Category: THE CEO

How can banks achieve results and enhance profit? It is by improving their risk management framework, says Taiwo Otiti, Country General Manager for IBM West Africa, covering Nigeria, Ghana, Sierra Leone and other emerging markets in Anglophone West Africa, in this interview with COLLINS NWEZE.

IBM recently hosted a ‘Solution Jam in Lagos’, which attracted banks, financial sector regulators and other stakeholders. What was it all about?

The ‘Solution Jam’ was all about banking in Nigeria. We did a banking day for stakeholders. There were different topics we wanted to bring to bear, especially for risk managers or people in risk control/internal control units in the banking sector, who manage risk basically.

There are different types of risks we manage around the world, such as credit risk, and controls. We are not just managing controls, but having the ability to put processes in place to achieve best results. We are also putting in risk management framework in place in terms of consultancy. When you put that framework in place, then how do you put in tools to manage and control those risks? And then, what are the tools you need to manage these risks going forward, and also ensure that from Basel II and Basel III point of view, which are international standards, and also localising certain things that are our own type of risks? How do you manage systems that monitor it, take data from all works of the organisation from treasury, to operations, to risk management, to general services and assets to Information Technology risk, and to credit risk, like loan defaults, to policies in place. And also how do you monitor those policies?

Now, is it just about guiding the banks or there are technologies, or solutions, that need to be deployed to achieve the best results?

They are. Besides, it is not just about technology, but adding that framework. Otherwise why are you automating, when you don’t have a framework? It means you are saying, in terms of our risk appetite, our default rate on a particular loan type, must not go beyond this point. So, those are framework you have to put in place because, not adhering to them will affect your capital at the end of the day. Again, besides, the fraud happening in your branches, how do you mitigate and put a process around them? So, we take feeds from everywhere and put thresholds and rules in those systems. Banks are big now, and you cannot throw bodies at them, you have to throw automation. You start with a framework, and based on that framework, you put systems, controls and procedures around it.

What exactly are you doing with the banks?

It is not just banks. Good risks and controls are not just for banks. They are also for regulators that manage their own industries. For instance, we are talking about how does the Central Bank of Nigeria manage risks? How does Nigeria Interbank Settlement System manage risks? Even when you go into manufacturing, they are also risks, they also have their own type of framework based on the kind of business they do.

Are you incorporating risk management frameworks into the concerned companies?

We work with them, because we also have a consulting arm. We look at the automated tools that will help you do those things and ask what are the business processes reengineering that you might do, that will help the organisation better mitigate some of those risks?

The equipment is basically what you use to do your business. For instance, in a risk policy you might say, you want bulletproof doors in your branches to mitigate against armed robbery. Those are some of the framework we can develop.

What is the feedback from banks, regulators and other stakeholders you are selling the idea to?

It is part of international standards and rating agencies also look at some of those framework. Where you don’t have a framework, they score you low. Now, lets go to the telecom industry. Are there specific issues you are addressing in that sector? In the sector we do things like revenue assurance, where you just not look at processes, but at how do we get data out of cell sites, switches and co, to see what is going on around people. For instance, if you make a call now, and someone clones same number and starts getting your calls, we have ability to block such numbers.

Does it mean that when we see such occurrences, it is not system failure but interference with the system?

It is not about interference. There are syndicates whose work is to deploy technology into cloning numbers. So, we used to see that in the era of 090, but the GSM is a bit more sophisticated, but remember you can port the number from one SIM to the other. Sometimes, it is internal fraud. We have the ability to find out who primed or moved that particular SIM. So, we are able to stop that internal fraud emanating from people embedded in the organisation.

Is it similar to what happens when Automated Teller Machine (ATM) cards are cloned?

There is no cloning of ATM cards, most of them are internal fraud that happens when someone primes a card, and attaches it to an account number. That is it. A lot of issues in Nigerian banking are internal. But we can also, based on our analytics and tools, know who did what. Sometimes, they steal people’s identities to do it, but we can also see who primed that card, because the laws are there.

Why do you think that Nigerian companies need IBM?

I think we are very different from others, the way we are set up. We do consultancy and IT services management.We can run your hardware, and have a lot of hardware that fit into key sectors of the economy. We run major infrastructure. We have massive knowledge in different matters, and we are much more wider. We also do a lot of research and development. Again, hard ware is jut about 10 per cent of our income now. We are much wider.

What roles can big data play in the globalised world?

With big data, you can predict if one can default in loans or not based on previous actions. Human beings are always evolving, but based on things you are seeing, you can adjust your risk appetite. Analytics allow you to have a better view of customers and because you can understand this, you can develop a suitable products and services.

Data has always been there, but it has to be well utilised. Data is the next resource that will drive the global economy. The challenge here is that we have not started mining data. IBM’s ambition in Nigeria is to help government to better manage data that will help companies grow. Data storage is also key. Decision should be driven by data. If you don’t have data on how you run your businesses, you are likely to make mistakes.

The ability to access and make sense of huge volumes of information, often in real-time, is fuelling the Big Data phenomenon and transforming every industry, government, profession and society. All kinds of previously unattainable data sources are helping clients transform their operations.

IBM customers can now take advantage of mobile analytics today via the   cloud to give front-line employees — who are inundated with information but often lack business insight – the collaborative tools to help them   make better decisions.

There is a CBN policy specifying that bank customers travelling abroad should inform their banks, especially when they want to use their electronic cards in those countries. How do you see the policy, and does it intend to check fraud?

Yes. You know that standards for cards in the world are different. For Europe and most of Africa, they are using the chip-based cards. Go to America, it is magstripe which is susceptible to fraud because it can be easily cloned.

So, what they have done is set up security operating centres, saying that if a transaction comes from this region, if I have not told my bank that I am going to that region, block that transaction and contact us.

Basically, it is to mitigate fraud. When Europe was on the magstripe, there was a tremendous amount of fraud in the card sector. Those frauds have moved to America, and America has started to change their system, because it is very expensive for them to change their system.

They have started the process. That is why the banks are now saying tell us that you are going somewhere. The most intelligent of banks will not bother you when you go into a place where they are using chip and pin. Some banks, once they see it is a magstripe transaction, they will stop it. It is actually to protect you.

There was a customer, who did transaction in the US, and immediately, he made payment, within 24 hours, more than N1 million was taken from his account by fraudsters. What do you think might have happened?

It is because they are using magstripe. There are many unresolved cases. The magstripe can be easily cloned, but we are using chip and pin. Although Nigeria uses chip and pin, but when you travel to America, you are using magstripe, because you are there. When you do a transaction in Nigeria, it is chip and pin, but when you travel, say to the United States, it is magstripe, because the transaction centre uses magstripe. Magstripe will eventually go away, that is why people are saying, inaugurate security operating centre, so that you monitor where the cards are used.

If it comes from American geography, or certain geography where they are using magstripe, stop it. Some people say, they don’t care if it is a chip and pin, or magstripe, just tell us you have gone to Dubai, or any country, if you do not tell us, we are not going to approve the transactions you do in those countries.

What do the banks do when you tell them?

They just unlock the block because it is an anti-money laundering software monitoring processes.

Money laundering is rampant in Nigeria because of corruption. Is there something your company is doing to assist the government or other stakeholders put a check on it?

I don’t believe that it is only in Nigeria that money is laundered. I think the issue in Nigeria is that we are just turning a blind eye to it. Look at Nigeria Financial Intelligence Unit (NFIU) and Economic and Financial Crimes Commission (EFCC) and data collection, those data on daily basis go to banks and EFCC. Every bank has a limit and the system downloads all suspicious transactions which are electronically sent to EFCC and CBN. It is just for us to start doing enforcement. It is for us to put analytics on all those data. You can see the trend.

You have to understand that banks are constantly evolving, and we can see a trend in social media, everyone wants to bank online. We need to unify a lot of things like setting of Interswitch. Banks can compete, but need to put achieve system interoperability.

What is IBM’s investment on big data like?

IBM has invested $24 billion to expand its Big Data & Analytics portfolio through R&D and acquisitions, and   underscores the vital role that the Big Data phenomenon continues to   play in transforming industries and professions.

It’s estimated that 2.5 quintillion bytes of data are created every day from sources such as email, posts to social media sites, digital pictures and videos. At the same time data is exploding, mobile devices have become much more pervasive.

IBM customers are taking advantage of mobile analytics today via the cloud to give front-line employees — who are inundated with information but often lack business insight – the collaborative tools to help them make better decisions. Staying on top of processes, having the relevant information at hand, and soliciting feedback from others are time consuming tasks – and in a traditional environment, this may take days or even weeks to accomplish.

IBM is poised to win in the Emerging Big Data Market even as the market for data and analytics is estimated at $187 billion by 2015.  Big data and analytics serves as the “silver lining” of IBM’s core business initiatives today it’s woven throughout our entire portfolio of products, services and industry expertise.

In fact, business analytics is now nearly a $16 billion business for   IBM. You may recall that was the original target for 2015, but IBM has already taken our 2015 objective for business analytics revenue up to $20 billion.

More than $24 billion invested to date to build IBM’s capabilities in Big Data and analytics, including $7 billion in organic investments and $17 billion of gross spent on more than 30 acquisitions.

What is IBM’s view on cyber security as it relates to risk management?

Cyber security is just one of the risks that you have to manage. Because if you start having leakages through cyber it will negatively impact on your image, and a reputational risk. We are one of the biggest companies in terms of security in the world.

The explosion of data in the global world is real. To what extent is that happening in Nigeria and are there ways to check it and what measures are needed to address the challenge?

I think it is already happening in Nigeria. The thing is how do we capture the data and start making sense out of it. The thing is what are they saying about my banks and what do I do about it? Banks can begin to interpret information and make insights out of it will do better. There is need for banks to embrace corporate governance and good internal processes.

Several people still want to do online banking but for the rate of breaches. What do banks need to do to achieve the desired trust?

Education is needed. Some of the banks are using secured token, and you cannot remove money without the secured token. If you write your password somewhere where people can see it and also place your secured token carelessly, people can take your money and there is nothing any bank can do. You put yourself at risk and not the bank.

So, there are various checkpoints that banks have put in to mitigate fraud. But it is also dependent on their customer to safeguard his information.

But, as I told you, some of the risks you are seeing, are also internally generated from the banks themselves. If a syndicate infiltrate a bank, it is possible that they link your account to someone else’s profile and do the transactions. But if you have the right systems in place, you can mitigate around that. We have solutions that ensure you don’t move money within internal accounts.

The Managing Director, Bank of Industry, Rasheed Olaoluwa, says the Development Finance Institution (DFI), has adopted sufficient measures to drive the Small and Medium Enterprises sector, thereby helping to create jobs and growing the economy. He speaks on these and other issues in this interview anchored by Group Business Editor, SIMEON EBULU and TOBA AGBOOLA.

What strategies have you  adopted to ensure that funding gets to the intended segments?

 The Bank of Industry has embarked on a number of innovative  steps to deepen its credit delivery process and enhance the access of  Micro, Small and Medium Enterprises  (MSMEs) to financial services. Since poor packaging of loan applications and lack of access to working capital have been identified as two of the major challenges facing MSMES, BOI in a competitive process appointed 122 Business Development Service Providers (BDSPS) to assist MSMES with the preparation of bankable business plans and also provide them with post-finance services, such as mentoring and capacity building that would ensure proper utilisation of loans and their repayment.

BOI will like to become the leading development financial institution, not only in Nigeria but in Africa. What that means is that in terms of industrial development, BoI will play a significant role in the key sectors. According to the United Nations Economic Commission for Africa, they’ve identified commodity-based industrialization as the best way forward. What  this  means is that, rather than export primary  agric  products , we can add value to them locally. So we have agro-processing. Rather than export solid mineral that is dug from the ground, we can add value locally in terms of beneficiation. We can also process them locally.

Another bold initiative embarked upon by the BOI towards fulfilling its developmental mandate, is the creation of a N5 billion Cottage Agro Processing Fund (CAP Fund). This is designed to address the challenge of post-harvest losses by financing the establishment of cottage agro processing plants that produce food products and other intermediate products for industries. A minimum of 20,000 direct and indirect jobs are expected to be created under the first phase of the scheme.

We have also established a dedicated Bottom of the Pyramid (BOP) Scheme for micro enterprises in the lower stratum of the society. Under the Scheme, funds are provided for eligible micro-finance banks to on-lend to micro entrepreneurs at single digit interest rate per annum.

 You appear to have robust partnerships with both locally and international financial bodies?

 We are partnering with lots of organisations and we intend to do more. One of them is the Department for International Development (DFID). The interesting thing about DFID,  is that you are right at the centre of  activities, you are right in the middle of the economy.. We  must of necessity  interact with several stakeholders. These include governmental and non-governmental, domestic , international and so on.

On the domestic scene, we deal with lots of stakeholders in terms of several state governments,. most of the ministries at the national levels, the Federal Ministry of Agric is a very important partner for us, as well as the Federal Ministry of Women Affairs, the Federal Ministry of Solid Minerals, the Federal Ministry of Communication and Technology.

We relate with research centres as well. We have visited Project Development Institute (PRODA), National Agency for Science and Engineering Infrastructure (NASENI),  Federal Institute of Industrial Research, Oshodi ( FIIRO), and the Raw Materials Research  and Development Council (RMRDC).

On the international level, we are also partnering with the United Nation Development Programme (UNDP).  We also work very actively with the United Nation Industrial Development Organisation (UNIDO). There is a programme they are about to introduce to Nigeria, called the XPX in which BOI is going to play a very important role. It’s about how we can  insert our domestic SMEs into the value chain of the major multinational companies. I

As one of our strategies to diversifying our funding base from government to other sources,  we are talking to the Brazillian Development Banks (BNDES), the Industrial Development Corporation in South Africa (IDC), as well as the Development Finance Company (FMO) in Netherlands.  We are talking to  the customer groups, Manufacturers Association of Nigeria (MAN),  Nigeria Association of Small and Medium Enterprise (NASME) and the Nigeria Association of Small Scale Industries ( NASSI),

What about the recent A-rating for BOI?

For the first time we got A-rating and I think we are probably the only developmental bank in Nigeria  that has gotten that. We are not there yet and we believe that by supporting players and companies in this sector, we would have contributed significantly to the achievements of Nigeria’s strategic vision of becoming among the top twenty leading economies by the year 2020

How optimistic are you about a thriving future for the SMEs?

I believe this year is going to be a very good year for SMEs in Nigeria. There are a lot of programmes and initiatives in place to enhance the growth of the sector. I believe that 2015 will be a better year for the SMEs because things have already started taking shape since 2014.

The most pressing issue of 2014 was the realisation that SMEs have not had so much access to finance in the past. What we have done in this regard is to identify all the factors responsible for the inability of SMEs to have access to finance. We have done that and we are addressing the factors, one at a time. Sometime last year, we accredited a number of business development service providers. That was done to address the fact that most of the applications that we received from SMEs were not bankable.

In order to address the issue of loan applications by SMEs we employed the business development services providers who will in turn help them repackage their proposals so that they can stand a better chance of success. We are essentially taking steps to de-risk the sector. If an SME goes through the BDSPs, it is hoped that they would have helped to streamline the business proposal of that SME in terms of the supplier, market demand and other requirements. That way, they must have put together a proper business proposal. We are hoping that with this initiative, the risk can be reduced and the operators will stand better chances of accessing funds.

Talking about de-risking the sector, what does it entail?

In addition to the strategies that we have put in place to ensure accountability, we also recently came up with a scheme to applaud those who have been faithful in paying, back the loan they collected from the bank.

The BoI Board of Directors approved the establishment of a hall of fame where we celebrate worthy customers who have taken loans, not only once but in some cases, five times, and have fully repaid. The inaugural list contained 10 names and those names, pictures and profiles adorn our website.

On the other hand, we have also established a hall of shame alongside the hall of fame, to expose people who not only failed to pay back the loans they collected, but who had collected the loans under fraudulent and dishonest circumstances. A lot of them gave cloned documents and diverted loan proceeds to other ventures not mentioned in their document. Just as the names and citations of the inductees into the hall of fame are published on our website, the names of the inductees to the hall of shame are equally published to serve as deterrent to others.

Apart from being exposed in the hall of shame, notices will be sent to banks where the defaulters do business as a warning to the bankers.

 Most SMEs have lost faith in commercial banks because of high interest rates, how is the BoI helping to solve this problem?

 The bank is well aware of this problem. Often, when we ask SMEs to approach commercial banks for working capital, they complain about the high interest rate. Because of this, we had to find out which banks were more SME friendly. When we engaged an SME group to identify banks that were SME friendly, the group came up with a number of names.   We wrote to the banks and requested an agreement to the effect that while the BoI provides long-term loan for plants and machinery, the commercial banks will provide the working capital.

In addition to that, we entered into a long negotiation process that also covered the duration of the loan facility as well as other things that SMEs feel very uncomfortable about. Last year, we signed a Memorandum of Understanding (MoU) with the SMEs friendly banks. What we did under the MoU was to agree with the SME friendly banks that they will charge MPR (Monetary Policy Rate) plus six per cent interest for any loan advanced to SMEs. By working with commercial banks we can arrange proper working capital facility. We have seen instances where BoI gave out a long-term loan and the SME ended up stranded for lack of working capital.

When loans go bad, one needs to understand why the loans have gone bad. What we are also doing is to look at all the reasons why loans go bad and try to address them one at a time. We believe that over time, the incidence of defaults will also reduce. There are genuine businessmen that really want to do business but for some reasons, they are hampered by factors beyond their control.

What is the level of success of your recent partnership with the Federal Ministry of Agriculture?

The bank  is currently  working with the Ministry of Agriculture on a N13billion Rice Intervention Fund for the establishment of  10 integrated rice mills and six cassava mills across the country.

The objective of the Federal Government’s Agricultural Transformation Agenda is not only to increase crop production, but also to create value-added food processing industries as a means of reducing food imports.

BOI had in the past successfully implemented a N3.4billion Cassava Bread Fund designed by the Ministry of Agriculture to finance the establishment of 41 processing plants for High Quality Cassava Flour.

The agro processing is one of the four key sectors that have been identified as strategic under the Nigeria’s Industrial Revolution, noting that it has backward linkages with the primary agricultural sector.

The  agro-processing has multiplier effects in job creation, reduction of post-harvest losses and generating  better rural incomes. For instance,  a High Quality Cassava Flour processing Plant uses cassava as raw materials and supplies its products to Flour milling plants.”

Also  the N5billion’ Cottage Agro Processing Fund   being launched by the bank will provide loans to beneficiaries to establish small scale plants, or mini mills to process Nigeria’s agricultural products such as cassava, oil palm, paddy rice, groundnut, yam, maize, sorghum, cocoa and plantain, among others.

What is your funding basket like?

Based on our performance, we have continued to attract funding from the public and private sectors as well as the international development community. Consequently the bank has been appointed to manage 32 special intervention funds. They include two on behalf of the Central Bank of Nigeria – the N300 billion Power and Aviation Intervention Fund (Graphics CBN’s N300 billion PAIF) as well as the N235 billion Restructuring and Refinancing Fund for Manufacturing Firms (Graphics CBN’s N235 billion RRF). The other major funds under BOI’s management includes the N100 billion Cotton Textile and Garment Industries Revival Scheme, the National Automotive Council’s Fund in respect of which BOI received N18.1 billion, the N10 billion Rice Processing Fund and the N4.3billion Cassava Bread Fund being managed on behalf of the Federal Ministry of Agriculture and Rural Development.

Nobody is looking at the gains. I think it is everybody’s enlightened strategy. We are talking about growing our national economy and banks play essential role in the economy. If SMEs grow, they add more value to the economy, they create more jobs. It has a multiplier effect. We all have an interest in ensuring that the SME sector grows. One way for them to grow is to have access to funds.

We are in the process of ensuring that we address all the factors that had hitherto militated against   SMEs accessing funds. There are lots more to come. In addition to engaging BDSPs and SME friendly banks, we have a dedicated directory on SMEs and we are also increasing the number of locations where we operate.

How long will the partnership with the SME-friendly banks last before it is subject to review?

It is a long-term partnership. We would happily have it run for eternity. In some instances, however, we would like to review it after three years just to see aspects of it that require amendments.

What is the framework and the target?

The framework is very simple. When we have SMEs that require long-term loans for plants and machinery, we will grant such loans. But we also know that most SMEs require working capital components. They will choose the bank and we will provide a reference to the bank on their behalf. It also goes the other way, the SME friendly banks that have customers looking for long-term loans for plants and machinery can also refer them to BoI.

We aim to address a lot of the synergies that have been absent in the SME system for a long time now. We are hoping that with some of these steps that we have taken, we can also strengthen the system to deliver value. 

Given the measures in place, what is the success rate of loan repayment?

I think I can say we have achieved a reasonable amount of success in that area. Let me give you an example, BoI has supported a very small company employing less than 30 people. They have taken loans from BoI five times. They took the first loan to buy equipment, they repaid. They came back for three more equipment, they repaid, then they came back for five equipment. Now that company is a large enterprise. They have 7,200 employees currently.

 

Despite poor funding, the management of Nigeria Commodity Exchange (NCX) is determined to make it the West Africa’s commodity trading hub. Managing Director/Chief Executive Officer Mrs Zaheera Baba-Ari, tells Assistant Editor Nduka Chiejina what the Exchange has been up to.

Why did the Commodity Exchange change its name?

The Exchange’s name was changed to reflect its national outlook. Prior to that time people alluded that it was an ‘Abuja Exchange’, which was not true; it is a national Exchange.

What role is the Exchange playing in the actualisation of the present administration’s Agriculture Transformation Agenda?

NCX is actually central to ATA as it is the marketing end of the agricultural value chain. In accordance with the ATA, after increase in productivity of agricultural commodities by farmers, the next link of the value chain is storage and a market for the produce and that is where the Exchange comes in; with standard and Exchange accredited warehouses and an organised trading platform.

How far has the privatisation of the Exchange gone?

The privatisation is at the very preliminary stages; therefore,regular exchange activities will continue till it is eventually privatised.

How is the Exchange coping with the paucity of funds to run its operations?

We are coping as best as we can in the face of limited funds. We are wooing donor agencies to attract funding for specific programmes. The government, however, realises the importance of NCX in engendering a revolution in the agricultural sector and achieving an improved livelihood for farmers. In this regard, the CBN is collaborating with the Exchange and two other relevant institutions, whereby the Exchange plays a key role in providing accredited warehouses and a trading platform through its pilot Warehouse Receipt System (WRS).

For some time now, the CBN has been nursing the desire to take over the NCX.  What is the disposition of NCX management to this planned?

The CBN has never nursed the desire to take over the Exchange. Some years back, the former CBN Governor who is now the Emir of Kano, wanted to inject some funds into the Exchange to make it viable and valuable so that the government could divest to the private sector after a three-year period. That plan however, never came to fruition. The CBN currently has major shareholding in the Exchange.

What is the status of the warehouse receipt launched last year?

Since the launch of the pilot WRS last year July, five more financing banks have joined the scheme, a reputable collateral management and logistics company has also been in the fray to manage the warehouses and provide logistic support. We have carried out sensitisation at major crop producing areas of maize, sorghum, sesame, soya and cocoa. We are providing a trading platform.

How many warehouses are being managed by the exchange and where are they located?

The Exchange has accredited four warehouses located in Kano, Kaduna, Gombe and Akure.

How far has the computerisation of the Exchange and its trading floor gone?

The Exchange has been computerised from inception. However, with our new focus, our trading system has to be upgraded. Liquidity on the trading floor is ongoing.  Remember that this is a pilot so we change what is not feasible in terms of trading and come up with acceptable strategies.

Since the NCX is slated for privatisation and there is the desire to upgrade its trading system, would this upgrade boost tits value during privatisation or, according to observers, prepare it for cherry-pickingh by future investors?

The upgrade of the trading system would boost trading activities and add value to the Exchange when it is eventually privatised. The privatisation is following due process, so the question of cherry-picking does not arise.

When will trading begin at NCX to enable it compete globally? How many commodities do you have presently to trade in?

It is like we are being born again! What we are doing is to ensure that the enablers for a successful exchange are put in place. These enablers were totally absent when we began operations and without such enablers and incentives from government in place, no commodity exchange can make any headway. Luckily, the administration of President Jonathan is doing its best in that regard. We presently trade in five commodities.

What are you talking about when you say you want to ensure that the enablers and incentives for a successful exchange are put in place? What are these enablers and incentives that you want to put in place?

For a Commodity Exchange to be successful, the necessary physical, legal and institutional structures have to be put in place. For example, there must be adequate warehouse capacity, farmers cooperatives; as most African countries are chararcterised by small holder farmers, good ICT facilities and appropriate legal and regulatory infrastructure that will develop trust amongst stakeholders, a national system of grades and standards, a credible system of contract enforcement and very supportive government policies, including the regulation of commodity trading activities in Nigeria. Incentives such as excise duty rebate and export levy rebate could be used to encourage commodity market operators to patronise the Exchange.

What are your plans for the Exchange going forward?

I plan to within the first year strengthen spot and warehouse receipt trading, so that within the next two years, we can evolve to futures trading. I also envision that with hard work, NCX will become the commodity trading hub for the West African sub-region.

Do you think we have Nigerians in the right numbers that are knowledgeable about futures trading? How do you hope to develop this generation of futures traders?

All the Commodity Brokers Association of Nigeria (CBAN) members that have undergone NCX training can trade futures. Remember too, that NCX handed over the comex training programme to CBAN three years ago and they are continuously training people.

To evolve from warehouse receipt system to futures trading in the next two years, does that mean Nigerians should expect a fully developed warehouse receipt system operational in the country before then?

Before we evolve into futures trading, the spot market would have been developed as prices for commodity futures depend on the underlying prices on the spot market. A well emplaced warehouse receipt system will normally run side by side of a Commodity Exchange and help provide liquidity on the Exchange. So yes, Nigerians can expect a vibrant Warehouse Receipt System within the next two years.

What have been your experience and challenges been like so far?

The experience has been that it is difficult to persuade stakeholders to do things differently. The farmers’ groups expect us to incentivise them with inputs and funds before they bring their commodities into our warehouse and this is because they are small holder farmers who have to aggregate. Warehouse owners expect us to lease from them and manage the warehouses ourselves. Middlemen think it is business as usual and see no reason to go through the processes of trading on the Exchange. We thus understand 70 per cent of our time sensitising stakeholders. However, once they understand the benefits of reduced transaction costs, market transparency, price discovery, standard storage facilities, grading facilities, which lead to improved quality of commodities and access to finance, they are usually eager to work with us.

Are you faced with any gender issues either as CEO or with the people in the fields, especially female farmers?

All the farmers’ groups for our tradable commodities that I have met are made up of men. The women are usually involved in the clearing and sorting of grains. I don’t know if that’s gender based.

What other challenges are there that you wish to overcome in the discharge of your duties?

A Commodity Exchange as an alternative trading platform is more complex to set up than a Stock Exchange, therefore it is imperative that the basic and required infrastructure as well as the right policy initiatives and government interventions aimed at strengthening the operations of the Exchange are put in place. Nigeria Stock Exchange is what it is today due to a number of intervention policies of government since the 1970’s. The singular reason why an exchange like the Ethiopian Commodity Exchange (ECX) is so successful and palpable amongst its farming populace is because of the strong support they have received along the way from its government. The South-African Futures Exchange (SAFEX) which is private sector driven has the support of all commercial banks; if you must use agricultural commodities as collateral to obtain funds from the bank, you must trade on SAFEX.

The devaluation of the naira is an extra burden on individuals and corporate entities because of its wider implications on the economy. But Nigerite is promising not to allow the devaluation to affect its business. The company, its Managing Director/Chief Executive Officer, Mr Frank LeBris says, will not increase its price, at least within the first half of the year. LeBris, in this interview with MUYIWA LUCAS and BUSOLA ADESUNLOYE, talks about the operating environment and how to bridge the 17 million housing gap, among others.

What is your assessment of the  business environment?

The business environment should be very good for us as a company because there is a housing deficit of between 16 to 17 million in the country. So, I should say the environment is very good, but there are some external factors which are not favourable and most likely this year, because of the present political environment, we are expecting  lower sales in February and maybe in March too. This is because most times people wait a bit before the elections before spending money. So, business in Nigeria is a bit of a question mark and I see it remaining so for the first half of this year in the Nigerian market.

How has this affected the performance of Nigerite as a company?

Although it could affect us, but at the moment, it has not affected the performance of our firm. It would only affect us because some customers will wait a bit before buying. So, it would affect our turnover for one or two months.

The naira devaluation means that cost of production would increase. How do you hope to cushion this effect on the final consumer?

The commitment of Nigerite is to provide very good quality sheets at a good price. So, I will say the decision at the moment is not to pass the burden to the customers; we, as a company will bear the cost differential. This is to say that we will cushion it at our own cost, that is to say the customers should not expect a price increase for the first half of this year.

How do government policies encourage your company?

I don’t see any encouragement of the government for us, but I see some encouragement from our partners such as the Manufacturers Association of Nigeria (MAN), Lafarge Africa, or other local partners.

Could that be inferred to mean that government policies are not favourable to you?

It’s not because they are not favourable, but I know the government wants to encourage the local content, like the technology transfer for sure, so they are in favour of what we are doing. But we would appreciate if we had more financial support for example. At the moment we don’t have such. I would say that is one of the supports we could benefit from, and also we are ready to contribute to team up with the government or with some private partners in order to build affordable houses. We had a CSR project in Abuja supported by the foundation of our mother company. It is a  Foundation founded by the shareholders of Etex group, which  is the main shareholder in Nigerite. So, we built 24 small affordable houses in Abuja at affordable price of less than N2 million, which the people have a chance to buy at lower than N1 million due to subsidies from the government. So, we are waiting for this kind of support from the government and the private partners.

How many bedrooms are those units of houses?

One bedroom, kitchen, simple. It’s the same pattern. We have four-by-24 houses which are almost a hundred houses.

How many states do you have housing partnership with?

We are in partnership with Osun and Ekiti States and we have some talks with Ogun State. In addition to that you must know that Odua Investments, which include the five old western states except Lagos are our shareholders. Ogun, Osun, Oyo, Ondo and Ekiti, have five per cent each. So, we should have a tight relationship with them. For Osun, the government is ready to listen to us and to team up with Nigerite. It should be encouraged and we should speed up the cooperation with these states.

What informed your investment in dry construction technology?

I would say it was its advantages, because it allows you to build new houses very quickly with this technology. Then, secondly, for Nigerite as a company, it makes for an extension of our operating scope because it takes us from being providers of ceiling and roofing products to a full provider of houses, that is, the walls, flooring and all the other parts needed in completing a house will now be provided by us. That’s why we introduced this new process to be able to be a “one -stop” shop provider for housing.

As a solutions provider in the building sub sector, what solution would you proffer to housing deficit?

It’s to provide kalsi walls, a concrete surface for the floor, some kalsi partition and to use our corrugated sheets for the roofing. Of course, we need to buy door, windows plus plumbing, but for the rest we provide the full house. We cannot meet this deficit within a short time, but the dry construction system makes it possible to construct within a short time. So, with possible collaboration with the government and other agencies this will be achieved within the shorter time than the ordinary construction. That is the solution that we are bringing to the table. We can at least fill this gap within a relatively shorter time. Indonesia is a booming country like Nigeria.  In terms of the number of inhabitants, Indonesia has already launched the kalsi. It’s a new process and in fact, they use the kalsi to build two types of walls measuring 2.4 meters by 1.2 meters and the thickness of 3.5 millimeters putting the two together. With that you can build a lot of houses at very affordable price.

What is the comparative cost advantage of kalsi over the mortar and brick system?

We take into account everything. This is because the cost of building materials is slightly higher than the current materials we have, but thanks to this because you will save 30- 50 per cent of the time to build a house. So, if you add it to the material link costs, the labour costs, the financial costs, it will be cheaper than the current way of building houses.

At what point in construction can kalsi be deployed?

You should have a normal foundation of concrete, but all the rest from ground floor to the roof will be made of kalsi. You can use the kalsi board as the external cladding. Most of the people I saw in Indonesia and in a South American country have old houses as ground floor and they want to renovate the house. The best way to use kalsi to start with, is to keep the ground floor as it is, brick and mortar then you crash all the walls and replace everything with kalsi including the flooring. Then you can have a very nice, big bedroom or a small internal garden and everything in kalsi is lighter and it is a big advantage. I saw it in Indonesia. I’m talking about middle class. So, the first step is to start with kalsi and the next step  is to have a full house for the upper class. In this case, 20 millimeters and then you have very nice external cladding. We have been able to copy some chalet in Canada or other countries to have a wooden effect.

How can an average person benefit from the Kalsi dry construction innovation?

First, we have a very good network of distributors. They are our main partners and we rely on them to explain the benefits and the way of using kalsi. We have another group of partners who are carpenters. We train the carpenters to explain the benefits of kalsi to a vertical exercise to use kalsi. So, this two population, the distributors and carpenters will help us spread all over the country. Lastly, our training team will  not go all over the country, but to the south west first, the rural market to support the distributors and the carpenters and to explain the benefit of our product, and of course, to sell.

We plan very intense action this year, but for the following year we will continue because the south west of the country is a big market. We are also in partnership with professionals like architects and builders and you know most of them are in places like Lagos, Abuja, Port Harcourt, Ibadan and the likes, but they have projects all over the country. Once we are in good rapport with them, wherever they go, they carry the technology with them. Another one is that we are also going to use the mass media extensively. Where we cannot get to, our radio and TV adverts can get, even newspapers, these are other means of awareness that we are planning.

In what way has Nigerite intervened in enhancing technology transfer?

We brought the auto clave. We did all the training and skills in Nigeria. Therefore, the technological transfer for us is to transfer the skills to our workers so that they will be able to handle more sophisticated equipment. So, that is the first thing. The second thing is the increase of local content. We will increase the number of suppliers because in the new system we have a new supplier for sand. So, we import less because in the current process we import fibers from abroad, but in the new process, we will use less fiber. In fact, we are increasing local content of our product.

What is the state of your investment in a new plant?

It should be completed by the end of March. It’s a big investment, we are talking of an investment between one and two billion naira. The main part of it has been provided here. So, we have also some equipment coming from Europe, China and Japan. So, it’s really an investment financed by Nigerite.

What’s the volume of your investment in Nigeria?

Let’s say 50 per cent for the one in Nigeria and 50 per cent for the equipment outside. We use state-of-the-art facilities at Nigerite. So, we pick the best from every country. We got something from China, Japan and Germany. We also asked some specialists to come from Germany and Spain to help us. Here, we have a lot of technical assistance from Nigeria.

What are some of the things you are bringing to the market?

First, you bring to the Nigerian market, a model, a new product. The designs on the product are smoother and more elegant. It is easy to paint and nail and one of its best advantage is that you can bend it. Nigerians like specific designs, which are good and it is lighter than the former PVA. So, it is easier to handle by a carpenter now.

How has your company been able to evolve over the years considering the competition that has been springing up?

First, our industry is not a matter of putting machines and running them, it is also a matter of improving the processes. So, the engineers of Etex did a remarkable job to run the machines between 1995 and 2005. So, we improve the efficiencies of all our machines and work and processes around it. We are committed to have a high level of safety in our factories. We still have some accidents unfortunately, but we are now moving for the highest standard of safety, that is, the EEC the European standard of safety on a machine. So, we will have competitive edge, new safety equipment by the end of this year. We have moved from those machines we used in the 60s and 70s to more modern machines. The last investment was done in 2008. So, it’s step by step and kalsi is the last improvement. We are entering into a new market and the new market we want to emphasise on is the non-residential market-the offices, banks, commercial malls; all these markets were not open to Nigerite, because our PVA and roofing sheets. We were and still more dedicated to the diverse market since 1995, but with this new one we will be able to extend our activities to offices.

Looking at the market and the new product you are bringing do you have the capacity to meet up with demand?

At the moment no. We have plans to prepare, but for  extension I would say that in the next 10 years we will be able to multiply our capacity.

So what is your present capacity?

It is about 20 million square meters per year and the market is so huge that we should be able to multiply to 40 million. But you know in this industry it is a matter of return and investment. You want to be sure that the money you invest, you want to get back and we are not going to invest for nothing. This is the first time with kalsi I’m sure we will be successful and then we will expand and have new machines to extend the capacity.

So what is your current market share?

We should have different market share. For me I would say the roofing is 30 per cent and the ceiling, I would say is 50 per cent.

What is the advantage of the crater roofing over the corrugated iron sheets?

There’s no noise, the insulation is perfect and its good for the human health and its life span is for life except you want to change because of fashion.

Are your raw materials locally sourced and are there any challenges in getting them?

Mainly the raw materials are locally sourced. Cement, sand, celluloid, we have suppliers in Nigeria. It’s just that we need some fibres, which are provided abroad. There is no problem of validity because it’s an advantage to have Etex as the main shareholders. Etex group is the biggest supplier of this kind of fibre in the world, so we have a kind of central purchasing unit based in the Europe buying for all the subsidiaries.

So, there’s no problem the only problem we could have is the Nigerian ports. Sometimes we could have some delay of vessels or bureaucratic problems at the ports in this regard; I would say the government should help us with some waiver. We are fast-tracking it, but with that there’s room for improvement.

Five years from now what should Nigerians expect from Nigerite?

Nigerite would be with higher market share in the building market and we would have a significant market share in the nonresidential market. The long term market is 50 per cent. For Nigerians, my dream is maybe not in five years, but in 10-15 years. Nigerians will buy small sheets of one by one or two by two or in small quantities, to store it to prepare a ceiling, or a roofing or to make their walls, Nigerians should go to distributors to get everything related to building a new house.