• Thursday, July 18, 2024
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IFC under Makhtar Diop is faster, bolder

IFC under Makthar Diop is faster, bolder

…eyes historic $50b in investments

Makhtar Diop made history as the first African to assume the role of managing director at the International Finance Corporation (IFC), the private sector arm of the World Bank. His previous role was as the World Bank Vice President for Infrastructure, a testament to his expertise and leadership in the field.

Diop’s journey is a unique blend of finance and the arts. He served as the minister of finance in Senegal, advocating for removing taxes on musical instruments and empowering artists with copyrights. A true art enthusiast, he even taught himself to play the bass guitar while studying in Paris, a testament to his passion and dedication.

Diop is a trained economist who spent substantial time in his career in the banking sector before serving as minister of finance in Senegal from April 2000 to May 2001. He later joined the International Monetary Fund (IMF) and the World Bank. He holds degrees in economics from the Universities of Warwick and Nottingham in England.

IFC is the world’s largest private-sector development organisation. It combines finance, experience, and influence to build markets and opportunities in developing countries.

In this interview with Eniola Olatunji, banking and finance reporter at BusinessDay, Diop discusses IFC’s partnership with BUA on a $500 million cement factory in Sokoto, Nigeria, increased investment in commercial agriculture, and the commitment to support Nigeria’s film, fashion, music, and creative industry value chains.

Read also: IFC invests $23.3m in Nigeria’s cocoa processing to boost export

You learned to play the bass guitar as a student in Paris during the 1970s as new trends in jazz emerged and reggae exploded. Similarly, a global crisis unfolded when you became the IFC’s first African managing director. How fast have you had to learn, move, and do things differently?

Every crisis is an opportunity to do things differently and to be able to respond to them through innovation. One of the things that we learned during this crisis is that we needed to help companies that were facing difficulties by innovating and simplifying our processes.

So, we took several measures to pilot the simplification of those processes and learned from that experience. After the crisis, we continued with the same momentum to generalise the application of new processes we had developed and apply them to our portfolio. If it was working during the crisis, why not use the same process and be able to cut time?

In addition, when I came, one of my priorities was to be as responsive as possible to our clients. Some clients wanted us to move faster and have our response time shorter, and all these were sometimes driven by internal processes, which required too many clearances. We drastically reduced the number of steps in the institution and focused on those critical to the project, such as quality control, which allowed us to reduce the response time.

Another innovation we had was that we wanted to help companies facing challenges during the crisis. We developed a programme, the Distressed Asset Recovery Programme (DARP), for companies that were previously profitable but were temporarily facing some hardship because of the COVID crisis. It was important to support them through the roll-over risk of viable entities and restructuring their businesses to be sustainable and enter a new phase in a much stronger position.

These were the kinds of things that we did. It was product innovation and an internal cut to some of our processes.

How do you plan at IFC to replicate your World Bank’s “record-breaking” $70 billion for sub-Saharan Africa for energy access, women and youth economic empowerment, and technology adoption?

We have replicated it partially because last year, we had a record increase of 30 percent in our commitments. That had not happened in the history of the IFC. And this year, we believe that we’ll be able to have an increase of at least 20 percent.

Two and a half years ago, we were around $34 billion a year when I joined the IFC. Last year, we moved to $43 billion. This year, we aim at hitting $50 billion.

So, we are replicating it with the same momentum, and the secret has been to simplify internal processes and delegate more responsibilities to the front lines.

We have decentralised many responsibilities to the directors on the ground, so we can make a much faster decision when they are working with a client.

We have rigorous risk management systems that we put in place, which allow us to enter new sectors that are important but underserved. This has allowed us to increase, for instance, our presence in Africa.

At the end of June, which marks the end of our fiscal year, we think we will be reaching $12 billion in commitment from our own resources and resources mobilised for Africa, which is a record-breaking result.

Read also: Refinery not possible without Afreximbank, IFC, Access Bank – Dangote

So, decentralisation, empowering directors and managers on the ground, increasing the ceiling for decision-making, and reducing the number of things that used to be referred to headquarters for decision-making.

How can Nigeria seize the day and unlock private sector opportunities to support inclusive, diversified economic growth? How do the meetings lined up during your visit tie into this?

I met with Aliko Dangote, Abdul-Samad Rabiu, and others in the private sector. We had very good conversations about scaling up our work to support private-sector development in the country.

For example, there is an important transformative project that we are doing in the north of Nigeria, in Sokoto State. It’s a $500 million cement factory, and we are doing it with BUA. It’s a kind of investment that makes a big difference.

In my conversation with Abdul-Samad, the Chairman of BUA Group, we agreed that we would like to give a big push to two to three sectors. One of them is commercial agriculture and biofuel, which use agricultural products to do that.

I had a similar conversation with Aliko Dangote, where we also support the fertiliser industry. For us, a push in agriculture will be very important in Nigeria to support the diversification of the economy and make it more resilient.

Secondly, agriculture is important because it can help with Nigeria’s balance of payments and allows the central bank to have more reserves because the reserves used to import goods can now be produced locally. That will have an important impact at the macroeconomic level.

Third, by increasing production, you can help reduce the cost and ensure that prices are relatively low because there will be enough of that product on the market.

These are the reasons we are focusing a lot on agriculture.

We are also looking at the second big sector, infrastructure, because, as we know, there is a big deficit of infrastructure in Nigeria, which affects the logistics of the country and urban mobility.

My conversation with the Governor of Lagos was centred around urban mobility, which includes metro transportation, bus rapid transit (BRT), and other modes of transportation.

Read also: Inclusive urban devt, circular economy in focus as GBCN, IFC EDGE host summit

I spoke to the federal government about Lagos Airport, which would be an important part of the logistics in Lagos.

Lastly, we talked about a couple of roads that will help Nigeria connect better with neighbouring countries, starting with the Republic of Benin.

When it comes to the creative industry, we are pushing for it because it’s a job creator and employs many young people.

There’s a lot of creativity and dynamism in Nigeria. You have Nollywood, fashion, and music. Afrobeat is now going beyond the borders of Nigeria and Africa. All these need to be supported. I wanted to know more about that ecosystem to see what the needs of the companies working in that sector are so that we could help them.

Also, I had lunch with women business leaders and entrepreneurs to see how we could continue targeting our resources towards women-led companies. We already have some credit lines that we are giving to banks for that purpose, but I wanted to ensure we are looking at all opportunities to support even more women-led businesses.

Can you describe the huge externalities of improving local capital markets and access to finance?

We are working with the central bank on various elements of capital market improvement that can be used to improve and deepen the capital markets and give more resources to firms.

Firstly, companies need to have access to local currency. I just signed an agreement with the central bank governor in which we will be accessing some local currency to better support companies in Nigeria so that the exchange rate fluctuations do not affect them too much.

We also want to take more equity in the companies because many companies have access to credit but sometimes do not have enough equity and, therefore, are constrained in their growth. We would like to take more equity in companies in Nigeria, and having access to local currency will be very helpful for that, in addition to the loans we give to the companies.

The third element is the asset monetization programme. Depending on how it will be implemented, it could allow an opportunity to float more assets on the stock exchange and, therefore, open an opportunity to mobilise domestic savings in a much more consistent and effective way towards productive sectors to support the capitalization of some companies.

Lastly, we have developed a certain number of thematic bonds. These thematic bonds are very important. They are green, sustainability-linked, and linked to supporting women-led companies. That will help deepen the capital market and give different financing instrument options to companies in Nigeria.

Read also: IFC chief visits Nigeria to boost private sector growth

Given the slow progress of real development in Africa, do you think that multilateral and bilateral organisations should adopt a different approach in Africa?

We are all facing challenges in a fast-changing environment. Looking at where the world is today regarding geopolitics and various elements, you will see that we are in a different time. Previously, there was low inflation and strong macroeconomic situations in most of the G7 countries, and we didn’t have things like COVID, which stopped the world economy for two years.

We have different challenges. I think it’s important to acknowledge and see how we can address those challenges.

The challenges of today require a lot of cooperation. We strongly advocate at the World Bank Group that multilateralism is important. We need to cooperate and work together to address the solutions. One party can’t address these issues on their own.

This is what came out from the conversation I had with His Excellency, the President, emphasising the importance of working together so that Africa can contribute to solving the problems of the world and that the world also needs to support Africa in these developmental challenges so that it can contribute to a better world.

This is the context in which we are evolving, and I think we are now seeing some innovation by doing that. For instance, the President of the World Bank, the African Development Bank (AfDB), and other partners launched an initiative to connect 300 million Africans to electricity by 2030.

This led to a coalition including Sustainable Energy for All (SE4ALL) led by a Nigerian, Damilola Ogunbiyi, bringing together the CEO of the Rockefeller Foundation alongside Akinwunmi Adesina from the African Development Bank and the World Bank Group led by President Ajay Banga. We will all be working together to reach that goal.

So that is an example of how development institutions are working together, bringing the resources of foundations, DFIs, and the private sector together, and looking at the problem through the same lenses. In the past, it was looked at differently. That has changed, and how we will do things will be different.