The chairman of the Association of Nigerian Development Finance Institutions, Mr. Olukayode Pitan, has emphasised the crucial role of fresh ideas, creative approaches, and collaborative efforts in bridging the financing gap and driving transformative changes that Nigeria desperately needs.
Speaking at the 3rd Association of Nigerian Development Finance Institutions Annual General Assembly in Abuja, yesterday, Pitan, who also serves as the managing director of the Bank of Industry (BoI), highlighted the pressing need for innovative financing to address Nigeria’s evolving economic landscape.
Pitan stressed that innovative financing presents a valuable tool for Development Finance Institutions (DFIs) to raise additional resources for development. However, specific market failures and institutional barriers impede private investment from flowing into developing countries like Nigeria.
Asset deterioration, weak corporate governance, and risk management frameworks have hindered development aspirations and affected the growth of DFIs and private sector players within the Nigerian economy.
To bridge the financing gap and drive transformative changes, Pitan called for collaboration, innovation, and synergy. He highlighted the significant role DFIs play in ensuring sustainable economic and social development, a role evident in both developed and developing economies where DFIs have been instrumental to their economic successes. He said leveraging expertise, resources, and networks, DFIs can act as catalysts for economic growth and development in Nigeria.
He said, “We need fresh ideas, creative approaches, and collaborative efforts to bridge the financing gap and drive the transformative changes our country desperately needs. This is where innovative financing mechanisms that will complement traditional DFIs funding sources come to play. By utilising specialised funding arrangements complemented by non-financial services, we as DFIs are able to act as growth catalysts to the development of the Nigerian economy.”
He continued, “As we all know, DFIs play a significant role in ensuring sustainable economic and social development. This is evident in developed and developing economies where DFIs are instrumental to their economic successes. Therefore, we must continuously work together, leveraging on our expertise, resources, and networks to unlock transformative projects by working in synergy with the organised private sector and our respective Governments. Collectively, we can deliver the level of sustainable social and economic development that Africa needs.”
Pitan showcased the Bank of Industry (BoI) as an example of successful innovative financing. The institution has significantly grown its total assets and equity position, facilitating transformative projects that have contributed to the nation’s development.
Speaking on the importance of international cooperation and solidarity in advancing innovative financing for developmental impacts, Pitan said developed countries can support developing countries by providing resources, technology transfer, and capacity building.
“Multilateral institutions, therefore, have a critical role to play in coordinating efforts, mobilising resources, and ensuring the effective implementation of innovative financing mechanisms.”
He added, “Using the Bank of Industry as an example, over the years, we have successfully raised funds from the international capital market, which has allowed us to not only fill critical gaps and provide the necessary funding for transformative projects, but also exposed us to global best practices and innovative solutions that promote institutional development and improve the effectiveness of developmental initiatives.”
Speaking further, he told the gathering that since the Bank of Industry (BoI) commenced its innovative financing mechanism, the total assets have grown significantly by 381 per cent between 2017 and 2023 (H1), reaching N2.38 trillion by the end of year 2022 and closing at N3.29 trillion as of June 2023. The equity position has grown by 188 per cent from N220 billion in 2017 to N634 billion in 2023 (H1).
He added that the creation of quality risk assets has helped the bank to maintain a non-performing loan (NPL) rate of about 2 per cent as of 2023 (H1), falling below the regulatory threshold of 5 per cent. “The bank maintains a strong corporate governance structure, its accounts are audited by one of the big 4 firms, and it is rated by international and local rating agencies i.e. Fitch, Moody’s & Agusto & Co. In a nutshell, the benefits of innovative business initiatives cannot be overemphasised.
“To deepen our activities in innovative financing, we must foster mutual support and encourage cooperation among our members. This can be achieved through the exchange of technical expertise between our member DFIs and similar organisations globally. Likewise, we must prioritise the professional advancement of our members while leveraging on the knowledge from best-in-class economies that have adopted innovative financing initiatives,” he said.
Similarly, in his address, Head of Treasury & Financial Institutions at Africa Finance Corporation (AFC), Banji Fehintola, said DFIs, in line with new developments and global practices, must be innovative and more intentional about making an impact.
“As DFIs, we need to start thinking about diversifying our product offering; the issue of having one solution for every problem needs to change. We need to be innovative, and for us to be innovative, we need to invest in attracting the right people,” he said.
Highlighting focus areas for DFIs, he said they must think differently in solving problems and think of different types of equity instruments that can be introduced into the capital structure to attract different types of lenders that will support its capital base.
“As DFIs, we need to focus on project development and think about how to support that capital base regularly, as capital is a major pillar for our credit rating so we need to,” he added.
