Win-win

Interest-powered banking is entrenched in Nigeria’s banking -- and development -- market.  Halal banking is making in-roads: and it comes with high prospects of BOI tapping into it; and expanding and diversifying its funding base, local and global.  So, a case for financial inclusion, across different faiths, and diverse business cultures, cannot be better made.  Indeed, in this sense, inclusion means good business!

The Cable, in a February 9 report, described the BOI managing director as saying his bank’s new path would “drive inclusive growth, mobilise new ethical funding, expand support for the real economy, and align its financial activities with social and developmental objectives.”  It should.

Indeed, BOI’s request and CBN’s approval are a commendable move to expand Nigeria’s banking culture to reflect the country’s multi-faith reality.  Conventional banking is western.  Its basic propeller -- charging interests -- issued from traditional usury.  But the Islamic culture frowns upon any form of usury.

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That must have kept a good chunk of Muslims -- those resentful of usury enough to shun interest banking -- off BOI’s business: its long-term development finance, which nine per cent interest is virtual lending utopia compared with commercial banks’ rates.  But that’s even from the demand side.  From the supply loan-stock side, the non-interest window gives BOI the golden opportunity to diversify its pool.

The Islamic Development Bank, for instance -- and other non-Western funding sources -- should, with this policy tweak, be more favourably disposed to partnering with BOI, thus joining its Development Finance Institutions’ (DFIs) traditional partners.  That’s a win-win for everyone in the vast Nigerian market, which craves development funding.

Incidentally, from data published in ‘The Nation’ of February 12, courtesy of Theodora Amechi, BOI’s divisional head for Public Relations, the bank just rolled out bright stats of its operations, between late 2024 and 2025.  During that period, it disbursed N636 billion to various ventures across Nigeria, with a non-performing ratio of less than 1.5 per cent -- its biggest development finance ever.

A good chunk of this intervention is the N200 billion Presidential Conditional Grant Scheme which, from its data, reached 957, 400 beneficiaries.  Further breakdowns of different business grades: nano-enterprises (N51 billion), micro-ventures (N32 billion), small and medium enterprises (N178 billion) and large enterprises (N375 billion).

The sectoral spread of the deal is as follows: Agro-allied enterprises (N202 billion), Infrastructure (N100 billion), Manufacturing (N79 billion), Extractive Industries (N77 billion) and Services (N55 billion).

The 1.5 per cent non-performing ratio indeed attests to the quality of assets in BOI’s care.  That should augur well for its bid to diversify its access to global development funding.  It should press that advantage, for the full glory of Nigeria’s real sector.

Still, it should spare a special thought for core manufacturing. Commercial lending, by newspaper reports, is trending heavily towards services, not manufacturing.  Short-term commercial lending is, after all, different from long-term development finance.

Yet, BOI should develop more long-term lending instruments that manufacturing can tap into, if it must fulfill its pledge of growing and deepening the Nigerian real sector.