16 October, 2003, 12:09

Instituted by this Administration to promote the growth and development of small and medium scale industries in the country, the Bank of Industry is a product of the merger of three development financial institutions. They are:

§ The Nigerian Bank of Commerce and Industry (NBCI)
§ The Nigerian Industrial Development Bank (NIDB)
§ The National Economic Reconstruction Fund (NERFUND)

The merger, which was carried out by the Federal Executive Council in January 2000, targets an effective harmonisation of the resources of all three institutions for efficient use in areas earmarked for industrial development.

The establishment of the Bank of Industry is one of the most powerful incentives for Nigeria’s industrial development.

As follow-up to the initial creation of the Bank of Industry, President Olusegun Obasanjo formally launched the new Bank of Industry on 17 May 2002, which started operations with an initial capital base of N50 billion (about $500 million). The new Bank, which is solely owned by the Federal Government, has offices in all 36 states of the federation.

Mandate of the Bank

The Bank of Industry was conceptualised by the Federal Government to “transform Nigeria’s industrial sector and integrate it into the global economy through providing cheap financing and business support services to existing and new industries in order to achieve the attainment of modern capabilities to produce goods that are attractive to both domestic and external markets”. Specifically, the Bank is expected to assist in resuscitating ailing industries and promoting new ones in all the geopolitical zones in the country. To this end, it is mandated to identify and assist:

§ Projects that have large transformation impacts (by creating forward and backward linkages with the rest of the economy)
§ Projects that utilise domestic inputs
§ Projects that generate huge employment opportunities
§ Projects that produce quality products for the export market.

Structure of the Bank

The new Bank of Industry comprises four subsidiaries. They are:

§ Leasing Company of Nigeria Limited (LECON)
§ NIDB Trustees Limited (NTL)
§ NIDB Consultancy and Finance Limited (NIDB Consult)
§ Industrial and Development Insurance Brokers (IDIB)

Collapsing Previous Banks into the Bank of Industry: Reasons

When the Obasanjo Administration was inaugurated in 1999, it observed that privately owned commercial and merchant banks were not meeting the needs of industries, while government-owned Development Finance Institutions (DFIs) had not fulfilled the goal of channelling long-term finance to the industrial and agricultural sectors. Apart from being in a very poor financial state, DFIs needed to have their operations rationalised and streamlined to eliminate the duplication of functions. They also needed to refocus their energy and resources to perform more effectively. The poor performance of commercial and merchant banks and DFIs was a major reason for the set up the Bank of Industry.

With its establishment, President Obasanjo charged the management of the Bank to avoid the mistakes of the past by ensuring that loans and investments to industrial concerns are based purely on merit and professional consideration. He guaranteed that Government would continue to improve the investment regime in Nigeria by providing it with adequate financial resources as well as protecting it from political interference.

Brief Profile of Previous Development Banks

1. The National Economic Reconstruction Fund (NERFUND)
NERFUND was an outreach programme that sought to empower the banking sector through the provision of small and medium scale industrial loans. NERFUND did not lend directly to beneficiaries; it did so through participating commercial and merchant banks for onward lending to small and medium scale enterprises. It came into existence in January 1989 and commenced operations in September of the same year.

2. The Nigerian Bank for Commerce and Industry (NBCI)
NBCI was set up in 1973 to promote the development of small and medium size enterprises (SMEs) in the country. Until it was subsumed under the Bank of the North, the principal function of the NBCI had been the provision of long-term investment financing and equity funds to SMEs.

The NBCI, which was exempted from paying taxes, had a fully paid share capital of two million ordinary shares at N100 each. The Ministry of Finance held up to 60 percent of the shares, while the Central Bank of Nigeria (CBN) held the remaining 40 percent.

3. Nigeria Industrial Development Bank (NIDB)
The NIDB was established in 1964. According to its memorandum of association, the main objective of the NIDB was to assist enterprises engaged in industry, commerce, agriculture and the exploitation of natural resources in the country. The CBN, the Ministry of Finance and the Ministry of Industry were its supervising agencies.

Supporting Other Businesses

The Bank of Industry will promote the development of small and medium size industries in the following areas:

§ Agricultural finance
§ Industrial and commercial finance
§ Natural resource exploitation finance
§ Long term investment financing and equity funding of SMEs
§ Support of SMEs through lending funds to commercial and merchant banks.

Facilities of the Bank of Industry

The bank of Industry owns the following facilities:

§ Initial capital base of N50 billion
§ Offices in the 36 states of the federation
§ Additional facilities from NBCI, NIDB and NERFUND.

Divestiture Plan of Government for the Bank of Industry

The Federal Government plans to commercialise and privatise the Bank of Industry in order to improve its efficiency, viability and productivity. To this end, it is offering 51 percent of its shares in the Bank for sale. Because the Bank was formed out of the original merger of three development banks, it is currently the only development bank in the country. For this reason, it stands to operate profitably and has the great potential for future expansion.

Future Prospects of the Bank

When the Bank becomes full operational, its achievements will centre on:

§ Becoming a major player in Nigeria’s industrialisation programme
§ Establishing a nationwide branch network
§ Encouraging an emerging market economy
§ Promoting the national drive for industrial development
§ Implementing a strong and enhanced capital base.



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