The Nation Newspaper

Category: THE CEO

  • ‘Scrapping Cocoa Board was a mistake’

    ‘Scrapping Cocoa Board was a mistake’

    For 27 years, Dimeji Owofemi, Executive Vice Chairman, Multi-Trex Integrated Foods Plc, has been in the agro-allied business. He criticised the scrapping of cocoa boards, saying those countries that recommended it, retained similar boards in their countries. Owofemi spoke at the firms premises of the firm in Lagos. Group Business Editor, SIMEON EBULU, was there. Excerpts:
    In what ways havegovernment policies inpacted the economy?

    Government is a lot of the time hypocritical and pretentious. There is no inducement for hard work. Take the export of the raw commodities and the value addition for instance. About 20 per cent of the crop is value addition.

    The people who are involved in raw commodity exports are mostly European companies who want to keep their home factories running. In addition to their getting that incentive, there is double jeopardy for those who are adding value to the remaining 20 per cent.

    European countries’ regulation also impose tax on anything that is processed, meaning that our system here gives them double advantage. You give them 10 per cent, or whatever percentage and we get charged about seven per cent for exporting the value added product; so there is already a 17 per cent gap.

    When as a foreigner I can see how you are discouraging value addition engaged in by indigenes, then I will not bring in that foreign investment. There is no such thing called foreign investment.

    You can’t practice Brentwood economy in a Nollywood environment, its suitable for Hollywood environment, where all other things are equal. Because that is what economist will put to escape when it doesn’t work. Otherwise, how would you justify Europeans coming to Africa to say sign this partnership agreement? Is that a partnership agreement? It is a takeover agreement. It should be called European acquisition agreement.

    Is this not an indictment on our financial system?

    The truth must be told, we as a country have no confidence in our banks. When China generates money where do they take it to, do they bring it to Nigerian banks? When Britain generates money, do they take it to another country? So the big income from the government and the economy, exclude our banks from having access to it.

    So when a foreign company comes to Nigeria and it wants to do business, it goes to borrow money from the same bank. What they do is when they raise funds they syndicate it. Any bank in the US that wants to lend Nigerian bank money, they are accessing the same money that Nigeria put in their banks. When it is about to access that money, that bank would again say there is a country risk, they put four per cent. This implies that your money is coming back to you as a country risk and it is now recorded as foreign investment coming to you, whereas it is your money in the first instance.

    The banks are just being made scapegoats that they don’t support the real sector, they have not got the money to support the real sector.

    So, you support what Aganga is insisting on?

    It is not Aganga, it is Nigeria. And other African countries have started seeing the sense in what we are saying. The European Union Minister was here with his delegation because he has been hearing us work against it. Why should we allow our borders to be open again when we have a flipper of opportunity to add value? They can see that Nigeria and other West Africa countries are now generating revenue; they want to come and wait for that revenue.

    They pretend they are setting up industries here, but they will be setting up only packaging industries; everything will be brought from outside the country and it will come with their own citizens to and run it. In the days when… and the rest of them started, there was none of them that did not have expatriates in large number. Those they call directors or technologists are workshop officers in their country. The person knows the limit of his power, he gets the same salary he will get when he is there, but we get charged the salary they want, so it is a way of repatriating the so called investment.

    There is always this fear about inconsistensy about policies. What is your take on this?

    We will not stop talking. It is no longer wise to leave it to government. If we were not making noise some civil servants would have been compromised, even as far as Manufacturers Association of Nigeria. But we recgnise what people like Chief Kola Jamodu have done, he stood his ground, and the reason is because he is coming from this area. He has run industries before, industries that belong to foreign bodies and he knows what efforts to put in for it to stand.  There is no country in the world that has more human resources than Nigeria and I am ready to prove it on any platform.

    Including China and India?

    For our own economy we have enough. That is the point I am making. In Africa, we are leaders. Anywhere you get to in the world and you don’t find a Nigerian, don’t stay there. We are just specially gifted and what happened is because sometimes we talk more about what is not happening in our society and blow it out of proportion.

    They don’t want to do business with Nigeria because there is security problem, it is a sad thing that is happening, but because may be there was no stitch in time, if there was stitch in time, it wouldn’t be happening the way it is happening.

    Have you anything to do with AMCON?

    We are in AMCON as a company, we have our loan bought by AMCON, but they were probably told untrue stories and they are acting on it. When the truth became clearer and they wanted to help the company by giving additional capital. Central Bank in its wisdom, because they feel some bad eggs created problems, rather than punish those ones loitering around the corridors of power, they put a blanket ban that anybody whose loan has been bought over by AMCON should not be allowed to even have access to borrowing from Nigerian banks for working capital. I borrowed money from you to buy a car but you are saying I shouldn’t be allowed to borrow money to buy fuel into the car and yet you are expecting me to pay back the loan.

    The year 1986 seems to have been a sort of watershed for the cocoa industry, the dismantling of the cocoa board, the privatisation, deregulation and so on. Actually, what did you get through that structural adjustment programme?

    We did not plan what will happen after the scrapping of the cocoa board. What we got wrong is, World Bank says we should go and scrap our cocoa board, just like EPA is forcing us now, attempting to force us with the promise that it will benefit us by just increasing taxes on the existing poor people.

    Scrap your commodity board you are subsidising by using commodity board, you are protecting them and shielding them,” they said. The mother and father of free economy or capitalism is America. America is forever subsidising its farmers. They created the WTO to protect themselves.

    Then again with the General Agreement on Trade (GAT), they created so many things to protect themselves. When one fails they will device another one.

    What we got wrong is that, we never planned for the future. And not to plan is to plan to fail. If we scrap this commodity board, what will happen to the farmers? What are the structures sustained by this commodity board or cocoa board that will suffer if we scrap it? Do we have the alternative value structure to protect this value chain?

    That’s what we got wrong. Nobody asked that question. When it also dawn on them that there was now the aftermath, after they realise they have created a problem for the farmers, they started ad hoc measures without looking for a way to proffer solution on the existing problem. Instead of encouraging banks to go to ADB to borrow money and lend it to willing investors, without telling those banks the tenure to lend it. So, the banks took the loan for 25 years and they gave it out for three-three years with the intention that they will roll it over. They were treating development fund as a trading fund.

    The project has failed from the on set, for the reason that you can’t do this kind of business with a two or three year loan. It won’t work. And they didn’t have the capacity to sanction those banks and correct them even when complains were made. They lent it out in hard currency in an environment that is just devaluing- it is the devaluation of the currency that the World Bank wanted when they say scarp your board.

    There are still cotton boards in the US. They still have grapes board in the US. Why did they ask us to scrap our own? nobody is asking that question. When it was now scrapped and you realised it, you now got money from the same set of people, who in their wisdom also gave you for 25 years. But your own bank is now seeing it as trading money. They lend it again through banks who they had given N10 exchange rate to come and pay back, refused to give that same rate because they are seeing it as foreign exchange rate, and took the money from you at a rate which they pass to the customer but they never gave them the facility in naira.

    When eventually government say come and pay back at 22 per ent, even if they had the naira to pay at 22 per cent, the quantum of naira is now more than the money they borrowed, which means either the capacity of the machine suddenly expands to cope with the volume of money they need for that purpose. So, they were constrained there.

    Another basic component you mentioned was actually the devaluation, which…

    It is the devaluation because it was meant to make our economy penetrable, America is forever asking China to devalue its currency, because then your export become unattractive and they can dump sales on you. Anybody who wants to produce in that economy cannot compete. So, they want to make your economy uncompetitive by insisting that you must devalue. China is forever never going to do that because they know that it doesn’t make sense and America knows it doesn’t make sense. The British government refused to join the EU, they joined the EU but they held on to their pout. The reason why they did that is to protect their own economy.

    Just around this time, last year, the Nigerian raw cocoa lost its export vaue on alleged policy assessment, what is the situation?

    It has. Even as at that time what happened was that when you make it an all comer affair, it is not your field and the attraction  for everybody who set up a finance company at that time, was because of foreign exchange. And cocoa, up till today, is about 70 per cent of the foreign exchange earner in non oil, so everybody rushed into cocoa, anybody could gather the bags. People saw the opportunity from the supply point of view because they are in hurry to make quick money, you know they were taking deposit at 15 per cent everybody comes inside forum. The only way they can pay that return is to turn the naira into foreign exchange then bring it back and turn it back into naira, that was the basis of forming that numerous finance companies at that time. And so the rush put pressure on the farmers as well. When I came into this industry people were selling for less than N4,000 per ton, at the last count it is about N540,000. You can look back and say farmers are making more money but break it down on the value chain. Who is making the money? It is not that farmer. He has no capacity to compete. He has no capacity to even negotiate. Those capacities have been removed.

    How much of that goes to the farmer per ton?

    Nigeria still gets the highest but it doesn’t make it right. Along the West Coast, Nigerian farmers get the highest proportion, about 60 to 80 per cent, where they are not cheated. Where they are not cheated is 80 per cent, where they are cheated is about 60 per cent. Cheated in the sense that this foreign buyers goes to the field with adjusted weight that has already adjusted the price they are giving. So, they give a good price in the imagined sense of it but they have taken the weight to balance the price back to a lower amount. Government is no longer, at that time, responsible for making sure they get the chemicals they need. The current minister, who would imagine that it is possible to stop government from importing fertiliser, which government will give a lot of money to import, they will subsidize it; the same people who brought it are coming back to collect it and they go to the farmer and sell it at increased price therefore the farmer can only buy so little and the quantity he is going to apply to the farm is insufficient. So, if you talk about outbreak of disease on the farm, these are the consequences. The people who caused us to scrap it are coming with what they now called different policies for farmers; private partnership, they have all sorts of coinages.

    The fact that children are no more interested in looking back in sustaining what is inherited from cocoa farming does it create some fear in you that the supply source may dry up?

    If people don’t die we wouldn’t probably give birth to new ones. And so when you give birth to new ones you will not be able to take care of them. It gives me sleepless night that you are talking about generating employment when the real employment is on the farm or in the factories. When banter statistics of how many employment have been generated they should group it into qualitative and quantitative. Because the fact that more people are being employed does not mean those are the people which kind of employment we need, not labourers.

    We need people who read Economics, Engineering, Civil Engineering, Mechanical or Electronics, where are they going to work?

    Manufacturing sector over the years has been endangered. What is the staying  power of your company?

    The staying power is passion, it is just passion. I mean if you have done something for 27 years you most love it so much that you are not distracted to do other things. It is passion that is making me stay. The investment in this place has the capacity to, direct and indirect, to employ about 1500 people and it is the same for other factories. We are about eight that is functioning; eleven that are cocoa processing but the eight that are functional, one percent. The only two doing very well among us are owned by foreign companies, and I give kudos to those foreign companies that dared to invest in Nigeria, in our industry. The remaining six are all Nigerians. Three of us are candidates of AMCON. AMCON is the savior, as far as I am concerned, that can CBN say, don’t allow them to borrow money for working capital, how do we generate the flow to  about giving waiver or discount they will be looking at the total which the act insist they must look at. But they forgot that what happened to us happened in America. How did the American government deal with it, they pumped cash into those industries and they were eventually able to pay back. Take Peugeot automobile for instance, they can employ 10,000 people minimum, if not 20 or 30 sub industries, but what brand of car are our leaders riding? Toyota, Mercedes, BMW and so on. Do not blame those people riding those cars? Because that is the car that is available, I am probably guilty of the same offense. But Peugeot those not make a car and nobody is thinking. Right, we are going there to control that company but we are going there to make sure it works.

    Such that over the years Peugeot have not been able to evolve because design has moved away from Peugeot 504, so for them to compete now you need to change the entire production line. Where is that money? Ajaokuta was designed to do flat ships when what you need is rods, and we spend so long a time thinking about the fact that Ajaokuta is not producing what it is suppose to be producing. How long are going to be doing the thinking and the talking? When are we going to be walking the talk?

    What can you say on CBN raising the cost of servicing debts?

    First, it is the government. The government in a way setup the CBN, they had since independence. If government says bring Nigerian money to Nigerian bank CBN will do it tomorrow. Because it is holding the money on behalf of the government, it is a banker the government. And the owner of the money will tell you how to put its money. Now, the same government that is blaming the banks, the little deposit we put there, when they do these their treasury bills, which is what you are talking, cash ratio, they pay the bank 12 per cent. Can they go to the same bank and tell them to lend single digit to the industries. They say there is a risk in lending to industries; let us not kid ourselves that there is no risk, even the book of investment says the higher the risk, the higher the returns. But if you know you are going to be disgraced for taking cognate risks you will rather go and put the money in treasury’s bill. If you look back, when government created the AMCON money and said buy “toxic asset”. When they gave the money to the bank it is in that period that the banks started declaring billions of profit. Banks that were declaring N15 million, N40 million profits suddenly declared N100 billion profits; how did they generate that profit? Very simple, they take that money they declared as toxic asset they put it back in CBN for fear of it might go bad again. So banks are scared to even take risk. Maybe now that investment bankers are they are borrowing at a high rate. If government should go to the bank tomorrow and say treasury-bill, we will pay you four per cent; interest will come down because it is the reference point. They can’t lend at a lower rate than the rate at which rate treasury-bill are issued. You pretend to be mopping up money from the person who you have taken your own revenue away from and you are expecting him to develop that economy for you.

     

     

     

    The Minister for Agriculture has been talking about the value chain approach, what is the benefit of that to a company like yours in the processing of cocoa, how far have that value chain benefitted you? And what do you think can make it boost activities in your sector?

    Minister for Agriculture is somebody who likes to be engaged, and when you talk sense he will listen to you. Recently, there was this government pronouncement about industrialisation. I am waiting for the effect of it. Operation Buy Nigeria, the same Nigerian government that those not think they should give contracts for production of our kind of product for them to consume 52 times they meet in a year. Brazil was in the same situation we were 17 years ago, what they did is anything that government must use must be produced locally. So, how do we then ensure that we get the benefit of what this minister is doing; he is just laying the foundation. First, the kind of crop that we have on the field has been bastardised for so long; that is the starting point. You need highbreed that can give the farmer higher yield on the same size of land to gradually and speedily take him out of poverty line.

    What future does this industry hold?

    The future is bright but it is covered. Let government remove that cover for the grace of God to manifest. But they can only pull it for so long. Multitrex is an Act of God nobody can kill it. No policy can kill it.

    Tell us about your product.

    There are two brands of product. We have good customers in AMCON that have tested our product. The judicial system in Lagos also, they love our product. They have come to a point where they have lost sleep somehow, you know over time they don’t sleep well, when they want to sleep it is that Vangarta they take. It is not only good for diabetes or blood pressure but funny enough it is good for fibroid in women which there is nobody here that does not has connection with  a woman either mother, wife or daughter. We also make chocolate here, which anybody who is somebody in this government has been in our factory. Former President, Olusegun Obasanjo opened the first factory. The Sultan of Sokoto has been here. The General Overseer of Redeemed Christian Church of God, Pastor E. O Adeboye has been here. Minister for Industry has been here. Minister for Agric launched this product. The incumbent president, President Goodluck Jonathan has been here. He is the one who commissioned the chocolate line.

     

     

     

  • Lack of infrastructure hampering economic growth

    Lack of infrastructure hampering economic growth

    Worldwide, the manufacturing sector has driven change and impacted the prosperity of more companies, nations and people. It has been a key driver of higher-value job creation and a rising standard of living for the growing middle class. But the case of Nigeria is that of dismal performance. In this interview, Group Managing Director/CEO, Flour Mills of Nigeria Plc. Mr. Paul Gbededo discusses the challenges of managing a manufacturing outfit, in an environment lacking in infrastructure

    Successive governments have failed to reinvest in the existing infrastructure, leading to loss in competitive advantage. In this regard, Nigerians are clamouring for some strategies to reverse the decline of its manufacturing industry. What is your take?

    I think Nigeria has left it for too long. If you recall in the late 1950s, when countries in Africa, especially West Africa, were clamouring for independence, there were a lot of energies in the leaders at that time. One of them, who comes to mind, is President Felix Houphouet-Boigny of Ivory Coast. When he was inaugurated as President, he promised his people two basic things – I will get you power. I will give you roads. You sort the rest.

    Basically, that is what he did. Throughout the 1960s and 1980s, Ivory Coast (Cote D’Ivoire) became known for these two things. In fact, it became the Paris (France) of West Africa because of the level of development the leadership had accomplished.

    In this light, developing the power sector and general infrastructure is key to industrialisation. We must be able to fix our power sector and the transportation sector as a whole. Our infrastructure level must be dynamic and functional to move goods around and help people create wealth. That is very important.

    The manufacturing industry requires urgent revamping. There is need to improve and maintain basic amenities and infrastructure, particularly the road network to aid distribution and delivery of raw materials and finished products respectively.

    I think the government needs to do that because infrastructural development is key to us achieving industrial revolution.

    What is your outlook for the economy?

    Nigeria has fallen in terms of low level of electricity supply.The level of industrialisation is affected. Demand for electric power is accelerating rapidly, without a corresponding increase in power supply. Capacity utilisation is so low because the raw material for production doesn’t get there in time for companies to carry out their production activities. The raw material come in through the ports and then through the roads to the mill locations. Whereas a trailer can only carry 30 tonnes of consignments at a go, a set of wagons on railway can move 1000 tonnes at once. So, how many trailers will move such quantity in one go? It is important that we look at this critical sector, providing infrastructure for our industry to be able to produce. Otherwise, we will forever remain non-competitive in the global market place.

    What does it take to make our manufacturing industry globally competitive and eventually lead to an improved employment ratio and investment?

    To make the manufacturing industry globally competitive and the environment favourable, it is pertinent to improve electricity, maintain good road networks in addition to other basic amenities.

    Generally, global business expansion are evident in areas where the required infrastructure and energy services are available and which are linked to transport and highway corridors. In this regard, I think we need to look at those countries that are ahead of us. They have the solar, wind, all form of new and renewable forms of energy that are environmentally friendly.

    But have they neglected the core areas, producing power from coal, waste and petroleum gas energies? No. Some have gone on to develop power from nuclear. Today, major industrial countries get power from different sources.

    How can these new forms of power technologies impact on the country’s power consumption requirement?

    Perhaps, we still need to look at the coal sources. For instance, we have hydroelectric power in this country. Why have we abandoned it? Because of lack of maintenance .We are going into thermal power generation based on our petroleum gas reserves that we are richly endowed with.

    But have we thought of the framework to do that? Is the gas sector fixed? Do we have the gas sector in the hands of those who can better handle it? Those are issues we have to look at and be sure we have the framework for the industrial revolution that we want. Not just going downstream and not fixing the upstream.

    As part of efforts to expand power supply, government should diversify the power mix in order to secure continued access to primary energies.

    Think of any industry today in Nigeria. Think of any company in Nigeria. It is like a city on its own. The company fixes its water supply system, access road, electricity and all that.

    As a company you are responsible virtually for everything you have-infrastructure is not just available. These add to the cost of doing business and production.

    For us to be competitive in the global market there is a need for power. Economic expansion places greater demands on the power generation. We can ensure continued economic growth by guaranteeing adequate supplies of power.

    We need infrastructure to support competitive industrial activities. Look at what have been done to our roads. The Government has been trying to fix roads. But because of heavy duty vehicles traffic on the roads, they get bad so quickly. This is because we have neglected railways transportation. So we need to fix that aspect of our transport system. Happily the government is addressing it. We transport raw materials from the port area to the North. You need railway transportation to really do that.

    How has rising inflation affected sales in the food processing industry?

    In our sector, we have not increased the prices of our products in the last 18 months because of falling consumers spending /purchasing power.

    On the whole, one needs to be strategic in this environment. You need to be creative. You need to impoverise so that you don’t incur excessively high cost of production so that your products are not priced beyond the reach of consumers. With that you first of think of economics of scale.

    What are your views on wheat bread?

    Let us be clear that full importation of wheat to Nigeria is not sustainable because the population is growing and also the import bill will be growing. What the Minister of Agriculture and Rural Development is saying that we should have some kind of import substitution makes sense. The way to do that is by cassava intrusion into bread. If we can succeed in ensuring that we do it right and get the consumers to like cassava bread, get the bakers to be able to bake cassava bread properly for consumers that will be it for Nigerians. That is why I am thinking that there must be a kind of national reorientation on inclusion of cassava flour into bread.We need to start changing the thinking of Nigerians by letting them know that it is for our own good that we start putting cassava flour into bread.It has to be a composite bread. It is for our own good. It will create more jobs for the country. It will help to be proudly ‘Nigerian’. It is true we have been used to wheat bread for so long. Why can we not have up to five per cent cassava flour inside or even 10 per cent cassava flour that would have saved us 10 per cent in foreign exchange.

    But also, industries like ours should be encouraged to cultivate other crops in addition to cassava. We can explore other industrial uses of these crops. I think of Thailand. They don’t eat cassava in Thailand.

    They don’t put cassava flour in their bread in Thailand.They don’t eat it. The fact is that thy think about other countries and what they need from cassava as a raw material. Therefore they convert their cassava to things which are exported to Europe and other parts of the world.

    While it is true that we are pursuing our programme of compostite bread, we should think of other uses of cassava especially now that are cultivating cassava for export.

    As a major producer of cassava, we can look at other places we can export cassava to. We can look at other countries doing well in cassava exports and see whether we can duplicate their success stories.

    How would you describe the current food adulteration menace in the country?

    The efforts of National Agency for Food and Drug Administration and Control (NAFDAC) as the regulatory agency in this regard is noteworthy; the agency is doing a wonderful job in tackling the problem of fake and adulterated products.

    They set very high standards to protect the consumers and ensure that most key food products are registered or pass through due registration process; are certified fit for consumption before going into the market. It is worthy of note that NAFDAC does not allow unregistered,uncertified food products as it is mandatory for every food products to carry a NAFDAC registered number and expiry date.

    Everyone speaks now about supporting small farmers to achieve food security. What measures have you taken in this direction?

    It is important we support small and medium scale farmers. The government needs to assist by subsidising the cost of clearing input, enlightenment on the proper application of fertiliser, logistics, getting the right kind of seedlings, improving yield and provision of soft loans and grants. However, to achieve rapid food production and improve the state of farming, we need corporate bodies and individuals to undertake large scale merchandised farming.

    Some farmers are complaining that it is difficult to get young people to go into farming. Is it something you are looking at?

    Yes, we employ youths in all our farms and we encourage them to have their farms as part of outgrowers scheme.We have also employed 10 graduate trainees with agriculture background in our agro-allied division so that skills and expertise could be transferred from expatriate farmers to Nigerian farmers.

    Even though our farms are highly mechanised,we still engage a lot of youths and women to participate as regular, adhoc or temporary staff particularly during planting and harvesting seasons.

    All the youths in villages surrounding Kaboji are engaged especially during planting and harvesting.We engage them.Yet we are mechanised but not to the extent of not allowing the villagers and youths to be involved in value creation within their communities. Women in particular are engaged in the harvest process.

    Young men are given opportunities to own their own farm plots near to our own hectares.They benefit by learning agricultural techniques of seeds from reliable suppliers and the fact that they are part of an uptake market.

    We purchase the grains from them as well as for our farms.So ,we have created a zone in Kaboji that is bringing wealth to the people.We don’t find the kind of restiveness that you find in other places in Kaboji area,because the youths are fully engaged. I think this need to be replicated in other places in the country.

    How do you perceive the sugar situation in Nigeria?

    Nigeria currently consumes 1.6 million metric tonnes of sugar annually. Out of this,98 per cent is imported into the country. This is not sustainable. That is why the national sugar master plan dictates that the three refineries must be able to go back to the farm. They must have backward integration; by the year 2020,Nigeria should be able to have 70 per cent of its sugar needs produced locally.I think it is achievable though it is a very tall order,but it is achievable provided all the measures that have been put in place can be sustained. We are doing our plantation but it is no even enough,We need to do more to see that we become self-sufficient in sugar production. Sugar cultivation employs a large number of farmers and that is very important.We do it locally. We have other refineries doing a great job of sugar cane cultivation.if all the three refineries in the country practically implement the master plan and follow laid down guidelines, we should be able to achieve it by 2020 with at least 70 per cent of our raw material being sourced locally.

    What efforts are you as a Company putting in place to make this target a reality?

    We have a 17,000 Sunti farm estate. We are developing 10,000 of that into sugar cane. In the next two or three years , we would have planted the whole sugar cane segment of the farm. It will be producing about 100,000 metric tonnes of raw sugar.Our sugar cane crushing mill will be in place. We are developing another 5000 hectares few kilometres to Sunti. Within the estate farm , we will produce raw sugar from the farm, and then refine it at the refinery for table and industrial use. That is another value chain.

    What opportunities exist for investors to come and partner with Flour Mills?

    We need partners in cultivation. The more land that are made available by the government within the sugar cane belt,the better. You cannot imagine the level of land that is required for the 100,000 metric tonnes that we are producing; it is covering 10,000 hectares. So if you are thinking of 1.5 metric tonnes, you are looking for 150,000 hectares of land to be able to be self-sufficient.There is still room for investors to come in and cultivate sugar cane locally.

    I am glad to read that Kaduna State government is tryng to encourage sugar cane cultivation .But remember we are talking about industrial sugar cane cultivation not sugar cane for people to eat raw.

    How would you evaluate the impact of Flour Mills Plc on food security?

    The impact of our business on the economy is profound. Our achievements in our agro allied business are resounding! These include Kaboji farm which is one of the largest commercial farms in Nigeria with farmland comprising 10,000 hectares near Kontagora, Niger State. This season witnessed cultivation of 2,000 hectares of maize, 1,000 hectares of soybean, 1000 hectares of cassava and trail of 50 hectares of sorghum.We have the oil palm plantation in Edo State. The plantation produces fresh palm fruits.We are crushing that and extracting fresh palm fruits. We have crude palm oil from there. We have the table oil refinery in Ibadan-Rom oil that converts the crude palm oil into vegetable oil for the kitchen. We going beyond that to produce margarine and butter.The plant will be commissioned at the end of this year. So you can see that another value chain is being created. We are driving this value chain and creating jobs and wealth for communities, why would the Nigerian public not take notice of us as we are really moving in space and have become the biggest food and agro allied industry in the country.

    Everyone knows the story of Flour Mills. The company has been around for over 50 years. The strategy of flour mills is to ensure food security for the country, ensure that jobs and wealth are created. But over the years, we have been importing our raw materials for our food business. We are the biggest food milling industry in the country. This is increasing as the population is increasing.So importing raw materials would not be sustainable.

    So, many years back,10 years back, we started thinking about what we can do locally.That is what developed into our agroallied business.

    Today, we have become the biggest agro allied business with farms all over Nigeria. We have farms that are producing sugar cane,coans, soyabeans,cassava,rice and oil palm.

    So with these different value chain, we have continued to develop, it is not just cultivation now but also processing the produce from these farms.That is the value chains that we are developing.

    For instance, we have kaboji producing corn.We turn corns into animal feeds. And therefore we have the biggest animal feed company in sub-Saharan Africa.We have an animal feed company in Ibadan,Oyo State.We produce 350,000 metric tonnes of animal feeds per annum.We have just commissioned a new one in Calabar,Cross River State. We are producing 350,000 tonnes per annum.

    We need raw materials for these industries ,that is why we have to go back to the land, cultivate corns and get all the farmers producing corn to supply to it to our businesses. That is the entire value chain.

     

  • ’We’re going to hand over a solid bank’

    ’We’re going to hand over a solid bank’

    Soon, Enterprise Bank, one of the bridged banks, will be sold by the Asset Management Corporation of Nigeria (AMCON). Its Managing Director/CEO, Ahmed Kuru, believes his team has accomplished its task, saying any investor that acquires the bank, will find it a good buy. In this interview with reporters, he speaks on the bank’s fortunes and other isues. Group Business Editor SIMEON EBULU was there.

    What is your assessment of the bank from the time you assumed office till now?

    When we were appointed by the Central Bank of Nigeria (CBN) through the Asset Management Corporation of Nigeria (AMCON), we clearly said our mandate was and still is, to manage the bank commercially, professionally, to take the bank out of the woods, position it for better service delivery. In any organisation, there are three things that are key to success. These include the people, technology and processes. When we came on board, we met people that were clearly de-motivated, people that were not properly trained and were not sure about the future.

    By and large, we have been able to motivate the people, trained them, built confidence and positioned them to be able to compete favourably with anybody. We made it very clear from the beginning that we are not here for the size game. We are not interested in being number one, two or three.

    Our strategy has always been to be an efficient bank, a retail bank and to be a bank that is focused towards helping small businesses. There is no way you can achieve that without having a highly motivated workforce. So we invested a lot of resources towards building our people. The core banking operations that were supposed to drive our operations when we came on board, most of them were obsolete when we came on board. So we have been able to upgrade some of our core banking operations, we have upgraded our servers and equipped most of our branches with the necessary tools required for efficient banking delivery.

    We were able to turn around the bank and right from the first year, the bank has consistently been profitable, which to us, is a very big achievement.

    We are not distracted by the sale process. Right from the beginning, it was very clear to us that AMCON, at a certain point in time, will divest from the bank. So the divestment is not an issue for us. I always tell people that most of the banks in Nigeria are for sale and they are being sold daily. If you go to the Stock Exchange today, you will see the transactions that happen in the banking sub-sector. It has always being the highest. People are always changing ownership in terms of selling and buying stocks. So if AMCON wants to divest, what it is doing is selling its shares which is not something strange in the industry. So the fact that AMCON is divesting now is good for the industry.

    We are almost finalising on our 2013 accounts, but will not want to comment on that because it is with the regulators.

    But what I can tell you about our account is that it is improving by the day. We are very confident that at the end of the day, we are going to hand over a very profitable financial institution. We have almost 160 branches. The bank is now electronically driven. There are incentives to encourage people to use ATM and other electronic channels.

    What’s the time frame for the sale of the bank?

    Right from the beginning, our mandate was to run the bank and run it commercially. So, even when AMCON decided to sell the institution and appointed financial advisers to assist them, we decided not to get distracted with what is happening. I can confirm to you that we are not part of the sale process. Professionals have been appointed and they are driving the process. What we are doing is to run the bank. Of course, the timeline was discussed with us initially, but like every other thing, there were issues pertaining to adhering to the timeline, particularly in this kind of environment. Initially, the target was to the first quarter of this year, but because we started very late, what AMCON has said is that the process should be completed by October. For us, we are ready, everybody is welcomed. What AMCON decided to do was to leave the professionals to do their work such that there is no much interference. About 24 prospective investors have shown interest locally and internationally. A lot of them called us, including international financial institutions that showed interest because they have seen the figures and the financials and they strongly believe that the bank has a lot of potential. So, we don’t know how many institutions finally made the list.

    But what we decided to do internally is to focus on running the institutions; we don’t ask questions about what is happening and we have allowed those responsible for the process of divestment to carry on with the assignment. At any point in time, if AMCON requires our attention, they will surely get it.

    But our mandate is to run the bank and we have energised our members of staff because whoever is buying the institution is not buying the building, but the value, the customers, the quality of staff and so we are working on those mandates so that the valuation of the institution would be very high.

    How will you assess the financial performance of the bank?

    Since we came on board, we have been building the books on the average of 20 per cent yearly in terms of our deposit and if it is risk assets, we have done over 80 per cent. When we came on board, our loan-to-deposit ratio was less than five per cent, but today it is in excess of 60 per cent because we are building our loan book. In terms of profitability, last year we closed in excess of N11 billion. Our rate of return on equity is also increasing. Our return on capital is one of the best in the industry because you may see some banks declaring N50 billion, N100 billion, but what we need to look at is what is the capital deployed. If I am able to declare N5 billion or N10 billion on an equity of N25 billion and somebody is declaring N100 billion on a capital of N100 billion, it tells you the efficiency ratio.

    Averagely, on a year-on-year basis, we have been building our books by 20 per cent and that is why AMCON, because of the health of our financial figures and the achievements recorded so far, picked Enterprise Bank as the first bank it wants to showcase and to divest. The level of interest that has been shown indicates that what we have achieved so far is commendable. Generally, if you look at the health of our risk assets, it is also solid. You look at the character of the customers and the active accounts. We have almost 160 branches. The way banking is today, it is not the number of branches that matters anymore. Banking now gradually is electronically driven and what we try to do is to take banking services into the office of the customers.

    So, most of the branches that we have we are trying to make them more of e-banking to such an extent that from inside their offices, customers can scan documents, they can go to the internet and they can give you instructions without necessarily coming into the banking hall.

    In most of the banks, what we do is to come up with incentives to encourage people to use their ATM machines, to use their electronic cards so that they don’t necessarily need to come into the banking hall because that is why the cashless policy is being supported strongly by the banking community because it will bring down the cost of operations. Operational cost is very high in the industry today. That is what is contributing to the high interest rate. So if we are able to share services, bring down the operation cost and take our services to the customers, obviously it will bring down the cost of financial services.

    What is your loan target for the year?

    We started with an operating loan book of less than N5 billion in 2011. We have grown it to around N76 billion. Last year, our target was to do around N100 billion. We are a small bank; we don’t want to go back to the old days, so we are very conservative when it comes to building our loan book. This year, we intend to grow our loan book to around N130 billion because we believe that is what will support our balance sheet. But we are also very careful in diversifying our loan portfolio. Now, it is very easy if you want to build your loan book, for example, in the oil and gas sector, you can do that in one month with one transaction. But for a retail bank, you are trying to build the small loans and the small loans which we normally sell through products take a longer time. This is because we are talking about N10 million, N5 million, lease and so. That takes a longer time but usually performs because the irregularities are not up to five per cent. We have a lot of products to support our retail banking strategy.

    What is the bank’s most priced niche, or strength?

    Really, our revenue strength, just like most banks in Nigeria is from lending because that is the core line of our income. We do have a lot of income that comes from fees and commissions, but ultimately if you go through the balance sheet of most banks, between 60 per cent and 80 per cent of the revenue base is from lending. So we are not an exception. We make more money from lending even though quite a lot of fees and commission do come either from foreign exchange transactions, treasury activities, but basically lending is where we make more revenue. Now, public sector funds for us in the industry, before now was sort of cheap funds because there are no strings attached to them and usually you keep them in current accounts and it gives you a lot of leeway to have a lot of resources or to lend. So quite a lot of banks – some of the big banks and some of the small banks; realised that the composition of their deposit profile had a lot of public sector funds. Whether we like it or not, in Nigeria, the government plays key role in our economy. They are the major source of liquidity in the economy. So banking with public sector funds used to be very profitable because it gives you the cash flow. Obviously the increase in CRR would affect the investible cash flow that you have. At 75 per cent CRR, what it means is that if you collect N1 billion of any government deposit, N750 million of that money will be kept somewhere at zero interest rate.

    Meanwhile, it is also part of your balance sheet. So, there are lots of other benefits that you get if a deposit is part of your balance sheet, but now it works on the reverse side. So, definitely it will affect the cash flow that we have. But I can also tell you that it is also a welcome idea. It is something that the banking industry can also deal with. What it means is that we now have to refocus and re-strategise and go after the small businesses. If you observe the level of financials in Nigeria, it is less than 60 per cent which means that there is still a lot of room to grow in other sectors. What is happening now is that most banks have gone to the drawing board to see how to compensate the exclusion of 75 per cent public sector funds from the funds that they have to play around with. So, I will say it has affected the business because if you are going to Ikeja and you have a friend that has a boat, he will take you there faster than if you go through third Mainland Bridge. So, we are in business and once you are in business, you look for opportunities and public sector funds. This, I tell you, provides a lot of opportunities. But gradually, given the implication of excess liquidity in the economy as a result of the availability of public sector funds, I think the banking industry have come to realise that it is important that the mop up is done so that we can maintain price stability. If you have excess liquidity in the market, what it means is that you will not be able to control exchange rate stability and inflation. So, looking at it from a professional perspective, I think the banking industry has accepted and identified with as a sacrifice to strengthen the banking environment because it will help exchange rate, it will also help inflation and will also regulate money supply in the market.

    Which of the policies of the Central Bank greatly affected your operations, either positively or negatively?

    If you ask me what CBN policy has affected us as a bank, one can selfishly say the CRR. This is because it had taken money that typically is free, away from me. If I have N50 billion which typically I was earning from and you take it out, definitely there is an income loss to me. So, from a selfish perspective, I think that is a major policy that has affected us in the industry. But from a professional perspective, I think it is something that is necessary and something that we have identified with because in the last couple of years, what the CBN does is that most of these policies are brought to the Bankers’ Committee, we discuss, agree, and some we don’t agree. Sometimes when you have the urge to make profit and you look at the larger economy, then you can see sense in some of those actions.

     

  • ‘Piracy destroying broadcasting’

    ‘Piracy destroying broadcasting’

    The entry of Multichoice has revolutionised broadcasting, especially TV cable broadcast, in Nigeria. However, there are insinuations that the firm charges higher rates in Nigeria than it does in its home country, South Africa, a charge denied by Nico Meyer, chief executive, Multichoice Africa. In this interview with SIMEON EBULU, he also speaks on piracy and other issues.

     

    How important is Africa Magic Viewers’ Choice Awards and its impact on content development in Africa?

    From our perspective in Multichoice, we continue to invest in local content and Africa Magic Viewer’s Choice Awards is part and parcel of the recognition of local content and its development across the continent. We use the Africa Magic Viewer’s Choice Awards as a platform to help nurture local content.

    What is your assessment of the impact of Multichoice, DSTV and GOTV content on African subscribers?

    For us, it’s about an experience and the way to convey the experience is through content. So, DSTV, which has already been on the continent for 20 years, does exactly that. We have also recently launched GOTV to enhance the service. So, to us, content is extremely important to both DSTV and GOTV subscribers, especially local African content. That partly accounted for our huge investment in it, as well as the AMVCA rewards.

    People have observed that your charges are higher in Nigeria than South Africa. Why?

    That’s simply not true. When compared, in terms of our services that we provide in other African countries, Nigeria is one of the lowest in terms of what we charge. But also bear in mind that we also provide services for different levels of income. So, we have structured our bouquets to actually satisfy the different levels of income. The GOTV service is by far the lowest as per cost and it goes up gradually into the different tiers of services we provide on DSTV, up to premium bouquet. Now when you compare that to the entire continent, Nigeria is actually one of the lowest.

    Normally in financial planning, a large subscriber base should result in reduced charges. How has that worked for DSTV in terms of pricing?

    There are a couple of factors here that we need to take cognisance of. One is that we continue to invest in local content. So you would have seen over the last 10 years that we continue to invest more and more into local content.

    Secondly, with a lot of the international content that we bring, payment is based on the number of people using the services. So, when you have an increase in the number of people using the service, the cost also increases proportionate to the increase in the number of people using the service.

    So, you find that when you continue to invest in the industry, that the cost is increasing over time. Part of our investment in local content is because it’s so important to nurture local content in the development of quantities.

    For instance in Nairobi, Kenya, we have set up a studio to facilitate the creation of local content. Also in Lagos, we have studios here, and we are in the process of bringing more and more content into the studios here in Lagos. It is important that we continue to invest in the industry because that is the only way you get the industry to continue to grow.

    How is Multichoice Africa positioning, compared to competition?

    As I have said, we have been on the continent for more than two decades. So, we are here for the long run. Also, over the last 10 years, we have invested heavily in local content through the means of Africa Magic.

    So, we are focused on bringing the best digital television experience to the consumer. And that is where our investment is. Our altitude towards competition is that we welcome competition. And the reason we welcome competition is that it expands the industry.

    Our belief is that as the industry grows, the quality of content will increase over time to such an extent that we will be able to export some of the content into the international market. And that is when we believe the industry will be on the right track.

    In terms of Corporate Social Responsibility, how does Muiltichoice contribute to the community?

    Corporate social investment is extremely important to us. Where we see ourselves playing that role is in the area of education on the continent. Our focus over many years, is in the Multichoice Resource Centres. We have rolled out these resource centres around the continent.

    In Nigeria, we have about 300 resource centres. And what we do at the resource centres, is that we utilise the content that we have for the growth of our education sector. We focus around the Natural Geographic Channel, the Animal Channel and the History channel.

    In other words, the educational content that we have, is provided in these resource centres, which are school-based for free. And this really helps education on the continent. And this has had a lot of impact across the continent and Multichoice has been doing this for so many years, and we will continue to do so.

    What has been the impact of piracy on your subscriber base in Nigeria?

    Let me talk a little bit about piracy. It is very detrimental to the growth of the creative industry in general. What really happens here is, you need to pump funds into the local industry to make it grow and with piracy, those funds are not available to pump into the industry. Piracy is destroying the broadcast industry, and this is applicable to both the local content providers as well as the international content providers. So, we are very active in terms of combating piracy. And piracy comes in many forms, but we have a systematic approach of continuously taking on piracy on all fronts. On one side, we are protecting our business, but also we are protecting the wider business of broadcasting in terms of future development.

    Is piracy perculiar to Nigeria alone?

    Piracy is across the continent and you see many forms of piracy, but the action we take is across all of the continent. We see the incident all across the continent.

    What other innovations should we expect from DSTV, going forward?

    The DSTV and GOTV experience is about technology. Over the years, we have   brought cutting edge technology to the markets we have operated in. when we brought digital terrestrial, it was the best standard that we brought.

    We are also continuing to expand further on our product line up. So, the latest product that we have brought into the market is the explorer PVR Decoder, and this allows consumers to really bring the internet experience into their homes. So even when you do not have a broadband connectivity  you can still experience the best film and sports content. And that is what our business is all about, it’s about the experience. The Explorer PVR is the latest platform for enjoying this experience and we will continue to bring this experience to the various markets.

    What will be Multichoice’s contribution to the Digital Switch over?

    We have been very very active with various governments across the continent to assist with the digital migration. I think it is important to understand that we have already started digital migration when we launched satellite in Nigeria many years ago. Now that we have got to digital terrestrial we continue to offer our assistance. We are very suitable partner to assist many governments in terms of digital switch over. We have also championed the education of the media on digital migration. We have organised digital dialogue summits for the African media across the continent, including Nigeria. We have the technology, we have the process, and we bring the best expertise to the table. We also have the best of content. All of this we bring to the table.

    Many foreign investors in Nigeria do not show commitment by acquiring assets. Is this the same case with Multichoice? Besides, have you come here to stay or are you just a briefcase investor?

    We have been in Nigeria for over 20 years. We have local partners and we have invested in numerous properties across the country, From Lagos through Abuja, where we have set up our offices. In the future, we will be setting up significant studios in Nigeria and that construction work has already commenced. So, Multichoice is firmly committed towards Nigeria. We were 20 years ago and we are and into the future. I think our track record says it all. Our commitment spans from investment in properties as well as our philosophy to employ locals manpower. And through this process we hope to give consumers in Nigeria exactly what they want.

  • ‘Nigeria is a force in advertising’

    ‘Nigeria is a force in advertising’

    With its 160 million population, Nigeria is a fertile ground for advertising. The country, Mr Steve Babaeko, Chief Creativity Officer, X3M Ideas says has what it takes to hold its own against others in the trade. Many foreign advertising agencies, he tells Adedeji Ademigbuji, in this interview, are looking down on their Nigerian counterparts in ignorance.

     

    At the local and global levels, advertising business continues to dip. Yet agencies are multiplying. What are the issues shaping the industry?

    We will find that out in the next five years when mergers and acquisitions must have happened. Having hundreds of agencies when there are few accounts is like covering ourselves in borrowed robes. There must be business and accounts to work on for the industry to survive, that is why we must come together and reason. Let’s start with the recession. If you look at the multinationals and if you take your mind back to about 10 years ago, the multinationals were the big spenders, those were the people that were breaking the big campaigns. The recession was global and of course, affected them at the local level as well, even though it didn’t quite shake Nigeria as much as it hit Europe and America. This is because we are not a credit based economy. So, what you have seen is that the landscape has changed a bit, and it is true that the business has changed because budget has reduced, clients have become wiser.

    Therefore, clients are now asking agencies to do a rethink and it’s not about being able to spend big budget now, but with the little budget you have what can you do for us. I think agencies are a little bit finding it difficult to cope with this new trend.

    Now, agencies that used to do pretty good in the past because they had big budgets to manage, now find it difficult, because the client is demanding so much with little budget. You have to be more strategic and think outside the box. In fact, these days there are no boxes anywhere. Agencies that cannot adapt to the new reality of the day will definitely feel the negative impact of the new reality.

    X3M has earned credit for its works, what is your creative mindset?

    Again, I will give credit to 141 because that’s my alma mater. I was the pioneer Creative Director for seven years and I love that agency with all my heart. I also love Noah’s Ark ad agency too. Honestly, if there is any head of agency that has called today to congratulate us during our anniversary last year, it was Mr. Lanre Adisa of Noah’s Ark.

    I think advertising is going back to its roots because at some point in the history/evolution of this industry, this misconception came up that it is only the client service people that could run advertising business.

    They formed this stereotype that creative people are not good business managers and everybody bought the lies. So, they took control of running the business but if you look back in the history of advertising, David Ogilvy was a copy writer; the Ogilvy global advertising network is still thriving after the man’s transition. The Bill Bernbachs, Ogilvys of this world were creative people and they founded and ran successful agencies like DDB et al. The agencies have stood the test of time. I think something happened when all of a sudden, you want to do great work but the people running the business don’t quite understand the importance of creativity.

    I worked in different agencies for 18 years and nobody sent me to Cannes, there is no way you can develop yourself and keep yourself up-to-date in advertising if you don’t go to Cannes. Cannes is like a world cup for advertising. That is where all the big players of the advertising world gather every year. If you intend to be a big player, or you hope to make any impact in this business you have to be in Cannes. So, I worked for 18 years and never went to Cannes, nobody thought it right to send me to Cannes.

    The first Cannes I attended was in 2012 and I paid for myself. We started this business and in less than a year, our head of creativity just came back from Cannes. On his return, he told me “Steve, I now know what you have been telling us all this while. We have not started in this business”. You see if you benchmark yourself against the local agencies, you are going to fail because this is not where the competition is, if you know what is happening in Brazil; the revolution that is happening in Brazil today you will be amazed; what India has done in the past decade is mind-blowing. Those are the places we are looking at and we are saying how do we benefit/ help ourselves to up the game and up the ante in this market. It was that dream that propelled us to start this business in the first place, not for the fame or the money or the title. Most of the time I don’t even remember I am the CEO of this company to be honest with you because there is just so much work to do. In 2013 alone we have shot close to 20 commercials, I doubt if there is any agency in this country that has done anything close to that number. The clients know that there is a different kind of thinking that we will bring to the table and that is what they are buying into.

    Do you have any intention to have any global affiliation?

    We have been approached by close to three international agencies wanting some kind of affiliation. I have nothing against affiliation. However, you look back at the history, the agencies that went into affiliations 10-15 years ago, it was like the main thing for them. It was easy money because the people you have affiliated with will bring the business and dump it on your laps and it was good while it lasted. The bubble got burst and now it is accusations and counter-accusations by the parties to the affiliations – the local agencies are being accused of stabbing the global agency in the back while the global networks are being accused of wanting to swallow the local agency buy it out and chase it out of the business. Now everybody is running away from affiliations. I keep saying, personally I have nothing against it; the same thing I have told the three people who approached us is, “show me, put it on the table what are you going to do to make a difference to this company that we are not already doing, that will add value to my business, my stakeholders, my board members, my management team and staff. Show us and if you can’t show us anything different then leave us alone.

    Affiliation to me must bring good value and not just adding another name as was the fashion. It’s like you are married to a woman now who just had another name and carries this double barrel name, that is not what we want, we want value, it’s about value, what value are you bringing and don’t tell me you will train my people because we can do so. Our head of human resources (HR) just came back from Johannesburg on HR training. Who in advertising even send any HR person anywhere in this country? Few if any! We train our people and it’s all about training and retraining. Our position is that you are as good as your people. If we fail to train we will not be able to compete in the business and that is why we invest heavily, the margin is not much but out of the little we have, we invest a lot, we train our people. While we have nothing against affiliation, we will not go into affiliation for affiliation’s sake.

    Part of the things that drove us to start this business is that, we can be the one giving out the affiliation? Why must we even travel to Europe, America and South Africa to say we want to affiliate you? Why can’t I build X3M Ideas into an organization that agencies from Benin republic, Ghana, Ivory Coast, Togo would want to be affiliated with? Why must I be the one going out there looking for affiliation? Those are the part of nationalistic instincts that are driving us to believe we can build a solid local agency that knows the terrain of this market; that knows this business and can prove a point to the world that we can do it as well.

    What is your opinion on Nigerian agencies?

    All can see that the relationship between the international agencies that want to come in here and the local agencies is not really sincere at the moment. Some key players who have the affiliations are dumping them and some other people who are not just as good are taking them up. So, at that level, to be honest with you, this is my own opinion, I don’t even care for any of those big networks who look for affiliations in Nigeria but do not care about Nigeria, I stand to be corrected.

    I don’t think they care much about us; they are still looking more towards the Asia because there is that ignorance about Africa, they don’t think that any good can come out of Nazareth because they still think we are not there. I mean for a population of 160 million? Nobody can ignore this country; we have our challenges as a country but this country is still a giant on this continent and they ignore us out of ignorance because a company like X3M will continue to do what we set out to do and by God’s grace we will continue to grow in strength and then by the time they finally open their eyes they will see that the landscape has changed and a new crop of advertising entrepreneur has emerged.

    Talking about the level of creativity, why are we yet to make impact in international awards like Cannes?

    I think there is politics everywhere. It is not impossible that the politics of awards also exists in Cannes, but beyond that I don’t think the problem is with our creative output. I believe the problem is the packaging of that creative output for that award. There is a format for it; as I speak with you for this company (X3M), we are understudying agencies that have won and how they packaged their entries is a different thing. Packaging the entry is as big an issue as the ad itself you are entering; it is like if there is a wedding there is a dress code and if you refused to adhere to that dress code they probably won’t let you in, so you have already disqualified yourself because apart from having good material how you package will go a long way to help. We can’t keep screaming foul when India is winning, Brazil is winning, there has to be something we are doing wrong until we are able to crack that, I think we are still going to be disadvantaged a little bit. So, to that extent we are working hard to see that in the nearest future, in fact, before the next three years a Nigerian agency will win and I am so optimistic about that.

    What is the cost of entry?

    To be honest, if you are serious about this business it can be bearable. Again, it is still the mentality of the suit and creative people. If you go to Noah’s Ark, they won’t tell you that there is any expenses too much to enter an award because that agency is headed by a creative person. The same thing here. We will participate, but it’s just that for the whole generations that is ahead – advertising entrepreneurs because the reason for setting up the business is slightly different – subsistence business for me and my family let’s just eat and be happy. It takes a different dimension, we want to take this business seriously by participating in these awards, we see it as a major part of development. Our absence on the awards scene probably explains why the people we affiliate to don’t even take us seriously because we are not showing on the radar when it comes to the global mapping of people who have won awards and until we begin to win award we will not count much to them as an industry.

    How do you rate the AAAN LAIF advertising awards?

    They say half loaf is better than none. First and foremost, I think that engenders healthy competition where an agency will know that to be relevant in this local environment I have to enter my ad for LAIF and then be judged by an independent jury and they give us some kind of awards. You can begin to say which agencies in Nigeria are creative and which ones are not. It’s a good start but we need something better than that, we need to develop it to become even more competitive because I mean in the past few years it becomes a little too generous, we need to inject life into the award especially the organisation itself. The organisation needs to be pepped up. If you go to Cannes, you will understand what I am saying. So, there has to be improvements. Big shout outs to AAAN for starting LAIF in the first place but I think after about five or six years, we need to take it to that next level.

    What is X3M set out to do?

    From day one, if you go to our website, it’s clear because we are set out to redefine advertising in Nigeria and it’s not going to be business as usual. We set up this place when we had no money. We used the little money we had and some of the loans we were able to secure to set up this place. As small as this place is, you can envisage the direction we are going, it’s not going to be the usual, we are very future forward. Our aim is to redefine the whole business of marketing communications and the way the whole business structure works in Nigeria. That is our agenda, and to be able to establish the fact that we are creative people, we have ideas, we are entrepreneurs and we can move the gospel of this new message, this new way of thinking, and this new way of doing this business combining both traditional and new digital media platforms. Combine them effectively to build value for the brands that are in our custody. We want to send that same message, that new way of thinking across West Africa in the nearest future and that is our dream.

    You claim to be a digital agency, tell us some of the digital campaigns and their level of success in the last one year?

    Example of digital stuffs we have done for our clients, the two big ones I can really talk about would be Etisalat and Diamond Bank. We contribute a lot to the content that you see on Etisalat and Diamond Bank. If you look at the banking landscape before and how Diamond Bank was playing, you will see that it is a totally different ball game in the past three to five months. If you look at their Facebook fan page it’s bolder at least in our estimation with about 30-40 per cent and if you look at their views on YouTube. Before we started working with them there was none of their ads that has up to 100,000 views but today we are talking about 136,000 views the last time I checked and I haven’t even checked recently. So, that is how we have been able to run digital campaign. It’s strong because the media is fragmented. There are so many spaces fetching for attention, now the young people who don’t have time watching TV, they are either playing X-Box, playing games or they are on twitter or YouTube. Definitely they will have access to such contents. So, we have been able to meet them there and we have something that is called the “consumer footmark” which is our proprietary tool developed to help build our works – wherever the consumer goes we have to meet them and expose them to the messages of the clients. Those are the two clear examples I can give.

    Your projections, are there any spin-off shops?

    Right now, there are three businesses under this small building, we have X3M music, Zero degrees and we have X3M Ideas. X3M music caters to the music arm that we have always worked on as part of our youth development programme. There are so many young people in this country who are extremely talented but nobody to help them and we are going to pick one or two that we think we can help and don’t forget you will always need music in advertising and because of our in road into the music industry they respect us and if we come out, we can always get talents because they already know we have a pedigree. Zero degrees is into production, I have always said this you can legislate by fiat and say nobody should use commercials out of this country that is by fiat but what are we doing internally to make sure that the production element is up to scratch and I am thinking about the level of production. A client cannot give you money to shoot a TV commercial and you turn in a substandard stuff. That will be totally unacceptable to us. To be able to do the right thing, we set up Zero degrees. We are going to be bringing in best practices into this country, bringing the best directors, bringing the best technical hands to develop our people and we start shooting commercials locally. The third one is we are going to go into experiential marketing in the second quarter of next year by the grace of God. Maybe we will be calling you to say, look this is our experiential arm. We want to be a one stop shop when it comes to marketing communication solutions giving strategy and giving creativity solutions for the brands and clients that we serve and so it is a journey that has started and we intend to take it a lot further.

     

  • ‘National carrier days gone’

    ‘National carrier days gone’

    Soon, the government will launch a national carrier following the liquidation of the Nigeria Airways 10 year ago. But to the Chief Executive Officer, Jed Air, Captain Nogie Meggison, what the country should be talking about is a flag carrier because that is the trend worldwide. In this interview with KELVIN OSA-OKUNBOR, Meggison speaks on what the government can do to improve the industry.

     

    Why are domestic airlines experiencing high rate of mortality?

    It is very difficult to categorically state one reason or the other why domestic airlines fail in Nigeria. It is important to give you my background experience. Having spent over 30 years in the aviation industry, the factors that lead to airline failure or simply put, what some people refer to as the burst and boom circle of airlines, it is a combination of many factors. From a global perspective, anywhere in the world aviation is a barometer of the economy. It is the development in the economy that affects the sustainability and otherwise of airlines. Airline as a component of the aviation industry does not stand alone. It is the general effect of businesses in the economy that affects airlines. It is a great determining factor. It is the stability of the economy that affects airlines, their survival and its impact in the aviation sector. The strength or weakness of the economy has a huge impact on the sustainability or otherwise of airlines. Simply put, the growth and failure of many airlines is a direct determinant of the economy. Aviation does not stand alone; it is a reflection of developments in the economy. The effect of the economy on businesses in the country has contributed immensely to the high failure rate of domestic airlines, because airlines depend on the economy. The stability of any airline is directly proportional to the strength or weakness of the economy. You can tell the strength of any economy by its airlines.

    Is this the experience in other parts of the world?

    There is a direct correlation between the success and failure rate of airlines with developments in the economy. If you recall what is happening in Europe, for instance, we will understand how the strength and weakness of the economy is affecting airlines and their success or failure rate. Today in Europe you can see what is happening in the aviation sector. There is a direct link between the performance of the European economy and the airlines that operate there. Consider what is happening in Asia, the economy of the Asian Tigers is having a direct effect on the economy. Even, in the Middle East, the hot economic hub, you can see how the performance of the economy is reflecting on airlines. Because of the growth in the United Arab Emirates’ economy, that is why more airlines are springing up and doing well in that part of the world. In Nigeria, we have gone through our own economic boom and downturn which have affected the growth and development of domestic airlines. Airlines grow hand in hand with the economy.

    Is it the case of burst and boom circle for domestic airlines?

    People tend to think it is a circle that airlines just come and go. It is a pure reflection of the twists and turns in the nation’s economy. Rather, it is a different experience; aviation business in Nigeria is peculiar. It has its unique attributes and characteristics. Your feasibility studies may have been put together correctly by a team of experts on how to grow the airline business profitably, the truth is that the profit margin is so slim, compared to the turn over. The turnover is pretty high compared to the profit margin. The major challenge affecting airlines in Nigeria is interference. By interference, I mean external influences that affect the business that were not factored in when an operator was planning how to run the airline business. This factor is mostly responsible for the burst of airlines in Nigeria. It is also a contributory factor in other operating environments. External interference is a factor that is not calculated in the feasibility studies for the airline business. This factor easily affects the profit margins for Nigerian airlines. For instance, if there is war in the Middle East, it has a direct impact on aviation and airline operations in the area of the price of aviation fuel. This is part of the external influences or interference that trickle down to affect the fortunes of airlines from operational cost point of view. Another scenario, we can adopt is if there is an embargo on Venezuela, a member of the Organisation of Pteroleum Exporting Countries (OPEC) countries, it will affect the price of crude oil, from which aviation fuel is processed. The global price of crude oil could move around 10 to 20 per cent depending on the prevailing circumstances. If the margins of profit and loss in the aviation industry is about eight to ten per cent, you can see how the ripple effect of between 10 to 20 per cent change in the global price of crude oil could impact on airline operations . These are the factors that affect the growth and depletion rate of domestic airlines. These are purely external influences and interference that affect airline operations, which are not factored in at the initial stage when the airline feasibility was worked out.

    The consequence of this is that if the oil price index moves about 20 per cent, with the cost of aviation fuel contributing over 40 per cent of the cost of operations, this invariably affects the profit margin arising from increasing costs of operations from fuel alone. There is also the issue of interference from government policy with its attendant impact on airline operations. Today in Nigeria, the issue of government policy in the area of navigational and terminal charges just increased for non – scheduled commercial operators by aviation agencies is having a direct impact on airline operations. Operators are not opposed to introduction of charges, but would appreciate if such charges reflect the scale of their operations in a way that it does not put much pressure. For instance, if a $4,000 charge is introduced by aviation agencies for charter operations, we automatically know how such amount will affect charter airlines. If the average hourly charge for domestic charter for a flight from Lagos to Abuja is about $6,000, with a return flight averaging about $12,000, the introduction of $4,000 as charge for such operations will increase the operating cost for the airline by30 per cent. So such incremental charges will eat deep into the profit margins of the affected operators.

    What are the implications of such charges on the operations of airlines ?

    Let us be realistic, such a charge is already a threat to the profitability of any charter airline. This is because there is no way any operator makes 30 per cent profit on any flight to justify sustainable operations. These are the issues that affect the burst and boom circle of airlines in Nigeria. The scenario I have just given automatically takes the airline operations into the financial red region of unprofitability. Other factors that affect airlines’ sustainability include the taxes, levies and payments that airlines are expected to make that come from the government. They have their collateral effect on the operations of airlines. Other factors and charges that are not fixed take a huge toll on airline operations. The airport charges, taxes, navigation fees, and other levies introduced by government is affecting the business. Then, look at the role of financial institutions. They are also not assisting enough to get Nigerian airlines out of trouble. The high interest rates charged by Nigerian banks are too high. This alone has led to the collapse of many airlines.

    How does this affect the economics of airline business?

    High interest rates by Nigerian banks is not conducive for the domestic airline environment. When compared to the interest rate by banks and financial institutions from other parts of the world, the rates are relatively low enough to stimulate business and borrowing. In some parts of the world, banks loan money to airlines at between two and three per cent interest rate, but here in Nigeria, the banks charge as much as between 22 and 27 per cent. This is too high for any profitable business. But, we are happy that the government is doing something to bring about reduction in interest rates to enable domestic airlines access funds through some intervention. If this intervention fund is well implemented, it will assist airlines a great deal.

    The Federa Government packaged intervention fund for the industry a few years ago. What happened to it?

    Well, talking about intervention and funds from the banks that some airlines accessed in the past, it was not given as investment into domestic airlines. It was given to cushion the banks that borrowed money to some domestic airlines. It did not bring about any serious investment in the airline industry. The intervention funds were given to the banks as a way of reducing their exposure to the aviation sector bad debts. The intervention funds did not bring about any serious investment into any domestic airline or investment in their infrastructure. It was intervention funds for banks to cushion the effects of loans given to airlines, which had almost become bad debt. So, domestic airlines that did not have bad debts with the banks were not a beneficiary of the intervention funds that were given. The consequence of this is that, if as an airline operator, you were not indebted to the banks, the so-called intervention funds did not impact on your operations positively. If was just an avenue to cushion the effects of bad debts owed banks by done airlines. It did not bring about any positive investment in airline operations.

    For airlines that were indebted, instead of the banks charging high interest rate on the debt, government facilitated a reduction of interest rate the debtor should have paid to the bank for the loan. That was the whole essence of the intervention funds. For those of us, who did good business and did not fall into the hands of the banks by owing them money, the intervention funds were not for some of us. What government did was to negotiate the interest rate on behalf of the debtor airline from the supposed 28 per cent to about eight per cent. That was basically what happened. So, those of us that did good business without owing we’re not eligible to benefit from the intervention funds. That is the major reason some of us cried foul over the way the funds were disbursed, that it did not bring in any investment into the aviation sector for domestic airline operators, whether you are scheduled or charter. Our clamour is that government should put in place a more robust policy or scheme that will bring in investment into the industry. That is one of the ways that intervention should be robust.

    Are airlines’ business plans robust enough to ensure profitability and sustenability ?

    It will be wrong to say airline operators do not have a robust business plan. Everybody gets into business with the expectation to make profit having done their background checks. So, I am confident to admit that indeed many operators set out with a good business plan. The business plan may be robust at the point the airline was set up, but the effects of external factors and interference affect the business. That is how an unfriendly policy from government as an external factor or interference could affect the business which was not factored in in the business plan. No matter how robust the business plan, the effect of such policy could affect the profit margin. This explains why we are discussing with government on how to assist domestic airlines, which will be in the form of subsidy or one measure of assistance or the other.

    To what extent is the multiple charge regime by aviation agencies impacting negatively on airline operations?

    Multiple charges have direct impact on the operations and profitability of airlines. A collapse of the charges into a unified block will assist operators, whether they are involved in charter operations or scheduled. That is why the one-stop shop payment system introduced by government will be of immense benefit to domestic airlines. We think it is good, it is the way to go, and it will assist airlines to rework their cost of operations, which we continue to argue is on the high side. The single platform payment system just introduced is good for the system, it is good for all. If well implemented, it could ameliorate the problems of airlines. It is good for operators, because it will take the headache and stress off their shoulders and heads. It is good, but, we insist that the process should be transparent enough for both service users and providers. If the charges remain same and we are paying into one system, it is a good idea. But government just waking up with a sudden increase in charges will definitely affect our profit margins and business plan.

    How difficult is it to set up an airline in Nigeria? What is the level of returns on investment?

    The whole system about setting up and running an airline in Nigeria has changed dramatically. Many years ago, an operator could acquire an aircraft and in a matter of days, the airline hits the ground running. But, these days, the regulatory procedure and processing is becoming a lot more tighter and longer in terms of time. You need about 18 months before you can conceive an airline and start flying. There is a lot more involved in terms of certification processes and procedure to get the air operators’ certificate and start flying. You could even wait for more than 18 months no matter how push full the operator is. The stakes have been raised.

    There is this idea of floating a national carrier airline. What is your take on it?

    Well, this is an interesting subject that often would elicit varied reactions. But, let me address this from the point of view of being Chairman of the Airline Operators of Nigeria (AON). I have told my members that we need to look at the books and give serious consideration to this issue. Generally, we should be moving forward and not moving backward. There are different voices on this issue among operators. But, I think the concept of national carrier is archaic. What is being adopted globally is the flag carrier model. The airline industry has gone far ahead of archaic models. The era of national carrier is long over. Even, a country as vast as Brazil, now has many flag carriers. Even in the United Kingdom (UK), it is the concept of flag carriers that the country is pursuing. The concept many countries are pursuing now is flag carrier. This has happened in Brazil which now has seven flag carriers after the experience of Varig Air. In the UK, they have moved from national carrier to the concept of flag carrier with British Airways and Virgin Atlantic Airways. So, the concept of national carrier is outdated. I think Nigeria should look in the direction of what other nations have done to designate domestic airlines as flag carriers. Gone are the days of national carrier, it is out of vogue. Aviation business has gone digital, it is no more analogue, so, why do we need to go back to outdated models? But, airline operators under the umbrella body are consolidating and talking to the government on how to achieve what is the best for the aviation industry. We are convinced that government has good plans to set up a national carrier, I am sure the promoters of the carrier would have done their home work so that by the time the whole thing is worked out, the picture will become clear, and it is going to be a win win situation for everybody.

    But lack of capacity has been identified as the major reason for not designating international routes to domestice airlines. Is this correct?

    Well, this is a very interesting issue. But, let me give you a scenario of what happened in the telecommunications sector and power sector. Long time before privatisation or deregulation, government threw out bids and asked those who were interested to demonstrate their capacity. In the same vein, government should throw international routes open for bid for airlines that think they have the capacity to fly into them. The same thing should apply for all the bilateral air services agreement. That way, it becomes competitive for those who have capacity to deliver.That was what happened to the generating and distribution companies in the power sector. The same model should be applied in the aviation sector. That is what happens in other parts of the world. If it is done this way, it will be more robust and transparent for those who have capacity to deliver in flying into international routes. International routes should be put up for bids for those that have the financial capacity to go into its operation. What the airlines will then do is to get technical partners that will assist them to make it a reality. That is how global aviation works. It is driven by technical partnerships. You cannot do it all alone. Operators do not need to come alone but approach the business from a technical partnership point of view. That is the way to drive growth and development for air transport. Generally speaking airlines should bid for routes.

    What is the best form of intervention that government can package for airlines?

    There are many ways the government can intervene to assist domestic airlines. Government can create some soft landing measures to assist airlines to keep the business running. The minister of aviation is seriously looking into that through the partnership of the Central Bank of Nigeria (CBN), we are confident she is going to do something about it. The minister has been talking to the CBN on how to assist domestic airlines. We are confident that something good is going to come out of that. Assistance to domestic airlines by government is not necessarily the provision of funds for the business, it could be through the establishment of aircraft maintenance facility; the construction of a fuel facility to reduce operating costs for airlines; it could come through many other ways. It could be by making the flight time shorter, which will save time and reduce over 20 per cent cost of fuel. It could come from the provision of landing aids, fuel subsidy and put the money into refineries that will reduce the cost of aviation fuel.

    What about accessing funding from multilateral organisations?

    This will be achievable if we have a more conducive operating environment through favourable government’s policy. This is good, but Nigerian banks are afraid because of risk perception to loan to domestic airlines. Once government can give guarantee and create a development fund and give guarantee to access funds, then this will be easier for airlines. But, there are different ways of accessing the funds if you have a local bank guarantee. But, it is a bit difficult now, because the banks are afraid. But, government can give loans as it happened in the power sector.

    Do you think the airlines in Nigeria are too many?

    The airlines are not too many, if the government creates an enabling environment for them to thrive. It is a capitalist world. We can have as many airlines as possible. More airlines are welcome if there is stability. We can even go into other West African countries as it has happened in the banking sector because the position of Nigeria has already made it a regional hub.

  • ‘Real sector on verge of death’

    ‘Real sector on verge of death’

    For every country, manufacturing is the growth engine. Despite all efforts to save the sector in Nigeria, it continues to bleed. Director-General of Lagos Chamber of Commerce and Industry (LCCI) Mr Muda Yusuf argues that the sector may become extinct if “effective and sustained protective measures”are not taken. In this interview with TOBA AGBOOLA, he shares his thoughts on the power sector reform, trade policy, unemployment, access to credit by businesses, among others.

     

    WITH less than four weeks to the end of the year, how will you assess the economy? Has it been good for the private sector, especially those in manufacturing?

    Economic growth trend, measured by the performance of the Gross Domestic Product (GDP), has been generally positive over the last two years, averaging about 6.5 per cent. This is good compared to growth conditions in most economies around the world. However, there remains a major concern about the weak impact of the growth performance on the private sector and the welfare of Nigerians.Virtually, all business segments lamented the harsh operating environment in recent years. The power situation deteriorated as we now have a relapse into a chronic power failure. The refineries are still underperforming; unemployment level is still high and cost of fund is still high. Sectors that posted good growth performances in 2013 were telecommunications, 31.8 per cent; hotel and restaurants, 12.2 per cent; solid minerals, 12.5 per cent; building and Construction, 12.6 per cent; real estate 12.4 per cent; and wholesale and retail trade, 9.6 per cent.

    However, the contributions of most of the sectors to GDP are not significant. Respective contributions as at the third quarter of 2013 were as follows: telecommunications, eight per cent; solid minerals, 0.5 per cent; hotel and tourism, 0.6 per cent; building and construction, two per cent; real estate, 1.9 per cent. The character of growth explains the limited impact of growth performance on welfare of citizens. Local value addition and indigenous participation in many of the sectors is still very low.

    What are your views about the operating environment?

    The business environment is generally not conducive for manufacturing enterprise. This is why the risk of industrial investment is high and continues to increase. The various policy interventions have not had the desired impact on the sector. Unless there is an effective and sustained protection and support for the sector, it is only a matter of time for the sector to become extinct.

    This scenario has played out in the tyre manufacturing, the textile industry, the assembly plants, the battery industry, the steel plants and many more. Manufacturing business is perhaps the most challenging in the economy today. The trend has grave implications for the economy. An economy dominated by buying and selling cannot boast of a bright future. Production is critical to economic progress, value addition and job creation.

    It is impossible to have a vibrant manufacturing sector in the face of rampant dumping of cheap imports in the country. Some of these imports are landing at 50 per cent of the cost of products produced locally.

    Manufacturers have to worry about high energy cost because the power improvement is yet to be sustained; they have to worry about high interest rate (20 per cent and above); they have to worry about a multitude of regulatory agencies making different demands on them; they have to worry about massive smuggling and under invoicing of imports and many more. The multinationals and other conglomerates in the sector may have the resilience to cope, but for most small and medium manufacturing enterprises (SMEs), it is a nightmare.

    The stagnation of the manufacturing sector is one of the tragedies of the economy. Yet production is critical to an enduring economic and social stability. The way forward is to address the fundamental constraints to manufacturing competitiveness in the economy.

    The manufacturing contribution to GDP is still less than five per cent and this has been the trend for over a decade. This of course reflects in the capacity of the sector to retain existing jobs and create new ones. The reality is that job losses in the sector have been on the increase over the years as productivity declined on the back of the harsh operating environment. However, the multinationals and conglomerates have shown some positive trend in performance and resilience, especially in the foods and beverage sector as well in the cement industry.  Even then, they would do much better if the operating environment were better.

    If the power sector reform delivers the desired outcome, the fortunes of the sector would definitely improve.

    But the government made intervention by way of providing fund. Didn’t it have impact?

    Yes, the manufacturing intervention fund of N200 billion had a positive impact on the few firms that benefited.  It was a restructuring and refinancing facility which gave a significant relief to the firms and enhanced their cash flow. The interest rate was seven per cent and the tenure was 15 years. But the fund was evidently inadequate and has since been exhausted.

    The Bank of Industry (BoI) played a notable role in funding industries; but the beneficiaries were few compared to the financing gap that exists in the industrial sector. Meanwhile, credit remains a major challenge for manufacturing enterprises. Access to credit is difficult and cost of credit is outrageous. The problem is particularly acute for the small, medium enterprises (SMEs). Policy inconsistency is also a major problem for industries. This is more pronounced in trade policy. Tariff is adjusted in ways that are inconsistent with the nation’s aspiration of rapid industrialisation. For instance, the collapse of the tyre industry was the outcome of inconsistent trade policy. The patronage of made in Nigeria products is more at the level of rhetoric than concrete actions. Yet an effective patronage policy could make a whole lot of difference in the fortunes of the manufacturing sector.

    How about the government’s various policies and their implications for the economy?

    I will first like to highlight some of the policies before discussing their implications.

    The apex bank had expressed concern over what it called the dollarisation of the economy. We share the concern of the Central Bank of Nigeria (CBN), especially on the need to preserve the integrity of the naira. However in trying to deal with this situation, other problems appear to have been created. The naira suffered significant deprecation at the parallel market on the back of the new policy as the dollar sold for between N166 and N170. The parallel market premium also widened considerably. These conditions have potentially distortionary effects on the economy.

    There’s a high risk of round-tripping in the foreign exchange market as the official and parallel market rates widened. There’s heightened risk of inflationary pressures as the exchange rate in the parallel market depreciates drastically. This is significant because the economy is characterised by a large informal sector that source foreign exchange mainly from the parallel market. There is a risk of over-regulation in the market which could create further distortions and breed corruption within the regulatory system. The challenge of excessive documentation and bureaucracy which will slow down the tempo of economic activities and create transparency problems. The recent review of the Cash Reserve Requirements (CRR) on public sector deposits from 12 per cent to 50 per cent would have profound effects on the money market, real economy as well as the stock market. It is a scenario that would profit some players in the economy and penalise others.  The key areas of impact are as follows:

    The policy action represents a further tightening of liquidity in the economy in furtherance of the CBN objectives of promoting price stability. We would see a further increase in interest rates which means an added pressure on the operating cost of investors in the economy. High interest rates will ultimately affect profit margins. The impact is not just on the real sector, but the broad spectrum of investors in the economy.  We are therefore likely to see interest rates moving to new thresholds of between 25 and 30 per cent. If other charges are added, the cost of fund could be in excess of 30 per cent.

    However, this development would be good news to depositors as interest rates on deposits would trend upwards. The scramble for funds by banks would push up deposit rates which would mean better returns for those placing funds with the banks and other financial institutions.

    There is however the worry that this development may adversely affect the stock market.  Typically, the gains of the money market are often the loss of stock market. As returns on investment in the money market improve, negative investors’ sentiments may be created in the stock market leading to a migration to the money market, especially by short term investors.  This may have a dampening effect on stock prices.

    Generally a tight liquidity situation often enhances the stability of naira exchange rate and the moderation of inflation. This is another possible gain of the new monetary policy regime.

    What is the capacity utilisation rate in industries right now?

    The overall average capacity utilisation in the manufacturing sector is about 46 per cent but the performance varies from sector to sector. But it is instructive that sectors with relatively high local value addition have better capacity utilisation because of the competitive advantage.  Sectors that fall into this category include the cement industry and the food and beverage sectors. Industrialisation drive would be more effective if it leverages on local value addition.  If only the oil and gas sector was well managed, tremendous industrial clusters would have been developed leveraging on the by-products of the refineries and the outputs of our petrochemical industries.  The impact on the economy would be amasing.

    What is the way out for manufacturers?

    In order to avoid the collapse of what is left of the manufacturing sector, some immediate policy responses are imperative. Accordingly, the following policy options are proposed: strong commitment to the policy of patronage of domestically produced goods; import duty on raw materials, machineries and other vital input for manufacturing should be scrapped; value added tax (VAT) on raw materials and machineries should be scrapped; there should be generous tax allowances on infrastructure related expenditures.

    How will you rate credit facilities to investors by banks?

    The cost of fund in the economy is high and access to credit was even a more serious problem. The tight monetary policy stance of the CBN is a major factor affecting the credit conditions. Other areas of concern is that the collateral cover requirements by banks were beyond many investors. This impeded access to credit, slowed down the tempo of economic activities and undermined intermediation role of banks in the financial system. Also, government borrowing at a high cost of between 14 per cent and 16 per cent which is one of the highest globally was a major source of the credit problem in 2013. It created a disincentive to lend to entrepreneurs; put pressure on interest rates and increased the flow of funds from the banking system to the government coffers; a scenario which was clearly not healthy for the economy.

    What are your views on the privatisation of the power sector and the proposed privatisation of the refineries?

    First on the issue of PHCN privatisation, I want to say this is a work in progress that we can only wait for the outcome but with regards to the power sector in general. In the meantime, the power situation deteriorated in the last few months. Perhaps, the situation would have to get worse before getting better as the new owners find their bearings. They have to sort out issues of funding, gas availability, labour issues and others. This will take some time. We may have a crisis of expectations on our hands with regard to this matter. The improvement in power supply is not likely to come as fast as the public expects. Meanwhile, the situation continues to impact negatively on investment with increased expenditure on diesel and petrol by enterprises. This also comes with the consequences of declining productivity and competitiveness. On the proposed privatisation of refinery, what is of utmost importance is that we get the process right. We cannot continue to refine our crude oil outside the country. It is also clear that bureaucrats cannot effectively operate a refinery. What matters in an average bureaucracy is procedures, not results.

    What is your take on fake and sub-standard products?

    Fake and substandard goods remain a nightmare to manufacturers. It is important that regulatory and law enforcement agencies make it a priority to check this menace which has led to the loss of lives in certain instances. We need stiffer sanctions against perpetrators of this evil.

    The rate of unemployment keeps increasing. What is your view on this and what is the way out?

    The rate of unemployment in the economy is one of the highest in the world, at 24 per cent. Over 50 per cent of the youths in the urban areas are unemployed.  It is a very disheartening situation for parents who had laboured and strained to invest in the education of these youths.  The state of affairs has assumed the dimension of an economic and social crises.  There is a relationship between rising criminality and unemployment. We should do something urgently to create jobs, and in this regard we propose that there should be increase support for SMEs and business start-up through capacity building and funding, encourage domestication of private and public sector spending in order to boost the multiplier effect of domestic spending on the economy, promotion of sectoral linkages in the economy so that all sectors could be mutually supportive. The agricultural sector has enormous job creation potentials and should therefore be given greater attention.

    What are your expectations in 2014?

    We hope for a better business environment in 2014. We hope for improvement in the productive capacity of the economy, the prosperity of enterprises and an improvement in the welfare of citizens. For this to be realised however, the constraints to productivity and efficiency must be tackled with better commitment and sincerity. It is only then that the frightening level of unemployment and poverty can be mitigated in 2014.  A number of policy choices and actions are desirable to make this happen. These include commitment to improvement in the general cash flow in the economy. This is critical to stimulate the economy in 2014. The liquidity and cash flow situation in 2013 was a major challenge for many investors. Lending rates should be moderated and access to credit should be reasonably liberalised.   Monetary and fiscal authorities need to make this happen next year.

    New strategies should be adopted to deal with the security situation in the country. Security concerns heightened investment risk and depressed sales lats year. We hope for an improvement next year. The passage of the Petroleum Industry (Bill), preferably in the first quarter of the year, is desirable.  This would unlock the potentials in the oil and gas sector.  The passage of the bill would reduce the current uncertainties in the sector and eliminate the present stagnation of investment.  We hope to see a better level of budget implementation in 2014. But one is concerned about the possible distractions that partisan politics would create as we move closer to 2015.  The omens are not very good at this time.

    What advice do you have for the government in 2014?

    The Federal Government should consider the following steps in 2014: First, there should be deceleration of debt accumulation to protect the economy from the looming debt trap.  We expect a moderation in public debt accumulation next year. Better disposition of public institutions towards investors and entrepreneurs.  We hope to see a public sector that is driven by the true spirit of public service. This would enhance private sector development in the overall interest of the economy and the citizens. There should be a renewed commitment to fight corruption next year.  Currently, the economy bleeds profusely from corruption and our expectation is that this bleeding will be moderated next year.  This should happen through a combination of appropriate policy choices, deterrent sanctions for perpetrators and rewards for integrity.

    Another is new momentum to address the huge infrastructure deficit in the economy. We desire a higher dedication to infrastructure improvement especially with regard to power, roads, and railways.  Current reforms in the power sector should be sustained. We desire to see renewed commitment to patronage of locally produced goods by government agencies and institutions. Renewed commitment to local content policy, not just in oil and gas sector, but in other sectors of the economy should be prioritised.  Indigenous participation is an important strategy to ensure inclusive economic growth. Better commitment to the improvement of infrastructures in order to enhance the productivity of enterprises in the economy.

    Despite all the concerns about the state of our economy, I would say that our country offers tremendous opportunities for investors. We have the largest population in the African continent (estimated at 170 million); we have the largest black population in the world; ours is the second largest economy in Africa (with a GDP of over $300 billion); we have one of the highest growth rates in the world currently at 6.7 per cent; we account for over 50 per cent of the GDP of the West African sub-region; we are blessed with abundant natural resources (minerals and arable land) and our democratic structures are becoming firmly entrenched. What is missing is the capacity to harness these opportunities for our common good.  I am confident that this will happen before long.

  • Nigeria receives the largest amount of Foreign Direct Investment (FDI) in Africa

    Nigeria receives the largest amount of Foreign Direct Investment (FDI) in Africa

    Obiora Madu, Director-General, African Centre for Supply Chain, Lagos, spent a decade on the export desk of two major export-facilitating banks and was a member of the pioneer team that developed most of the export financing products and instruments that are generally used by most banks . In 1992, he left banking as Head, Export / Import Operations to start Multimix, the pioneer indigenous Export House in Nigeria. Mr. Export also pioneered Global Trade, Logistics and Supply Chain Education in Nigeria leading Multimix Academy to become the leading firm delivering competency based education that has empowered managers across all sectors of the Nigerian economy. Daniel Essiet sought his opinion on international trade, customs procedures, laws and regulations to improve trade facilitation, procedures for traders and government agencies involved in the import and export of goods.

    Experts are canvassing reduction in government size and expenses drastically. What solutions would you recommend?

    Governments everywhere face pressure to provide public services better, faster, and cheaper than before. Lean methods have been used by governments of various sizes across North America to successfully meet this imperative. Lean has particular promise for public-sector organizations because it doesn’t require a lengthy planning and implementation cycle, it does strive to make the best use of the talents and ideas of those who work in the process, and it focuses on the value that public services create for the citizen and how to maximize that value.

    Governments around the world want to deliver better education, better health care, better pensions, and better transportation services. They know that impatient electorates expect to see change, and fast. But the funds required to meet such expectations are enormous. The need to get value for money from governments at all levels is therefore under the spotlight as never before. But cost-cutting programs that seek savings of 1 to 3 per cent a year will not be enough and in some cases may even weaken the quality of service.

    In the past two decades beginning the 1980s, there has been a growing realization among some public servants, politicians, activists and academics around the world regarding the inherent weaknesses of government bureaucracy. From the industrial states of Europe and the United States of America to the developing and underdeveloped countries of Africa, Asia and Latin America, bureaucratic dominance is often viewed not as a solution to the problems of public administration, but the very source of these problems.

    LEAN is “a management culture that emphasizes the centrality of the ‘customer’, as well as accountability for results.” The main objective of implementing LEAN is to achieve “more transparency, more efficiency and more quality as well as reduction of expenses.”

    Mr. Madu has over 28 years of related working experience with international corporate exposure in international trade, customs and maritime as well as transport and logistics/supply chain management. His experience in training and capacity building cuts across all the industries as has been shown in activities too many to list. He has experience working with international agencies like International Trade Centre in Geneva, The US Commercial Service and USAID amongst others.

    How would you describe export outlook this year?

    The outlook for export this year is not two different from last year. Infact the press have reported some decline in revenue from non oil compared to 2012. However with the flurry of activities in the agric sector, we are likely to see a surge. The unfortunate however has been the fact that we continue to export raw agro-produce and this does not pay us. Our manufactured export is very low for obvious reasons.

    President Goodluck Jonathan in his message to a recent non oil export conference made it clear that if the country must achieve its set goal of becoming one of the top twenty largest economies of the world, Nigeria must embrace manufacturing and the non-oil sector, and that the country must develop the non-oil sector with resources from oil.

    The sustained volatility of world oil prices, the global tendency towards a diversified export based economy and the urgent need to expedite the process of economic growth and development has made it imperative that we either focus on non oil export or we regret it.

    How much interest is there from international buyers in our exports?

    In terms of agro-produce, tropical crops grow in the tropics and those who leave outside the tropics have no choice but to buy. But that notwithstanding, we have a acquired for ourselves a reputation of unseriousness particularly in respect of executing export contracts. This has adversely affected the level of interest in our export products. The result is that people that ship products from Nigeria and label them as either Ghanaian or Burkinabe products. Atypical example is in Shea butter.

    The challenges notwithstanding, what sectors of the economy stand to benefit the most from export trade?

    When you mention export every body’s mind go to the traditional agric produce but indeed so many sectors in the country are exporting without knowing it. However let me talk about the not too popular export of services.

    Trade in Services refers to the sale and delivery of an intangible product, called a service, between a producer and consumer. Trade in services takes place between a producer and consumer that are, in legal terms, based in different countries, or economies, this is called International Trade in Services.

    The International Trade Centre in Geneva has said that by 2050 80 per cent of workers around the globe will be working in that service sector and also that services now account for approximately two-thirds of the world’s economic activity, with trade in services contributing over 20 per cent of world trade and over US$1.3 trillion annually. Currently over half of the world’s workforce is employed by service firms, which also create most of the new jobs. The contribution of services to Gross Domestic Product (GDP) in the majority of countries is well over 50 per cent and in some cases, as high as 70 per cent. Furthermore, new information and communications technologies are increasing the tradability of services. Trade in services is expected to represent half of all world trade by 2020.

    A country survey of the services sector in Nigeria, I conducted for ITC in 2006 revealed that 42 per cent of Nigeria’s trade performance is traceable to the services sector. Identified sub-sectoral activities with high export potentials include engineering, telecommunications, healthcare, catering, tourism, architecture, accountancy, courier, business and management consultancy, etc. Emerging markets was also identified in business advocacy both at the public and private sector levels. It is doubtful, however, if the nation is aware of the potentials of this sub-sector and its ability to contribute immensely to the country’s economic diversification agenda. Nigeria’s tourism industry, for instance, is a big gold mine that is yet to be excavated, the same goes for our film industry with our home videos making waves in homes around the world and yet no coordinated approach to ensuring its official exports.

    What are the biggest challenges to export market development?

    The challenges are mainly policy failures. This is why at our export has not progressed in spite of the interest shown by government.There are other challenges within the sector. These include absence of relevant support structure. This issue is vital.The export sector is a very large one and needs so many hands on deck in the chain. This means that if any section is not working, others will be affected. It shouldn’t be only the concern of Ministry of Trade and Investment. You notice that that inadequate attention is paid to the small and medium scale enterprises in our export policies. As a strategy global, SMEs are supported because they offer considerable potential for exports. However, in spite of a deliberate policy of providing support to SMEs adopted by many countries, this potential is yet to be fully exploited. This assertion was made by the International Trade Centre in Geneva. It went ahead to say that in many developing countries there seems to be insufficient awareness of the part that can be played by export development companies toward coordinating the SMEs and channeling their exports. This observation is as relevant today as ever, particularly in Nigeria. A close study of our export sector shows clearly that we have never considered the issue of training in international trade important. Perhaps because our importers open Letters of Credits and receive their goods and our exporters seem to be “doing something”, we erroneously jump to the conclusion that we do not need training. Nothing could be farther from the reality. All countries that are serious with export, place a lot of emphasis on training because the quality of a nation’s export output is a reflection of the quality of her manpower. If we can possibly quantify the losses incurred and the image problem created by lack of training in this sector, then we will appreciate the importance of the need to quickly address this situation.

    Do you send any export potential in our film industry?

    It is doubtful, however, if the nation is aware of the potentials of this sub-sector and its ability to contribute immensely to the country’s economic diversification agenda. Nigeria’s tourism industry, for instance, is a big gold mine that is yet to be excavated, the same goes for our film industry with our home videos making waves in homes around the world and yet no coordinated approach to ensuring its official exports.

    In the face of current unfavorable developments in the international oil market which is likely to be with us for some time to come, Nigeria must seek alternative exports or face the unhappy consequences of constantly reduced foreign exchange earnings.

    The export industry is an exceptionally dynamic sector. Consequently, it requires a system of proactive and future-oriented strategic policies and measures which will have to be constantly reviewed, adapted and improved to ensure its effectiveness.

    What is the precondition for effective export promotion?

    Exporting is an important factor of economic growth, and therefore export promotion is a critical consideration for economic development of each country. As a public policy component government-sponsored programs must be developed to promote export activities. Promoting export activity; particularly by traditional exports and new export products, is essential for progress in this area. Currently the government is the principal provider of export assistance to the business community but government alone does not have all the resources, the staff, the expertise, or the communication channels needed to wage such a broad-based promotional campaign and for this reason the government needs to develop broader and deeper partnerships with the private sector. Export promotion is a high economic priority for virtually every country. While facilitating the expansion of existing export product lines is an obvious concentration area, it is in the promotion of new export products, and the exploitation of new markets that can provide special help to home enterprises. For developing countries, external markets pose several kinds of problems. First, home exporters do not know the basic environment in foreign states, and do not have the capacity to invest in exploration, much less pay consultants to advise them on entry strategies. Associations of exporters at home confront a like problem, though on paper they should be able to carry out market surveys and the like. Secondly, foreign regulations on safety and environmental standards, and other norms laid down by potential markets are little understood by home exporters, and pose real nontariff barriers (NTBs) to entry. Also home exporters lack credibility with potential foreign customers, and this becomes a chicken-and-egg syndrome, making it difficult to break this cycle of unfamiliarity.

    Overall, the economy has managed to navigate the financial crisis relatively well. We expect economic growth to accelerate. However, as the economy recovers, we face different challenges which were at the centre of the crisis. In terms of manufacturing activity, the immediate outlook looks to be slowing somewhat. What is your take? An economy with consumption mentality will face the challenges we currently face. The real sector is not working? Where are the manufacturing companies? Are small and medium sized enterprises (SMEs) growing or dying? If any economy is not growing forget about the Gross Domestic Product (GDP) and look at the reality on ground. Who will employ the army of half baked graduates that you churn out yearly? As we speak, the few companies that are still afloat are groaning under terrible conditions that affect their competitiveness-ranging from infrastructure, to human capital challenges occasioned by the half baked graduates coming out of our tertiary institutions. As we speak, the universities have been shut down for three months and as soon as they resume by the grace of God, examination will be administered. What do you expect from such a system? We must address both the hard and soft infrastructure to help our industries to survive.

    Will oil continue to be the key export, or are you expecting other sectors to play an increasingly important role?

    From available statistics, only few countries of the world can match Nigeria’s endowment in the area of natural resources. With an estimated population of over 140 million people, and onshore and offshore that boast of some of the finest deposits of oil and natural gas, a rainforest belt that offers the best cash crops and hard wood and a savannah region with very large tones of oil seeds, coffee, chilies, spices and abundant solid mineral resources. In fact, the opportunity that Nigeria offers investors in the field of non oil export is immense and irresistible. In spite of all these, the economy has remained largely monolithic with investment in non oil export sector being everything but strategic. There is no gain saying that any policy or strategy aimed at achieving the nation’s Vision 2020 should therefore integrate the development of the non oil export sector, if we are going to achieve economic recovery. We need a purposeful and well-articulated non-oil export development policy to form part of our general development plan to achieve such a goal.

    What kind of collaborative export promotion strategy, do you think would allow companies to overcome the various barriers and obstacles involved in exporting and to successfully position Nigeria in international markets?

    Obtaining access to export markets is crucial for fostering SME growth and productivity, especially in light of increased globalization and market liberalisation. SME in developing countries, however, face many constraints to competing effectively in these markets since they often lack the necessary knowledge and financing, may not meet foreign regulatory requirements, or may produce products in quantities and of a quality that are not adequate for foreign buyers.

    One effective way of addressing these problems is through the development of export consortia. Export consortia or Cooperative Exporting are voluntary groupings of enterprises, usually in the same or similar business or sub-sector, with the objective of improving the export readiness and increasing the export volumes of the participants. By combining their knowledge, financial resources and contacts within an export consortium, SME can significantly improve their export potential and reduce the costs and risks involved in penetrating foreign markets.

    Most consortia are non-profit entities, and members retain their financial, legal, managerial, and commercial autonomy. So, despite their participation in the export consortia, member firms do not give up any control over their business to others. This is the main difference between consortia and other types of strategic alliances.

    This offers firms the opportunity to reduce costs by capturing economies of scale. Joint ventures also enable participating firms to spread risks. These benefits are likely to be greatest for small and medium-sized firms that are either new to exporting or have limited export experience. However, firms of all sizes and levels of international business experience can use joint exporting to reduce per unit export costs and develop proactive export strategies that may not be feasible for individual exporters. The ability to reduce export costs and risks is especially important when considering entry into a new or complex export market

    It is wise to consider collective exporting and its advantages. The western markets are very complicated to export to but joining forces with compatriots may put exporters in a better position to succeed. ITC described the international market as ruthless, selective and fiercely competitive. This underscores the need to explore all options capable of reducing inherent risk.

    In an economic environment characterised by constantly changing technology and market trends, how do SME export companies cope?

    Access to finance had been singled out as one of the major challenge impeding the survival and growth of SMEs in Africa. Significantly low figures of SMEs who apply for financing succeed in getting financing. The ability of SMEs to grow depends highly on their potential to invest in restructuring and innovation. All these investments require capital and therefore access to finance. Against this background, the consistently repeated conception of SMEs about their problems regarding access to finance is a priority area of concern.

    Lack of adequate credit for SMEs traceable to the reluctance of banks to extend credit to them owing among others to poor documentation of project proposals as well as inadequate collateral by SME operators. Developmental policies weigh in favour of large firms and sometimes foreign owned firms leaving SMEs in a distressed and vulnerable position.

    The problem of access to information may be attributed to the inadequacy of SME support institutions. This point to the need for a supportive policy to encourage the establishment of documentation centers and information networks to provide information to SMEs at an affordable price.

    Federal Direct Investment is dwindling. Looking at the macroeconomic situation, is Nigeria not stable enough for foreign direct investment by multinational corporations?

    Nigeria receives the largest amount of Foreign Direct Investment (FDI) in Africa. Foreign Direct Investment inflows have been growing enormously over the course of the last decade: from $1.14 billion in 2001 and $2.1 billion in 2004, Nigeria’s FDI reached $11 billion in 2009 according to UNCTAD, making the country the nineteenth greatest recipient of FDI in the world.

    Nigeria’s most important sources of FDI have traditionally been the home countries of the oil majors. The USA, present in Nigeria’s oil sector through Chevron Texaco and Exxon Mobil, had investment stock of $3.4 billion in Nigeria in 2008, the latest figures available. The UK, one of the host countries of Shell, is another key FDI partner – UK FDI into Nigeria accounts for about 20 per cent of Nigeria’s total foreign investment. As China seeks to expand its trade relationships with Africa, it too is becoming one of Nigeria’s most important sources of FDI; Nigeria is China’s second largest trading partner in Africa, next to South Africa. From $3 billion in 2003, China’s direct investment in Nigeria is reported to be now worth around $6 billion. The oil and gas sector receives 75 per cent of China’s FDI in Nigeria. Other significant sources of FDI include Italy, Brazil, the Netherlands, France and South Africa.

    What is the most cost effective and quickest method to stimulate the economy and support job creation?

    Successful employment creation hinges on a triple E ie Education, Employability and Economy. That means that we must strategically deal with the three issues before we can achieve a substantial success in our employment generation effort. What is the quality of our education? Who is to blame for the quality? If you train soldiers for previous wars can they fight the present wars not to talk about the future wars? The answers to above questions will address the first two Es. In respect of the economy,

    Is the real sector working? Where are the manufacturing companies? Are SMEs growing or dying? If any economy is not growing forget about the GDP and look at the reality on ground that will employ the army of half baked graduates that you churn out yearly. As we speak the universities have been shut down for three months and as soon as they resume by the grace of God examination will be administered and what do you expect from such a system. We must do something about our education system to improve the employability of our graduates. Also the SMEs hold the ace if there is a deliberate effort to help them grow.

    Some ago when the present minister of Trade and Investment was in Finance three sectors that have the capacity to generate the largest number of employment and they were Business Process Outsourcing (BPO), Construction and Entertainment. It was unveiled and some meetings held but as soon as he left, nothing was heard of that again. The South African government identified BPO and Tourism as their target for economic growth and employment generation and I you fly into South Africa, from the airport everything speaks to you about these two sectors. This policy saumasult and they need to always change what the predecessor started will lead us nowhere. We need to get strategic and show seriousness from the top and pursue our dream to a logical conclusion. Grow the SMEs if you wish to grow the economy. Show consistency in policy implementation. As much as we do not want quick fixes, let us go for low hanging apples that will give us good results in the short run. Declare a state of emergency in our education sector and overhaul the education system to address current and future challenges.

    What services does your organisation provide to help firms become successful in foreign markets?

    Multimix Academy is an integrated supply chain solutions and intervention company that provides exceptional high quality International Business and Logistics education and intervention. We provide Logistics and Supply Chain Management consultancy services, Marketing Strategy Development, Professional education in Logistics and International Business Management, Import/Export and customs compliance Consultancy, Business Process Re-Engineering, Business Support Outsourcing and Customised training services.

    Our consultancy interventions will deliver amongst others: reduction in the logistics process chain, reduction in cost, enhancement in the operation system integrity, Improve staff productivity levels, Improve margins and profitability of your logistics operations and creation of additional value in the overall logistics chain.

    The key objective of our training programmes is to provide excellent programmes essential to anyone in pursuit of world class performance in logistics and supply chain management

    Multimix Export House on the other hand is Nigeria’s pioneer and leading Export Management Company. Our Services are a strategic link in the export process for companies of all sizes and degrees of export experience. Our Export Management Service is especially crucial to companies wishing to penetrate new markets or expand their current exporting business but lacking the expertise, physical facilities or other resources needed for such an international undertaking.

    We provide Export consultancy services for both buyers and sellers in the global supply chain. We are also traders of products ourselves using our knowledge and experience as an Export Management Company to help your business gain entry into new markets across the globe. Our solutions add real value and support international growth and sales. On the procurement side, we can provide professional representation for your company, helping source and procure new products and services.

    What are the requirements for exporters to avail of these services?

    Our Export Management Services are a strategic link in the export supply chain for companies of all sizes and degrees of export experience. Especially crucial to companies wishing to penetrate new markets or expands their current exporting business but lacking the expertise, physical facilities or other resources needed for such an international undertaking. Exporters can contact us right from the beginning of their transaction for handholding till the end of the transaction

    We act as the export management company for its client firms, assuming most of the technical export responsibilities. Our various services include: conducting market research to determine the best foreign markets for your products; attending trade shows and promoting your products overseas; assessing proper distribution channels; coating foreign representatives and/or distributors; arranging export financing; handling export logistics, such as preparing invoices, arranging insurance, customs documentation, etc.; and advising on the legal aspects of exporting and other compliance matters dealing with domestic and foreign trade regulations. Attend trade shows and travel abroad, meeting potential customers face to face. Continuously research and appraise market conditions overseas, providing feedback to our business partners for incorporation in their marketing and product development plans

    What do you consider as the major accomplishments of the export promotion council?

    The export promotion council has tried within available resources and have assisted in developing various products and organised various trade fairs and solo exhibitions. Through the Export Mentorship Programme which I manage for NEPC several new exporters have emerged coached by their mentors.

    What advice would you give the policy makers to help the economy and exporters?

    It is imperative that SME policies have an export orientation at the point of conception. This would culminate in the entrenchment of a wide-spread export culture in the country. Experiences of industrialised countries have proven that small and medium scale enterprises are the pivot of exports as they account for at least 60 per cent of export activities. With SMEs in the centre of exports repatriation of proceeds is monitored and guaranteed. It is recognition of this type of advantage that UNIDO has supported the Federal Ministry of Commerce in establishing and organizing the Aba leather products-cluster. This strategy should be extended to other products. Nigeria is no doubt one of the most promising countries in Africa and its potential as a net exporter of agro industrial products, manufactures and services has never been in doubt and will continue to attract high interest from the international business community.

    Result from the two major interactive stakeholders fora organised successfully by the Federal Ministries of Commerce and Finance has indicated the preparedness of the Nigerian private sector to accept the challenge of driving the nation’s economy. This acceptance is however, predicated on the ability of government to provide the proverbial enabling environment. It is, therefore, in recognition of this that recommended solutions need to be vigorously pursued via the vehicles of the attached specific projects. In doing this also government must accept and act on the fact that a lot of financial investments must go into the creation of the necessary support structures towards making trade the hub of the nation’s economic development and growth. Nigeria is no doubt one of the most promising countries in Africa and its potential as a net exporter of agro industrial products, manufactures and services has never been in doubt and will continue to attract high interest from the international business community.

     

  • ‘Many concessions are daylight robberies’

    ‘Many concessions are daylight robberies’

    He comes to the job with a rich experience. George Uriesi, Managing Director of the Federal Airports Authority of Nigeria (FAAN) understands the aviation terrain well. For years, he managed the Cape Town International Airport in South Africa. He was also on the executive team of the South African Civil Aviation Authority (SACAA). Since his return home in 2010, he has been working at FAAN, first as Director of Airport Operations and now, the Managing Director. His 20-month tenure as managing director has been dogged by controversy. Why? Because of his refusal to play ball with those fleecing the country, he says. Uriesi spoke with Assistant Editor Joke Kujenya.

     

    How do you react to allegations of financial recklessness in the ongoing remodelling activities of FAAN?

    All I can say is that all of these allegations are recycled information. And the one you are asking me now is even one of the mild ones. There are some that alleged I was a drug pusher in South Africa and even claimed that I ran away to the United States of America (USA) when I was declared wanted. In fact, this particular one you came with is one of the very old ones. There are some that claimed that while in USA, I was an international gangster, leading a group. I just think that I am very much disliked by very powerful people. But I am not bothered about this. The fact is some of those behind this stuff seem to be very powerful people. There have been a lot of so-called concessions done in FAAN over the years before we came in. First of all, they know that they cannot tackle me when we talk professionally because they too know that I am quite solid as an airport manager internationally. They also know that I’m a multiple award-winning airport manager.

    When I looked at the papers and saw all that were going on in the name of concessions and agreements, in fact, there was a particular one that I carefully read through all that were written on papers; I nearly fell off my seat. All I could gasp was ‘what is this for God’s sake?’ So, I told them all, this is not a concession. And in every instance, I went to the people concerned and said to them, ‘please, let us look at this together. Is this concession agreement against which you are doing this business?’ And I told them again ‘but you know that this can’t stand or work now.’ In fact, I said openly to some that ‘you know this is fraudulent.’ One of them actually told me ‘You know George, you just came back. You’ve been out of the country for many years. You don’t really know what is going on…’ Then he told me ‘Just focus on your own job because some of these things pass you…’ Then I told him, you know I am the managing director and I have a judicious responsibility to correct things that are not going on right. I also told some of them; let’s renegotiate some of these things in such a way that it would add value to FAAN. I’m not saying all of them should go away. And what they often end up saying is ‘My brother, I beg leave that side.’

    The least they expected was that I would be able to say ‘no’, we are going to cancel these things because it’s daylight robbery. So, in a very short time, I built a crop of very solid enemies.

    In specific terms, what do the controversies about the concessionaires entail?

    I am glad you brought this up. My take on it after being FAAN MD for about 20 months, is that it seems Nigeria wants progress but does not like progress in the real sense of the word. We fail to appreciate the fact that in order to make progress, we must take lots of decisions that must be very unpopular with the powers-that-be. And I have found out that these so-called powerful people do not take these things lying low. They react in ways that are so vicious. So, it surprises me that these are people who travel all over the world and commend airports of the many countries they had been to, as looking quite great, abusing our own airports. They are the same people who now see that, at last, things are being done to remodel and upgrade our own airports, yet, all they could do is to attempt to thwart the efforts. They are the same people who were shouting where do they get the money that is being spent to upgrade airports from and all that? They keep saying we’re siphoning money and all that. But I have had a very different approach to this. Let me start with the domestic terminal, the General Aviation Terminal (GAT) that we rebuilt from the scratch. It costs N648 million. This is an amount of money that is less than what many Nigerians spend in building their personal houses. And the GAT is processing the same number of passengers that the Bi-Courtney Terminal that is supposed to have been built for N38 billion, is processing. This is because it was designed very efficiently, because we made very good use of the space we had.

    You just said the GAT was remodelled for N648 million, and only Arik seems to be operating there. Why is this so and how would it generate the expected returns for the sector?

    Yes, only Arik is operating there for now. And that is because the other airlines are at the Bi-Courtney terminals. Our intention was never to take the carriers of the airlines there. But Arik has never been able to operate there because it does not have the capacity to manage Arik. That is why Arik finds the GAT a suitable terminal to ferry its passengers from Lagos to anywhere they are going. However, other airlines have ticketing counters so you can buy your tickets at the GAT and go board your flight at the Bi-Courtney terminal. Nonetheless, it is rather difficult to say for now if other airlines might be able to move over to GAT. But if any comes to us and say they want to move over, I doubt if we have the right to deny them. Yet, it would all depend on if we have the capacity. At that stage, we may have to weigh the pros and cons and be sure that we do what is comfortable for everybody concerned.

    FAAN says it is pursuing a radical automation programme intended to improve its revenue collection and block leakages, in practical terms, how is this objective being pursued?

    It is very simple. And the way I would answer this question is, this is 2013, airports cannot be run without automation. And this is another area of anger that has provoked the petition writers and the powers-that-be. The introduction of automation is vastly changing the face of airport operations all over the world. Let me give you a couple of examples. If you have a shop in the airport and you have a concession agreement with us that says you will pay us a rent for the space you occupy. And it also states you will pay us a certain percentage of your gross earnings. Now, let us assume your gross earning is five per cent concession fee, which means, if you earn a hundred bucks, FAAN would take five per cent. But because we have no way of knowing how much you have actually been earning on your business apart from what you always tell us this is how much sales you made; so you just give us five per cent of your overall earnings. But with automation, each shop owner’s sales will be monitored through our system. So anything you sell, we know. And at the end of the day we would realise that those who have been underpaying us have actually been declaring lower than their actual turnovers. So, our five per cent of your one hundred naira would be weighing more than what you have been declaring. And so, you can’t just declare anything to us any longer.

    Secondly, when you look at all the tickets at the gates of our airports, in which we print booklets and when you make your payments, they tear a ticket for you and you pass on to your destination. With all due respect to my staff, people always tell me, “Ha MD, the people have their own tickets and stuff like that”. I was even told that it is after they have used three of their own booklets that they would manage to tear one of FAAN’s. Well, automation will put an end to all that.

    Automation means when you come there, you will pay, take the tickets and then, the gates will open before you can pass. It will register exactly how much you pay, how many cars passed, and we would know precisely what our revenue is for each month. The first month of automation in Abuja airport, has been very revealing. I am not accusing my staff of having short-changed the organisation. But I am saying that whatever leakages there were, have been blocked. We are now protecting the gates here. And that is why when you try to go through, you seem to see a lot of traffic because we are rebuilding it in such a way that it would change our revenue profile.

    On electricity, FAAN pays for the power we consume at the airports. And everybody who sells at the airports uses same source of electricity supply paid for by FAAN for free. But in other airports across the world, the authorities recover the electricity charge. Sadly for us, there was no way to do this prior to recent times. So now, we are putting in pre-paid meters for every shop owner situated within our airports. So, power will only be supplied to your shop through the pre-paid meters. Now, FAAN has a bill of about N250 million monthly due to airport operations across the country. And we don’t recover anything. But now, I can bet you, we will start recovering between N150 million and N170 million of the overall N260 million. Each shop operator will now have to pay FAAN for the power that we pay to PHCN. And when you don’t pay for your electricity in your own shop, it means, power will not be supplied to you or your power runs out. So, all these measures will make a huge positive difference to the revenue generation of FAAN, which we would be able to re-invest into the airports in the country.

    While these are just a few of the benefits of automation, it also became a big controversy. It got me so bothered that I had to retort why these people don’t want FAAN to automate. I have given you some basic examples of the huge difference it would make to the operations of FAAN, yet they don’t want it to happen. They just want to be left to be doing what they had been doing to our airports for the past 30years or so. These are just the basics of the automation which if allowed to work, there would be a huge change to the revenue income of FAAN and the aviation sector in the country.

    Does it mean that if FAAN takes over the toll gates, it will run it better or what? And what happensto the operators?

    Let me start by saying that, I have nothing but the highest respect for the young Nigerian entrepreneurs who had a five-year concession for these toll gates at our airports. They have the best concession in FAAN, I must admit. And why did I say that? They paid us every month unfailingly. This is because in their concession, FAAN was able to include a clause that say they have a rolling monthly bank guarantee. This means, if they did not pay, the bank would take the money and pay us. So for that reason, they woke up to the responsibility of managing that concession. We may have issues with the amount of money that FAAN signed up to get out of the toll gates proceeds every month. I don’t mind that provided they were paying the money, one; and two, I could see that they were working very hard to maximise the incomes from the toll gates. But now that we are automating, their concession ends in November this year. So, it is not that we are stopping them, but we will not renew it for the simple reason that automation has taking off. We cannot be cheated, so why should we be paying somebody else a concession when the revenue can accrue to us directly because it is automated. So, it is just that the model has changed. We don’t need them anymore. However, they did a great job for the period. They were one of the very rare concessions that were well-documented. For that reason, I wish there was another area I could partner with those serious-minded group of young Nigerian entrepreneurs.

    They were not like many who were just out to fleece others and on a larger scale, the country. But they worked so hard at the toll gates to keep the concession going. But if we have other projects in FAAN and we need people that we know will do a good job and pay their dues at the time allotted, I will not hesitate to contact them.

    How is FAAN pursuing the airport certification programme?

    On airport certification, ours was the first in Africa to be certificated in Cape Town International Airport long ago. That was as far back as 2005. So, I am quite at home with the process of certification. And my attitude to it is that, I looked at our airports and I felt the certification that the country already had, our airports meet regulatory requirements. It’s got the right runways, taxiways, navigational and visual aids, and all the things that are needed to run. Certification just means that, you have an organisation that is able to keep the airports running at optimal. So, it will then be certified that this particular airport is a compliant airstrip. Now, we have all these things and we have the propensity to invest back into a recalcitrant attitude. And so, the organisation must change to become a proactive agency that is determined to keep the airport running properly before I would want it certified. That’s my attitude. So, I said we should first get the infrastructure right and that is why we are working on the organisation in an all-round manner. We trust that by the second half of the year, this July, we are going into the certification of the Lagos Airport. Our target is that by the end of the year, that is in December, we would achieve the first proper certification of the Murtala Mohammed Airport (MMA), Ikeja, Lagos, and then, we would move on to Abuja. By 2014, we would get the Port Harcourt Airport and the rest of them fully ready for certification.

    Well, it is on record that FAAN generates so much revenue, however, what is the level of support the agency gets from the Federal Government and in what ways would all these translate to the economic benefit of all Nigerians?

    Seriously, the airports are a huge revenue trigger. When airports are well managed, they contribute hugely to the economic base of the country and the surrounding communities in terms of employment, businesses, entrepreneurship and the indirect impact because a booming airport has a lot that gives an indirect effect. Now, we are going into the aerotropolis, which is a deliberate development of the cities around the airports. And this would then generate huge employments from the massive economic activities that would impact on the residents of the surrounding areas. If we don’t do this, then, everything is a waste. So, we are trying to make sure that we allow our airports to interpose in that aspect.

    Can you expatiate on the aeronautical revenues?

    Nigerian airports have been dependent on the aeronautical revenues from time. Whereas, the world over, dependency on aeronautical proceeds is almost suicidal for an airport. This is revenue that comes from landing and parking of aeroplanes as well as passengers service charge. Non-aeronautical incomes are the shops, businesses around the airports, and the commerce they generate. An airport must be able to rely on both independent sources. When Dana crashed last year, fortunately, there was this significant reduction in aeronautical activity because the airline was out. Shortly after, Air Nigeria went down, also for a while, Aero Contractors was suspended, and it was almost only Arik that was flying at a time. Our revenue grossly nosedived. And at the same time, we had closed all our commercials because we were doing renovations and all the airports seemed grounded. So, we suffered severely for the late part of last year. If we had the booming non-aeronautical revenue already going on, the impact of that plunge would have been significantly reduced. So, we need both. So, there is much more non-aeronautical activities such as restaurants, shops and all sorts of things and therefore more revenue to the airports. So in Akure, Ibadan, Ilorin, you will see a quadrupling. There will be a vast increase in the revenue generation unlike the previous offering. Already, in MMA, it is not quadrupling, it is about quintuple of the prior commercial offering.

    A few weeks back, an aircraft was sighted in an unusual place around Igando, it was later discovered to be a disused plane. What is FAAN’s plan towards removing such craft from our airports and what would be the cost implication in terms of removal and sales?

    FAAN didn’t generate anything, and we didn’t spend. It’s neutral for us. What we did is, in order to get rid of the aeroplanes, we get people that can come and dismantle and take them away. Then, they can make what they want out of it. This issue of disused planes have been unnecessarily over-exaggerated. There is really little of aeroplane parts that can be recycled. Lot of aeroplane parts are the seats and the inside generally. The major part that can be used is a part of the skin, and that is even very minimal. In every aeroplane, there is so much work to do in order to just extract a little skin. And that is why we said to people that can do it to come and take them away. For two years that we advertised, barely did anyone show up voluntarily until we finally got somebody who expressed his preparedness to take it up. So, he came around and carried away the scrap. Now, the one towed and seen at Igando, it was somebody that came and said he would like to use the aeroplane as educational specimen for children in a particular location. He’s one of these captains. So, they cut the wings in order to be able to tow it on the road, which is very normal. It happens in every country in the world. But in Nigeria, a crowd gathered, claiming that an aeroplane crashed.

    Now, for the billions of naira being owed FAAN by foreign and domestic airlines, what is the agency’s recovery strategy?

    We are being owed a lot of money, I must be factual. For now, we are going through a legal process where we have assigned legal debt recovery agents for the first time, to go about recovering the debts owed FAAN. That for us is the only avenue through which our debts can be retrieved. It’s difficult to tell you the exact amount because for the first time, we are going to ask the Federal Government to allow us to cancel and write off some debts that are considered unreasonable in our balance sheet. Such debts are, like those of Okada Air, Haco Air and most of the airlines that are no longer functional. But we are still carrying them on the balance sheet. We want to delineate between what is visible and recoverable because by now, we should know the ones that can never be repaid. So then, let them go. I assure that we are working on that in line with due process. But the good thing about that of the foreign airlines is that they are the ones that keep us going because they pay their bills. They all owe but our international airline owners pay us regularly. The problem for us is when they owe and do not pay and the thing keeps accumulating over the years. But we need the domestic airlines to service their debts more.

     

     

  • ‘Why govt must intervene in financial markets’

    ‘Why govt must intervene in financial markets’

    The Central Bank of Nigeria (CBN) and Bankers’ Committee established the Nigerian Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) to help farmers get concessionary loans. In this interview with DANIEL ESSIET, Country Head, Solidaridad – Nigeria – an international Dutch development organisation, Alex Gbenga Akinbo, urges government to resuscitate state-owned agricultural development banks to make loans available to farmers.

     

    Why is the financial system reform so important to agriculture?

    The answer is simple. There is no farming without money. Money for farming not only means access to credit, but also access to other financial products and services. Providing credit access to farmers enables them to insure against risk, enabling them to save. Every farmer who wants to expand needs finance. It is still difficult for farmers to get credit because farming is considered a high risk activity. The importance of improving farmers’ access to financial services cannot be underestimated. Traditional financial institutions come with strings attached, taking away successful investment in small-scale sustainable farming. The rural poor have no easy access to loans and grants from commercial banks or financial structures because they lack collaterals and modern business plans. Providing sustainable financial services for agriculture continues to be a challenge in spite of millions of naira being spent to strengthen financial institutions to serve the sector. We need reforms because agriculture still receives a small share of total formal credit. We need a rollback of reforms and a return to active government’s intervention, including the resurrection of state-owned agricultural development banks and the reintroduction of interest rate ceilings on agricultural loans. No considerable success has been achieved by some microfinance institutions (MFIs) in providing sustainable microfinance services that contribute to resolving the agriculture credit problem, especially the rural poor. The banks limit their operations to areas with high population densities and farm loans usually represent a small share of their loan portfolios. The government needs to intervene in the financial market to induce financial institutions to increase the supply of and reduce the interest rates for agricultural loans. Special cheap lines of credit need to be provided to lenders, incentives given to open rural branches, and agricultural development banks created to serve the sector when banks and cooperatives fail to meet lending targets.

    Financing agricultural research remains a challenge for international organisations, governments, the private sector, and other development partners. Have we made progress in these areas?

    Agricultural research and development (R&D) is primarily funded by the governments and donors. Overall investment levels remain below the levels required to sustain viable agricultural R&D programmes that address current and future priorities. Mobilising domestic political support for agriculture, especially for agricultural R&D, has been difficult. One reason for this is the inherently long time lag between investing in research and attaining tangible benefits.

    How do we address this?

    The government should emphasise agricultural research and innovation for development.

    What sort of changes have you seen during this year in the agriculture sector?

    Looking at the past government’s policies in agriculture; Nigeria’s agricultural policy framework has gone through a number of evolutionary processes and fundamental changes that reflected in a historical perspective, the changing character of agricultural development problems and the roles, which different segments of the society were expected to play in tackling these problems. But in the main, the form and direction of agricultural policy were dictated by the philosophical stance of the government on the content of agricultural development and the role of the government in the development process. Succinctly put, one of the major constraints to agricultural policy effectiveness was that of policy instability. Over the years, the rate of turnover in agricultural policies had been high, with many policies formulated and scrapped in rapid succession. Again, this problem could be partly ascribed to political instability as every successive government tended to jettison most of its predecessor’s policies and programmes in the erroneous belief that a new government could only justify its existence or make its mark by adopting entirely new policies and programmes.

    How has this affected cocoa?

    The cocoa sector is fully liberalised and has no central coordination. Agricultural extension is very weak in most cocoa producing states. Farmers receive uncoordinated support from some states. The Nigerian Cocoa Development Committee (NCDC), populated by deputy chief executives of the 14 cocoa producing states, tried to stimulate the sector; they started well but the sector has become moribund. At the moment, the national research institutes seem to have limited resources to spread best practices in cocoa production, but this role has been augmented by Sustainable Tree Crops Programme (STCP), which has been active in Nigeria and has gained good reputation for supporting farmers to improve their yields. Aside from STCP, few other development initiatives have significant presence in the sector.

    What is the way out?

    Existing knowledge and experience of voluntary standards in cocoa (and other agricultural crops) is very low, so extensive advocacy and capacity building activities will require increasing the acceptance of norms for sustainable production and trade. Multinational cocoa and indigenous exporting trading companies in Nigeria may be the best channels into the cocoa sector transformation. The new agricultural policy of the Federal Government will herald a new policy direction through new policy strategies that will lay the foundation for sustained improvement in agricultural productivity and output. For example, the Cocoa Transformation Agenda of the Federal Government addresses a holistic array of challenges confronting the cocoa sector. The agenda would help to boost cocoa quality output through strategic interventions in the production, processing, storage and marketing of the beans. This will enhance the objective of building the technical capacity of the farmers and providing basic input needs of the small scale farmers in the upstream and downstream productivity for higher income, job and wealth creation and household food security.

    How far has Nigeria gone with regards to expanding cocoa production?

    As regards cocoa expansion, one has to look back to memory lane after the Nigerian cocoa economy witnessed a dramatic change, which was after the dissolution of the cocoa board in 1996. The liberalisation of the cocoa sector without a regulatory body resulted in sharp decline in cocoa production and the quality of cocoa beans. One of the objectives of resuscitating the cocoa sector is increasing cocoa production and farmers’ income and divercifi-cation of foreign exchange earnings. Therefore, cocoa intensification and rehabilitation is being advocated. This would not lead to wanton destruction of the forest and environmental degradation. Currently, Nigeria is the fourth largest world producer of cocoa and much can be done to change the position.

    What are the challenges the country is facing in this direction?

    The Nigerian cocoa sector is characterised by three major unsatisfactory conditions: very low yield of cocoa beans, poor quality and repressive labour issues. The average yield of 300-400kg per hectare compares unfavourably with the potential of up to 1000kg under good management and well over 1,500kg in new emerging cocoa agro systems in new emerging countries. These deplorable situations have been attributed to a number of factors, dominant among which are the following. The production system is characterised by small holder producers with average holdings of less than three hectares. This makes profes-sionalisation uneconomical. In addition, the nature of cocoa production does not easily lend itself to mechanisation or technological innovations. The farmers are typically illiterate. This makes training and adoption of new farming skills difficult. They have low agronomic skills, agro-inputs and the government extension services are grossly inadequate. Most of the trees are old and poor variety. The majority of the small scale farmers have not benefitted much from recent research on higher yielding varieties. Many of the farmers are largely dependent on the cocoa economy for survival, and replacement of the old trees with the new varieties has to be slow. There is increasing concern about biodiversity and food security in the cocoa communities. Efforts to increase cocoa production through expansion will lead to increasing deforestation and poor environmental stewardship. On the other hand, the monoculture production of cocoa coupled with low yield could give rise to abandonment of cocoa farms or conversion of the farms to more profitable crops. Social issues around poor labour relation between the farm owners and farm workers, inappropriate use of children in hazardous farm work are in practice in cocoa communities. There is also the issue of discrimination against women in terms of equal pay for work done. However, sustainable production practices through certification have the potential of tackling several of the above constraints.

    In spite of research and awareness creation programmes, the agriculture sector is lagging behind. What do you think is responsible for this?

    Nigeria faces a lot of problems with regard to cocoa production. First is the land tenure system. Land still belongs to communities despite the Federal Government’s Land Use Act that stipulates that land belongs to the government. Many serious or genuine farmers have no land to expand their cocoa farms. There is also the problem of low productivity as a result of depletion of soil fertility orchestrated by serious soil erosion, flooding and lack of appropriate fertiliser to augment the deficiencies. Attack and infestation by pests (insects and diseases), can cause loss of about 30-70 per cent of cocoa yield. Poor rural infrastructural facilities – good roads, water, light and recreational facilities to encourage young farmers to stay on the farm, is another factor. Others include poor access to credit facilities and unavailable input and where available, not at the reach of farmers, poor regulatory bodies to control the manufacture and importation of banned chemicals. This leads to serious effect on the environment and ill-health of the users and consumers of cocoa products.

    Concerns have been expressed on negative reports in the media about the use of child labour in cocoa production. What is the situation now?

    Child labour, if I may be right, I think is work that exploits a child by preventing him/her from realising his future potential. Child labour may appear in different forms but what we are emphasising is the worst form of child labour – which means as the work, which by its nature or the circumstances in which it is carried out, is likely to harm the health, safety or morals of a child. It has been defined to include all forms of slavery, child trafficking, child soldiers, commercial sexual exploitation, hazardous jobs and using him for illicit activities. Although it is not well pronounced in the agricultural sector, eliminating these worst forms of child labour should be a major concern to all. Solidaridad has recorded substantial success in using the platform of certification to address some of these issues.

    You worked with the Cocoa Producers Alliance (COPAL) to spearhead a campaign for increased cocoa consumption in the sub-region. What have you achieved?

    In the cocoa value-chain, we are involved in building the capacity of farmers through improved agronomical practices and to attain sustainable cocoa production, so that processors can have access to certified cocoa beans. This we achieved by encouraging processors to bring their cocoa producers together as farmer groups and we can help train them on sustainable production. Solidaridad had just trained over 62 Multi-trex (cocoa processor) staff, lead farmers and youths from Oyo, Ogun and Ondo states on sustainable practices and certification. Similar support would be extended to other cocoa processors in the country.

    Due to growth limitations in cocoa supply in West Africa, the world market has diversified cocoa origins, considering logical sourcing alternatives. What does it portend for the sub region?

    Of course other emerging cocoa producing countries such as Indonesia and Malaysia that are doing cocoa intensification would push West Africa back, unless there is serious intervention that would transform the cocoa sector.

    The keys to food security are climate stabilisation, population stabilisation, dramatic rises in water productivity, soil conservation and afforestation. Are these issues going to determine our future?

    Food security is a concept that sees the sustenance of food for man. The survival of man on earth depends solely on continuous food production with adequate security measures. But the ranging ecological fires such as massive erosion, deforestation, burning, leaching, pollution, increasing population pressure and desert encroachment with resultant low food production has drawn more attention to food security. In an environment where the system of food supply is not organised, hunger and famine will be rampant and frequent, leading to social, economic and political unrest. Take for example, the fall of General Niemeri of former Sudan – “the bread riot’’ led to his fall and attendant crises. For future stability, food supply throughout the year is a necessity for all groups of human beings. Therefore, there is need for the government’s intervention in terms of suitable policy measures and financing of research organisations for innovations on new production systems and minimising ecological disasters that would guarantee continuous food production without side effects on the producers, consumers and the environment.

    People are migrating from one agricultural field to another. How adversely does it affect our agricultural field? What do you think is the reason behind it?

    People see agriculture today as not sustainable because of the dwindling income from it and because it cannot meet their livelihood needs. The teeming youths are not interested in agriculture due to the absence of most social amenities, such as electricity, roads, pipe borne water, recreational facilities, health facilities, etc. These amenities, if available in rural communities, will induce unemployed younger ones to be engaged in agriculture and remain in farming communities. Price fluctuations in agricultural commodities, especially in cocoa which is major export earning, is a major factor that discourages the youth from cocoa farming. Lack of intra-family succession is gradually leading to a decline in cocoa production, as this leads to farm fragmentation after the death of family head and focus is given to pursuit of ‘better professions.’ The resultant effect is low crop production that cannot meet the need of the populace and food security problems.

    What is the mission of Solidaridad in Nigeria?

    Solidaridad is a Dutch international development organisation with over 30 years experience in sustainable value chain development. Solidaridad West Africa, has its regional expertise centre in Accra, Ghana and head office in Utrecht, Netherlands. The Nigeria office was opened in December 2010, but became operational in January 2011. Solidaridad’s mission is to support the sustainable and economic development of farmers and workers in West Africa and indeed Nigeria, and the sustainable environmental development of their production systems and the trade channels.

     

     

    Solidaridad has been using the dynamics of voluntary standards to achieve these goals in Nigeria. With a strategic alliance with Utz Certified, Solidaridad has become the leading development organisation promoting and supported farmer to achieve certification in Nigeria. Solidaridad is also in the forefront of the Certification Capacity Enhancement, a project for the development of a common curricula for the multi-certification of farmers across three voluntary standards; Fair Trade, Utz Certified and Rainforest Alliance. In the coming years, Solidarida West Africa will focus on the scaling up of this curriculum, the embodiment of sustainable practices in the sector of economies of the major cocoa producing countries of the region. Look, the current global demands on cocoa trade place emphasis on the production and handling processes as well as emphasises on good agricultural, environmental and social practices. In order to ascertain the conformation to acceptable production standards, especially with relation to quality, companies are signing up to buying only cocoa, which comply with known standards, otherwise known as certified cocoa.