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BOI, others’ asset decrease by 2.48, put pressure on non-oil sector revenue



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THE Central Bank of Nigeria has described the capital ratings of two Development Finance Institutions in the country as weak following deterioration in their financial performance.

According to the Financial Stability Report of the apex bank, one of the six DFIs needed improvement while the capital rating for the other three remain acceptable but not excellent.

The DFIs, largely owned by the CBN and Ministry of Finance (which acts on behalf of the Federal Government) are: Bank of Industry (BOI), Federal Mortgage Bank of Nigeria (FMBN), Nigerian ExportImport Bank (NEXIM), Bank of Agriculture (BOA), Infrastructure Bank (formerly Urban Development Bank of Nigeria Plc., and National Economic Re-construction Fund (NERFUND).

The report also stated that the composite risk rating remained “high” for two of the institutions, “above average” for another two and “moderate” for the remaining two. The prudential and soundness analysis of three of the DFIs revealed continued deterioration in their financial performance owing to inadequate capital, poor asset quality, continuous stream of operating losses and weak Board oversight.

According to the report, the provisional total assets of these DFIs decreased by 2.48 per cent to N962.3 billion at the end of December 2015, compared with N986.8 billion at the end of June, 2015. Similarly, their net loans and advances decreased by 14.73 per cent to N687.02 billion in same period from N805.70 billion at end of June.

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In fact, the poor performance of these institutions was attributed largely to instability of the Board of directors owing to the frequency of their dissolution and reconstitution. The long period of absence of effective Boards in the affected DFIs denied them of strategic direction and effective oversight.

According to Gabriel Akume, financial expert, the deteriorating financial performance of these institutions is not unexpected given the low capitalization of the institutions and government dabbling into the running of their affairs.

“These institutions were designed to drive growth of the non-oil sector of the economy and provide the framework for its diversification .Government should pay the balance of the set – up capital of the institutions which had remained unpaid since inception, create avenue for them to raise bonds to fund their activities and support the institutions to recover their past due obligations”, Akume said.

The deteriorating performance of the Development Finance Institutions (DFIs), created to provide financial services to sectors and projects that would contribute to the growth of the economy and also promote real sector activity has brought starvation to non-oil sectors and projects that would add to the growth of the economy.

The implication is that the much talked diversification of the economy may be jeopardized as much pressure would now be on non-oil sector and other projects that would have contributed to the growth of the economy.