any Nigerian lawmaker to have even have N1 loan advanced to it by the Bank of Industry for such a purpose. Meanwhile, an average Nigerian Small and Medium scale entrepreneur can access loans at the Bank of Industry at rates as low as seven per cent and the business support that go with the access to such loans at no extra cost.

The BoI works and this assertion is one myself and those I reached at the Senate agree on. What we do not agree on is how to make it work better; they believe in setting up a National Development Bank of Nigeria to do more or less what the Bank of Industry does today. To set up this new bank, the Senate intends to repeal the Bank of Industry Act, essentially scrap the Bank of Industry, and repeal the Bank for Commerce and Industry Act and the NERFUND Act.

Let us have a rational look at the issue. The Bank of Industry has existed in one form or the other since 1959. It is the oldest development finance institution in Nigeria. In the market place, having such a strong brand is a strong capital. In a research by neuroscientists Sam McClure, Jian Li, Damon Tomlin, Kim Cypert, Latané Montague, and Read Montague, they found out that a good brand activates a higher-order brain mechanism that gives strong brands an extra advantage over their competitors. Essentially, when you kill the BoI to set up a new bank, you will be sacrificing an established brand on the altar of a new one that has zero capacity to activate such higher-order brain capacity. It will be interesting to know the sort of mental activation the Nigerian (8th) Senate’s brand arouses in Nigerians but you can be sure that scrapping the Bank of Industry will other further add to the negative perception of the Senate. But this last assertion does not even hold as much water as the inherent value and essence of the BOI as it is today.

A brand that has existed for 59 years has gone through all the challenges that go with creating such DFIs, it has stormed, it has formed and is today thriving and doing numbers that are even better than most of the commercial banks. One advantage that has worked for the BoI over the years is that it has escaped from the sort of political interference that has been the death of many such laudable programmes and projects. This brand commands the respect and confidence of the industry, locally and internationally and this point was well established by the bank during the presentation of its MD at the Senate hearing.  For a public institution, BoI’s ratings by reputable global rating organisations are nothing but an outlier reality in Nigeria; Fitch rated the bank AA+ in 2015, same for 2016. Moody’s raised the bank’s status from Ba3 in 2015 to Aa1 in 2016. Agusto rated it A+ in 2015, now AA+ in 2016. Surely, something works here.

The BoI has enjoyed some strategic partnerships with local and international partners over the years. This has firmly established it as one of the rare government institutions that actually make profits year in and out. The bank has been profitable for at least 10 consecutive years to date. You will be hard pressed to find a government institution with such numbers, especially for an institution that doesn’t depend on the annual budgetof the Federal Government. Its books are up to date and open to the public. This last statement is in no way at attempt at reminding the senators that Nigerians do not still know how it spends its budgetary allocation as #OpenNASS continues to be an opaque reality. The UNDP will be making $1.8m available to the bank in the joint financing plan for solar power projects in Nigeria. The interest rate for this is seven per cent. According to Mr. Waheed Olagunju, the MD/CEO of BoI, the bank has a Non performing Loans ratio of 3.87 per cent That is, over 96 per cent of its risks are performing. The industry average is 10 per cent. Its NPL does better than most of the commercial banks.

A google search for “Bank of Industry” and “Nigerian Senate” actually reveals a lot about what both organisations are about. The first page on the “Bank of Industry’ search reveals links to stories such as the Bank of Industry’s “N10bn Youth Entrepreneurship Support,” another link leads to the BOI’s “$31m for Agric-based SMEs” story and further down the same page you see stories that indicate that “as (of) February 2014, N310bn loans had been disbursed to the SMEs in four years.” That is the about the budget of the National Assembly for a little more than two years. A search for‘Nigerian Senate’ on Google showslinks like ‘Senate threatens to boycott sittings,’ another, “Senate moves to legalise lobbying in Nigeria,’ then  “Senate passes Nigerian Peace Corps Bill,” and thankfully, a positive story, “Senate accesses Nigeria’s Power Sector challenges.” If we went by the results of this search alone, the Senate wouldn’t even have the backing of search algorithm to scrap the Bank of Industry. But no one has moved a motion to either scrap the Senate – which would enjoy the support of most Nigerians – or at least drastically reduce the allowances of senators.

As soon as the Central Bank Governor, Godwin Emefiele, made it clear he was in support of the scrapping of the BoI – speaking for himself not the bank, the Senate should have gotten a solid clue on what to do; do the exact opposite of what Emefiele said because, you only need to see what he has done with his primary responsibility as the Central Bank Governor to know he should be the last person to show direction towards the path of development. The organisations that ought to know about the right step to take on matters like this made very solid presentations at the public hearing. The Nigeria Labour Congress, the Trade Union Congress, the Nigerian Economic Summit Group, the Lagos Chamber of Commerce and Industry, the Nigerian Association of Small Scale Industrialists etc all gave cogent reasons why the Senate should not consider scrapping the BoI. The Manufacturers Association of Nigeria submitted that, “going through the proposed bill, we can hardly see any value addition to be derived or achieved by the National Development Bank of Nigeria that is not already being rendered by BoI.” End of story!

If public hearings at the Senate are not just a cosmetic show with zilch influence in the depth of the Senate’s actions on bills, the public hearing on the Senator Ibrahim Gobir sponsored bill certainly landed an obvious submission; if you cannot support the Bank of Industry to even do what it already does well better, please, do not scrap a thriving unknown, for the uncharted darkness of the unknown. Will the Senate allow reason and rationality prevail?

This piece was originally published in Punch newspaper of Wednesday 14th December.