Land Use Act has remained a controversial law that has been blamed largely for challenges confronting housing development in the country.Added to this is also the unfriendly housing policies put in place by the government. Victor Alonge, a former Executive Director of London-based firm, Wilmont Chartered Surveyors, blames the failure of policies and government housing agencies for  social housing failure in the country. He speaks with OKWY IROEGBU ­CHIKEZIE.

 

 

Notwithstanding the adverse effects of Coronavirus pandemic on the global economy, some stakeholders in the real estate sector have said the pandemic has been a blessing in disguise for the sector. What is your reaction to this?

People need to understand that there are coincidences in life. COVID-19 couldn’t have resulted in improved property sale just like that; if anything, it would have depressed it. What happened was that during the lock down and the virtual hurt of the economy, the financial authority came up with robust policies to encourage and help the economy and some of those policies were responsible for what we saw in the economy. One of such policies that have aided this robust growth was the CBN policy of cutting the deposit rate and scaling down interest rate on fixed deposits to almost one percent. This policy became a disincentive to savings in bank deposits to gain high interest rate. On its part, the stock market was not attractive. People saw property as a viable option as it had an advantage of where you can store your money. The fortune investors and operators made in real estate  was not directly as a result  of the pandemic  but rather  the pandemic made the monetary authority  to  discourage people to save  their cash with banks by cutting deposit rate and by extension  high interest. People on their own saw an opportunity in real estate acquisition because property has an advantage of providing an avenue to store your money. Our firm also saw a big improvement at the peak of the pandemic but like initially stated, it wasn’t a result directly from COVID­19. It was as if the Central Bank of Nigeria (CBN) by their policy said don’t put your monies in the banks, go and invest in the real sector. The pandemic was not a time to build manufacturing outfits especially because of the insecurity problem.  The leap in real estate sector at this time came as a result of the underlying financial engineering and monetary policy by CBN rather than anything else.

What is the contribution of the housing sector to the nation’s GDP?

The housing sector is supposed to be a major catalyst in the development of the economy. In the United States, this sector contributes over 60 per cent and in United Kingdom the same. Indeed it is the heart beat of the economy in Nigeria but unfortunately, it contributes barely five per cent to the GDP.

What do you think is responsible for this low figure?

Here in Nigeria there are all kinds of bottlenecks that make investment in the sector unattractive. Take for instance, the issue of land documentation and titling and the challenges associated with the Land Use Act. Operators in the sector have been calling on the government to expunge the Act from the constitution. This Act, and other factors, have made the sector fail to be a major contributor to the growth and development of the economy. The single biggest investment any individual can actually undertake in his life time is building his own house but the inherent bottlenecks are making it difficult  for a lot of people to actualise this. There are challenges, for instance, the national housing policy is in complete shamble. The housing delivery framework and the procurement process are designed to fail. Direct delivery of housing by government should be a thing of the past because it has never helped. It is a major avenue for corruption. If government said they invested N10billion into the housing sector, the real value will be about N5billion. Look at the Federal Housing Authority (FHA) for instance, after about four decades what has been its impact? l can assure you that they may not have built  over 50,000 houses across the federation. In fact, I doubt if they are anywhere near the figure, how will they get it? Does it make good investment sense to invest the kind of money that has been put into FHA since inception with little or nothing to write home about? How many people will they claim to have they housed across the nation?  If we take a cursory look at the amount that government claimed to have invested in the agency and its achievement over time, it is nothing but a complete waste of resources.

What will you suggest the government do?

I suggest that we look at the developed economies and understudy how they do it. They make use of the subsidy system. This system works by looking at the housing delivery value chain. All the participants are incentivised by providing some kind of subsidy that will be redeemed upon delivery and performance of their respective schedule within the framework. There will be no need for government to give them cash; it can come in terms of material component of their activity. If there is foreign exchange there let them have it at the Central Bank of Nigeria (CBN) rate, tax holiday, tax relief all of which will be claimed after performance. It’s a system that is transparent and government will see the impact because at the end of the day all you want is for people to have access to decent housing. Most of the development you see in Ikoyi, Lekki, Victoria lsland, all in Lagos State and  Maitama, Garki, Asokoro  in Abuja or any other choice places are not the houses they are talking about because how many of those that are actually in need of housing can afford to pay  rentals in these upscale places. A lot of people or companies that got licences for mass housing in Abuja for instance just get the land, convert it and sell it to people. The estates are developed as luxury. We need to be more serious about housing provision in this country and government involvement in it will not solve anything. If l may ask just how many of the 17 million housing gap have we closed?  We have had this number since the military regime that means we have not done anything.

Read Also: Firm deploys crowd funding to make housing accessible

 

How did the country arrive at its 17 million housing deficit figure? Are there available data to prove this?

Statutorily, housing data should be prepared by the government with the support of international agencies because it is used for developmental planning. On a yearly basis, government is supposed to accommodate and budget large sums for housing.

What is your take on housing delivery and  subsidy?

We are supposed to have a National Development Plan for housing in the short to medium term.  Housing growth should be monitored through allocation to the citizenry by measuring its impact in terms of physical delivery. We need to provide houses for teachers, social workers, civil servants. If we have a proper housing policy it does not mean that teachers or journalists cannot live in Ikoyi. The point actually is that if we have a national housing policy that is geared towards incentivising and subsidising the housing delivery process  anybody can live anywhere especially if you have identifiable means of income . Now, part of accessing the housing delivery subsidy incentive will be for instance if you are developing in Ikoyi or Maitama, Abuja for instance about 15 housing units,  the developer will be made to sell some with huge discount, say five units  because the government have already given them subsidy while developing the houses covering the numbers that he will not at a premium. In advanced economies, government do this because they will be need for nurses, teachers, social workers and civil servants to live within the community.  In England it is called “Section 106 agreement” which stipulates that if you are building houses, one of the conditions for development and planning approval is that a percentage of  it will be reserved  for social housing for these category of people such as civil servants, nurses ,  health  and social workers. The local authority or government will take it and let it out, the people will pay but not at a premium. I don’t know how many teachers, health and social workers live in Ikeja GRA for instance and are paying the rentals?

How will you describe the country’s national housing policy?

We need a national housing policy that is encompassing; that will look at the country and her challenges in the housing provision to address the needs. All these direct construction of houses by government is not productive. Government will do more by deploying the resources they are using for direct construction of houses into subsidy and looking at the value chain in the housing delivery chain and targeting them for subsidy.  The current idea of government building houses and directly allocating to the public is good for politics but we should ask ourselves what they are building and advertising, what is it compared to the 20 million housing gap. Private developers are just looking at government do their thing and any little opportunity they get they go into high income premium housing for the return on investment. Government does not have the moral compass to decide for commercial developers how much to sell or let their houses.

Since the government seems to have failed as far as housing provision is concerned why are professionals who know what to do refusing to join politics to change the tide?

Some professionals are in politics, after all the Senate president is a Land Surveyor. We have accountants, quantity surveyors, estate surveyors, lawyers etc. The Speaker of the House of Representatives is a lawyer.  But I think we have them more in the accounting sector. The housing sector is under represented; the estate surveyors and valuers are grossly missing that is why the housing sector is suffering. Land surveying impact in the housing industry is minimal; they can function in policy and the finance sector of housing delivery. In terms of tailoring policy to meet need, understanding demand, processing it, we are better as estate surveyors. Unfortunately we don’t have the number and have not been able to present argument in the highest level. In terms of  syncronising finance, brick and mortar and  understanding  the sociological needs  of the people,we Estate Surveyors & Valuers are better trained and qualified.

It is believed that government has no business in housing provision. But the late Alhaji Lateef Jakande, during his tenure as Executive Governor of Lagos State, was said to have implemented a good social housing policy. Why can’t such be replicated?

Alhaji Jakande was a major success no doubt. The approach in those days is that contractors funded those projects before they are paid. If you look at that approach, it was more of individual contractors acting as developers because government will allocate land and ask the contractor to go and build like 500 units here and there. They will agree and you get paid after. It was successful because it addressed the low income earners which were good and then the population then is different from what we have now.

Can there be affordable housing in Nigeria?

If there is no affordable housing, the deficit and gaps would never be addressed. Government has to have a conscious decision and policy to provide affordable housing and also social housing which is at the bottom of the ladder.  Housing need of critical strata whose income will not allow them to compete favourably must be accommodated by government policies. Developers should be encouraged and the cost structure agreed upon. Government does not have the right to put a price on rentals when they didn’t have significant input in its coming into being.

Managing Director/CEO, Mainstreet Microfinance Bank, Mr. Adegoke Adegbami, is also the General Secretary, National Association of Microfinance Banks, Lagos. In this interview with Group Business Editor SIMEON EBULU, Adegbami on the CBN’s revocation of licences of 42 MFBs and other issues in the sub-sector.

 

The CBN revoked licences of about 42 MFBs recently. What would you say is responsible for this sanction? How does this affect confidence in the sector?

All the affected MFBs were those that have closed shops on their own for a long time. The CBN made it clear that these 42 MFBs have been out of operations for some time, so the revocation was just a formality, which has to happen by the laws establishing the CBN and NDIC. To be fair to the CBN, they briefed the leadership of our association about two weeks before it was made public. We still have more than 800 MFBs in Nigeria, serving millions of Nigerians. We have some of these MFBs that are as big as some commercial banks in Nigeria. There are new licences and new acquisition of existing MFB licence happening every day.

Several reasons could have led to this development. Some of them are common while others are peculiar to individual organisations and people. One thing that is common is that doing business in Nigeria is very difficult and expensive, and it is not getting any better. The rate of business survival is very low, particularly for small and medium businesses. This is not peculiar to microfinance sector, it cuts across. Check all the sectors and industries within our economy, you will see the same trend. In my opinion, MFBs have actually done better than some other sectors in terms of business survival in Nigeria. There are also a number of regulatory policy defects that negatively affect the operational success or failure of MFBs. There are other specific factors like poor corporate governance, lack of capital, liquidity problem, poor management, lack of discipline on the parts of management and board. Some people adopted wrong business model, particularly those who assume that microfinance is just a small version of a commercial bank. Some are victims of circumstances. There are normal business problems that you should be able to overcome over time, but if unfortunately, those problems coincide with wrong timing like recession or pandemic, it becomes extremely difficult to survive. As MFBs, we receive little or no support from the government and this is very serious because microfinance banks everywhere around the world normally receive a lot of support from the government. This is because we are serving high-risk section of the economy. The risk involved in lending to SMEs and low-income class is very high, particularly in Nigeria. Yet, we take the risk. Commercial Banks will only lend to rich people whom they perceive as less risky. They can collect deposit from anybody, including beggars, but they will only lend to the rich. They create a situation where you collect from millions of poor and middle class and make the money available for a few rich people. Ironically the society likes them for helping to increase the economic inequality in the society. That is the reason even some of the low-income people that we serve will like to keep their money with these commercial banks and come to microfinance banks to collect loans. So, the government owes us a lot, for serving the vulnerable people without which the level of violence and criminality in the society would have been more than what we have now. The society should also appreciate and support us to serve them better. In my opinion, the solution to our economic problems lies more with the microfinance operators and MSMEs. The government should do everything possible to support us.

Do you think this revocation will erode confidence in the sector?

I believe what matter is for the society to be properly informed. The reality is that whatever has happened is not peculiar to our sector. You know that the CBN recently revoked licences of some Payment Service Providers. Meanwhile, it’s not long ago that the CBN licensed those Payment Service Providers’. The regulatory policy for the ‘Payment Service Providers’ is a recent one.  They also revoked the licence of one of the switch license holders. You cannot stop patronising people who are doing well simply because some people fell by the way side. There are thousands of road and motor accidents in a year. Yet, we have not stopped plying roads or riding vehicles. Even when you have very fatal accident, you still need vehicles to evacuate people from the scene, whether they are dead or alive. People die of wrong diagnoses from time to time, yet we have not stopped patronising doctors and hospitals. The same reality is applicable here.

How do you see the global and national economy and the Microfinance sector in 2021?

There are different predictions about the global and national economies for 2021. All of them point to the fact that economy will begin to recover at different degrees, at different times during the year, depending on the peculiarities and quality of responses by governments and people around the world. One of such drivers of events in the year is the availability of vaccine against coronavirus. For Nigeria, economy will bounce back. Not necessarily because of anything we are doing better, but in response to recovery of the global economy and the oil market. Further devaluation of Naira is not unlikely. General income decline, higher inflation, low purchasing power, unemployment and uneven distribution of income are possibilities. As a people, we will find ways around it. We are a very resilient people. With good planning and critical thinking, a number of businesses will figure things out while others may drop by the way side. Of course, the pandemic has created a new economy; this is the best of times for certain people and certain businesses. That trend will continue and people will adapt and adjust. We should expect more of government intervention programmes, stimuli, palliatives and so on. The problem in Nigeria remains the fact that these programmes are not always properly thought out and strategically directed. As a nation, we will continue to struggle with our debt burdens. For the microfinance sector, the business will always be there. In fact, a recession will microfinance businesses, the number of people that need microfinance services will increase. At the same time, the risk of the microfinance business will increase and that simply means we must be very careful in our business and customer selection. We need to beef up our risk management system. We need to deploy technology; we also need more money to deploy. The bottom line is that microfinance is going to become very critical to the recovery of millions of active people at the bottom of the economic pyramid. The government must note this and make conscious efforts to support microfinance operators. The government must also do this without creating a monopoly in the market. Creating a monopoly will be counterproductive.

What will be your advice to operators and regulators in the Microfinance sector for immediate and long-term sustainability?

First, I believe it is very important for a MFB to drive liquidity aggressively. With the level of disruption and uncertainty that we have, your survival and ability to withstand shocks depends largely on the level of liquidity available. Secondly, all of us must prioritise risk management and corporate governance. We are not talking of only credit risk, but all the risks we are exposed to as MFBs, including those of compliance to laws and regulations. Risk environments are becoming more sophisticated and we must respond accordingly. Right staffing and training are very important here. Thirdly, we must improve on our brand awareness, we must all be deliberate in investing money and other resources in creating awareness of the good work we are doing. You don’t need a huge budget like the commercial banks, but you must deliberately invest in this line based on your level and capacity. Fourthly, we must all embrace and deploy appropriate technology. Five, there must be efficient cost management. Ensure you only spend on essential things that we directly or indirectly bring the money back to you. Things don’t necessarily have to be expensive for them to be good and effective, the key is to set your priority properly. Six, we all need to be deliberate in driving or beefing up our capital base from profit and external sources. The key word here is being ‘deliberate’. Seven, there must be good performance management. We must work towards a point where every staff delivers some quantitative value to the organization than cost. The value must be measurable. Eight, we must be sure we deploy the right product, most of us still run on generic products, We need to invest in tailor made products that deliver specific value to specific people or market. Number nine is leadership. All of us at the decision-making levels of our different organizations must do our best to continue to improve our leadership skills. Each of us must develop what is now called ‘Agile Mindset’. Boards are to be ready to invest in developing leadership capacity of their business managers. Each of us at management levels also need to take personal responsibility. Don’t spend all your salary on food, use part of it on personal development. If you effectively increase your learning, you will invariably increase your earning. Ten, we need to continue to adjust our business models and the way we conduct our businesses and serve our customers to align with the reality of today. We have to continue to move gradually away from our brick-and-mortar business models. I need to also add that each of us must strive to drive volume. You can start small, but you cannot afford to remain small for too long.

What was last year like for Mainstreet Microfinance Bank?

Considering the peculiarity of 2020, I think our most significant achievement is that we  survived the COVID-19 global pandemic so far in one piece. There were also the issues of #ENDSARS and other security challenges, which are peculiar to Nigeria while COVID- 19 is a global crisis. That we have survived all these, is a great achievement in my opinion.We can look at a few qualitative and quantitative achievements we have made.

On the quantitative side, we have grown our total assets by 81 percent year-on-year. Our portfolio has grown by 80 percent. Our gross revenue and profit before tax have grown 71 percent and 74 percent. To fund the growth in portfolio, we have grown our deposit moderately and debt funding significantly.

Despite the challenges of the last 12 months, our bank has won a number of awards and recognitions. At the Fintech Innovators Merit Award 2020, we won ‘Africa’s Most Innovative Micro Lending Service Brand of the Year 2020’. We were recognised as the ‘Microfinance Bank of the Year 2020’ by the Classic Magazine. We were also selected as the ‘Microfinance Bank of the year 2020’at the Peace Legend Award.

Finally, our Bank gained international recognition at the ‘Global Banking and Finance Review Award’. As the only OFI (apart from Bank of Industry) from Nigeria in the 2020 Awards, we got two classes of awards as ‘Best Microfinance Bank Nigeria 2020’ and Best Bank for Auto Loans 2020’.

As the MD/CEO, I was awarded ‘Banking CEO of the Year Nigeria 2020’. All these are testaments to the impacts of our efforts on the society and the assurance that the future is bright for us with hard work and commitment.

 

By Abiola Fasanmi

CEO of Wakanow, Bayo Adedeji, has narrated how his domestic chef stole from him despite all his efforts to make him comfortable.

In a Facebook on Thursday, he lamented the chef stole even after he paid him N100,000 monthly and surplus allowance aside from two-course meal daily.

He alleged the food bill was going high despite the fact that he was not entertaining guests due to the pandemic.

Adedeji said he then decided to go shopping himself but only two weeks after, he was shocked to find that some of the supplies had finished.

He was later disappointed as he caught his chef moving some foodstuff from his house.

Below is his post:

“I have always wondered why people treat domestic employees like shit in Lagos. After a few years, I now understand!

“I pay my chef N100k monthly and weekly 5k for transportation he typically eats breakfast and lunch at the house, if he comes extra days I give him 5k-10k.

“And when I travel abroad which is usually at least 1 week a month he doesn’t come to work while I am gone. During the pandemic I continued to pay him like nothing happened because I wondered how he would feed his family, I was not even in town o for 3.5 months

“I noticed the feeding bill continued to rise and it seemed we never have things in the house. When I ask to eat something I get an additional bill to do market runs every other day so I started tracking.

“My feeding bill went up by 100% in October for 3 weeks of feeding I was nearing 300k in spend excluding salary for me alone….. uhmmmmmm typically I have a lot of guest on weekends but in November we were always at Wave on the beach.

“So I went out and purchased so much food that we could not possibly finish in a month. 2 weeks after I asked to eat jollof rice with smoky flavor and imported rice so that the grains stand at attention, he told me we don’t have tin tomato.

“Shocked! I argued he told me I didn’t buy it. I checked my records and noticed I purchased 2 cartons of tin tomato. I mean 2 cartons o of premium tin tomato like the one in metal containers from Renee supermarket.

“2 whole cartons was gone in 2 weeks without having a major party. Then I remembered he had a naming ceremony so I thought he must have stolen it to use for his party but I assumed maybe I didn’t take it from the store or the house girl stole it since I didn’t catch him. America taught me to assume innocent till proven guilty not the other way around like typical …………

“I was traveling for 2 weeks and it was kinda impromptu so I informed him that he was getting 2 weeks of paid leave the same day I was leaving. As I was leaving he was also leaving the house too so I asked to see his bag. Alas!

“This guy had gone shopping in my pantry. The list was endless even hot chocolate (eruku oshodi), rice, beans, all my sardine, corn beef, even chocolate bars, canned sweet corn like the list is long.

“It broke my heart because I thought I was nice to him and his family. Remember he did naming in Dec I gave him 50k to support his child but I gave him after the ceremony hoping he will use it to take care of his 5 children as opposed to celebrating the birth of another child.

READ ALSO: Why we introduced Pay-Small-Small – Wakanow CEO

“Not knowing he has been stealing me blind. When he started working with me, I spent time in the kitchen teaching him how I like my food, I retrained him even though he had been cooking for years. He became so good. I mean his fried rice is madness, I mean it’s so good, we discussed adding it to Dundu Nation menu but I worried about scalability without him.

“I gave it all to him and told him not to come back again. I paid him for the time he had worked during the month. I know I am overly nice.

“I fundamentally believe that everyone should be treated with dignity and respected for what they do. Pay them fairly and be reasonable with them, take care of them and hopefully they won’t need to steal. My friends say I spoil them but I believe in the love thy neighbors law the Bible preaches I sincerely just follow it.

“Too many animals out here! Should I start buying bowls of soup but I just don’t eat refrigerator food and the food never reaches how cooked meal standard with blender grinded fresh peppers and uniquely selected meat parts not the cheapest meat in the market because I love ribs and brisket….. yes I am spoilt so I am back to cooking for myself and saving money since I cannot find a honest chef.

“Maybe I should hire him back sef?”

Group Managing Director, Vitafoam Nigeria Plc, Mr. Taiwo Adeniyi, heads Nigeria’s largest and oldest-surviving foam manufacturing group. A major voice in the manufacturing sector, Adeniyi, in this interview with DEPUTY GROUP BUSINESS EDITOR, TAOFIK SALAKO, speaks on the economy, manufacturing sector, finance and African trades among others.

 

What would you suggest as priorities to enhance ease of doing business in Nigeria?

Someone should move the Federal Government seat to our ports. All the ports in Lagos State, including Apapa and Tincan, are congested. The government should initiate a policy that will enable manufacturers to clear their goods through Onne and other channels. Let those goods that were initially slated for Lagos ports be diverted to those ports and we clear them from there. But nobody is looking at it from that direction. The roads linking the ports should be looked into and worked on. The seaports are all bleak when you look at them.

What is the outlook for the manufacturing sector in the year, considering all factors?

It is a bleak outlook. All the factors that should drive growth in the manufacturing sector are being challenged. I have always said it, if there are no raw materials, the manufacturing sector cannot perform. Every window created through the Central Bank of Nigeria (CBN) to let manufacturers have access to foreign exchange (forex) to fund raw materials is in a shambles. The reason is that the country does not have enough forex to go round. For instance, at Vitafoam or the foam industry generally, 80 per cent of our raw materials come from outside the country. That means we are really forex-dependent to get raw materials right. When you now struggle to get the forex to place order for those goods, they cannot arrive on the shores of Nigeria. Why? As of today, the nation’s ports are congested. We have more than 100 containers waiting at the bay of the seaports of Lome, Togo. All shipments coming to Nigeria are being diverted to Lome. Some have been there for the upward of three months with no space for them in the Nigerian waters. The question is: what is our government agencies and officials doing to correct this? If a container comes to Nigeria, for instance, what happens? You collect duties and port charges. If there is a port in Lome and driving those containers from Lome to Nigeria should not take more than a two-day journey, if Lome ports can retain those containers, what stops Nigerian government and agencies from going to have a form of strategic meetings in Lome and say to them: thousands of containers which were  supposed to come to the shores of Nigeria are within your shores, let them take the port charges or whatever forms of arrangement that will enable Nigerians to clear their containers off the shores of Togo.  After all, we have signed on to African Continental Free Trade Area (AfCFTA) agreements. There should be a way out to clear Nigerian containers off the shores of Lome; for manufacturers to clear their containers and have access to materials for further production. That way, the economy is sustained. We manufacturers have been waiting for more than three months now for our containers to come over to Nigeria. The goods are still there. We are only lucky that those materials are not perishables. Meanwhile, we have been paying for Letter of Credit (LC) obligation. This is tough.

What about local sourcing of raw materials?

I talked mainly about our sector and the materials. As of today, nobody is producing Polyol and Toluene Diisocyanate (TDI), these are the major raw materials for our production. These are petrochemicals by-products. Our only hope is that when the petrochemical industries come on full stream, we will be able to take advantage. Aside this, there is no alternative except that we continue to import. Yes, we can also talk about the local sourcing of materials for foam production. But natural sources are limited in supply. The volume that is required for this population cannot come from just natural resources. In any case, natural resources are green production, and affordability then becomes an issue. Unfortunately, we believe that anything that is green production is not expensive because it is natural. But it is definitely going to be expensive because you get little output from that particular window. Our major raw materials come out as they are fractionalising the main crude as petrochemical by-products. Those products were being wasted when Nigerian refineries were working. If that happens, for instance, the same by-products that lead to the production of crude oil can be exported from Nigeria too. And that would also bring forex to our country. When you look at the oil industry, the mainstream of income is not more of the petrol, jet fuel and the diesel you sell. Most incomes are more of by-products that come out of the petrol production that serve a number of other industries.

How do you think the forex issue can be resolved to make it available for the manufacturing sector?

What the government is doing is a balancing act and not to rock the boat. But if you ask me, honestly, I think forex should be floated because it will give us the real value of the naira. The major challenge with Foreign Direct Investment (FDI) is the value they get from the investment. The argument is that naira is not yet valued at the rate it should be valued and for as long as that is not happening, it means that we will not have enough forex. If I know that if I bring my forex into this environment, I will exchange it for a value that matches my investment, then I will bring it. But if it is government intervention we want to continue with, then we are only postponing the evil days to the future. The moment government does not have funds to intervene, it becomes a challenge, the rates go up without moderation and when the government intervenes, the rates come down. How long are we going to continue with this especially with dwindling resources from that particular window? I think what should be done is to allow it to be floated and then the value will be determined. In fact, the value will come to the point of equilibrium where it will neither increase nor decrease. This we have not achieved because of the government intervention from time to time to keep the balance.

But manufacturers also complain when forex goes up?

Manufacturers will complain because it is expected of the government as policy maker to say we can sustain the elasticity for six months and so be it. You issue a policy on it, that it will trade for N500 for a period. As a manufacturer, I will plan my work or trading  using the N500 benchmark for the period. As such, I will complain if the government  changes it suddenly by another increase because it has contravened the bargain of previous N500 policy I was working with.

You have subsidiaries in other countries and they should be a source of forex, how much of forex do you generate on your own?

We have not yet been getting returns from our subsidiaries outside Nigeria because they are also companies that are just coming out of negative to become profit-making ventures. We expect that going forward; we will have some returns from that investment.

With the coming of AfCFTA, what are the opportunities and challenges that you can see for Nigerian companies?

On AfCFTA, what we must understand is that a lot of work has gone into signing this agreement. It was like a case of the one between two devils, if you don’t allow it, it is already operational. We rather legalise it and let everybody know it is now legal because it has been operational long before now. People take up their goods to the Republic of Benin and bring them into Nigeria because our borders are so porous. It was in the wisdom of this that Nigeria championed this particular agreement. On its benefits, it is now legal and no longer for selected few. It is no longer under the table businesses anymore. It allows every manufacturer to benefit from it. If you are strong in exports, it is time to benefit from it. The main challenge I can see is to unify quality, such that the quality you get in Nigeria is the same you get in Togo. That way, cross-trading is uniform. It will also improve the standard of cross-trading.

Are manufacturers ready to take up the challenges of free trade?

There is this saying that necessity is the mother of invention. It is not about being ready, it has been signed. It has come to stay. If you don’t plug in, you plug out. Whether you are ready or not, there have been a lot of sensitisation programme in the recent past. The Federal Government has also declared January 2021 for more sensitisation on the agreement for the manufacturing sector in Nigeria. It is not about being ready or not because Nigeria alone cannot hold other African countries to ransom.

What were the main drivers of your performance in 2020?

There is no performance that comes by accident, every performance demands that a lot of work has gone behind it. Our pride as shown by our financial results for last year  is that we never rested on our oars; we are resilient. We had also decided not to give-in to excuses of what was going on in the country because if you look at it, you will realise that 2020 was one year belaboured with a lot of activities that had negative impact on economy and businesses. It started with COVID-19 shock. Just within that same period, we had #EndSARS protests and before you knew what was going on, the nation was on lockdown and 2020 closed. Even at that, Vitafoam has been able to weather the storm by coming out with the impressive financial results for the year.

If you look at the leadership of Vitafoam, it is structured to know when the company should move; know when to act, to know the decision to take at the right time without delay. So, that much we have done to be able to come out with such impressive financial performance we are looking at today. It also takes a lot of strategies, planning, hard work and working smartly to achieve the feat.

Some analysts ascribed your performance to sales of foams due to upsurge in COVID-19 isolation centres, do you agree?

The people in that category will always look for an easy way out to explain things. But if you do an in-depth analysis of Vitafoam performance, you and I will agree that even if it was Vitafoam alone that supplied foams to all isolations centres in Nigeria, the value wouldn’t have been worth N20 billion. But, virtually all foam-making companies in the country participated in the supply of foams to those centres and not just all about Vitafoam. Nobody will attribute the impressive performance of Vitafoam to supplies we made for COVID-19 period. We actually made foams for COVID-19 purposes, but I totally disagree that it was the factor for the growth we recorded. One must bear in mind that over the years at Vitafoam, we have put ourselves in a class that our competitors always look up to. Innovation is the drive; we do not wait for our products to expire in the market before we bring up another one. In other words, there is continual improvement along the line of our processes to the extent that we sell high-margin products – these are products that meet the demand of our teeming populace. At Vitafoam, our research does not start with us; our research starts with the market because after looking at the market, we discover what the market needs, we return to the company and come out with what is best for the market. This gains acceptance and everybody wants it, the moment everybody wants it, sales start moving and the company continues to grow. So, it is not about COVID-19 product sales, it is about innovations. A lot of mattresses were bought from Vitafoam really, but go and check, you will discover those mattresses supplied to isolation centres are not regular mattresses of Vitafoam.They were made specifically for that purpose from our research and innovation platform. We have to produce mattresses using PVC coverings. The PVC covering is usually used to produce mattresses for hospitals. But these were not hospital mattresses; these are mattresses that needed to be used for a particular purpose. As a result, we have to come back to our desk and design products that meet the needs of that purpose and we supplied.

How were you able to speed up research and produce purpose-fit product within the period?

There are two perspectives to mattresses because you have to look at the core mattresses and the materials. The core of the mattress does not change; it talks about density, but the covering for a mattress changes. For instance, one can take a mattress we have been covering with fabric over the years and for the purpose of COVID-19, changed the covering to PVC. With PVC covering, you can sanitise and re-use your mattresses for other patients. But, if it were fabric-covering foam, the patient can sweat or do whatever on it and it becomes completely messed-up. It can become useless from that point but foams made with PVC covering have corrected that since it can be sanitized even after a patient mess it up. You can clean up the PVC with any of the sanitary agents and it will be ready for use again. What we concentrated our efforts on is the covering that we had to change since we have done more of the core mattresses.

In recent past, acquisition was one of Vitafoam’s growth strategies. Do you still have strategic plan for more acquisition going forward?

At Vitafoam, what we are doing now is consolidation. That does not also mean that the door of acquisition is closed. No. If we have a strategic partner that we can be growing with, yes we will do. But as of today, we are consolidating on the ones we had acquired while making them to contribute to the parent company.

What determines your dividend payment and returns to shareholders?

Given returns to shareholders of a company like Vitafoam goes beyond sitting down and think we have made N10 today, we should be able to pay shareholders N8. No, because you have to consider your earnings per share (EPS), you also have to consider if you pay that much, would you not end up borrowing? What are the outlay and my working capital structure? All these have to be considered before you decide what returns your company can give out as dividends. But one thing we assure our shareholders is that since we started paying dividends, we have never disappointed them. Even in difficult times and year 2016, was an example of a terrible year for the company, we still made sure that we paid 12 kobo dividends to our shareholders to keep to the dividend payment history of the company. In 2020, our company performed well and we have looked at al indices that support dividend payment such as our reserves, and we are confident to say that we can pay what we have decided to pay shareholders. Our dividend policy at Vitafoam is that every year, we are going to pay dividend. What the value of dividend payout will be is dependent on a number of factors and not just profit.

But, our shareholders also benefitted from the growth of the company through share appreciation. By the end of last year, the share price of Vitafoam was about N5. As of today, the share price has doubled, which means that I can go and trade on Vitafoam shares and get value for money plus the dividend. When investors want to take a position on a company shares, they first look at your company ratios. And what drive your ratio are these factors we are telling you. It is not all about paying dividends alone. It is about building the ratios that are attractive to investors. As more investors come in, the value of shares also goes up and you get value for it. If the share price of Vitafoam was trading at about N5 mid-last year, and now trading at about N10, shareholders are better for it.

 

What assurances do we have on Vitafoam’s growth trajectory?

The performance of 2020 is just the beginning of greater things to come to Vitafoam. In fact, we have the result of the first quarter and I can assure you, it is in no way any less performance to what we recorded the same period last year. And if there is anything, there is growth. So, the growth trajectory has come to stay. This is what we have been doing in the past 10 years with all our subsidiaries. When we came up with those subsidiaries, some people thought shareholders of Vitafoam had wasted their money. We were even accused of taking money from the parent company to start-up businesses that will become moribund. But as of today, all our subsidiaries are returning profits and these subsidiaries can only get better as we progress. Once subsidiaries get better, they contribute to the main purse and the main purse can only become bigger, better and greater in our financial year. Don’t forget the major problem of our subsidiaries was not lack of expertise, marketing or bad management but they were underfunded. And the moment we got the funding right, every subsidiary turned in profit. So, the growth is sustainable.

Since financing structure is a major factor, are you considering equities recapitalisation?

When you do the general ratios of an organisation and look at the shareholders’ base of the company, you will be able to determine the direction of any offer. Our shareholders’ structure is so spread such that 80 per cent of them are actually share-holders – those who hold on to their shares. They are people that spread their shares like 10,000 units and most of them are retired people. They are not upwardly mobile people that are still earning some kind of funding and can be able to take up their rights.

We have looked at it. We have ventured into it and did broad analysis on it, we went to the extent of bringing a consultant to help look at it, but at end of the day, it was clear to us that we were not going to make a success of it. Rather, we would have wasted money. With all these, we realised it was not right for us to do rights issue now. Rather, we should look for a less expensive financing structure like Bank of Industry (BoI), we have looked at it and it was a lot cheaper than using the rights issue platform. This was why we opted for debt financing and if you look at Vitafoam’s balance sheet today, it is one of the strongest in our industry. With this, we may not need the rights issue.

What are your footprints in the area of corporate social responsibility (CSR)?

Up till the period of COVID-19, we have been donating mattresses directly to a number of states. Some people see our products and brands at COVID-19 isolation centres and think we have made money from that. Some of those you see were donations from Vitafoam. Those are some of the activities that formed parts of our CSR. We also get involved in schools because we as an organisation believe knowledge is power. And to fund knowledge, the company will continue to support because what goes around, comes around. If you fund education, it will come back to also contribute to the knowledge base of the organisation. We get involved in a number of CSR activities. We established laboratories around the country. We were also involved in purchasing some computers for some schools as well. We also played major roles in supporting the health sector.

 

On December 31, the curtains will be drawn, temporarily though on his illustrious three decades of robust banking career. An astute banker, technocrat and reformist, the outgoing Managing Director/CEO, Fidelity Bank, Nnamdi Okonkwo, says Nigerian banks have performed creditably well, post COVID-19.  In this chat, he speaks on a wide range of issues, including mentorship to a select group of reporters. Group Business Editor, SIMEON EBULU was there.

 

Nigerian banks’ performances post-COVID-19 results have been positive and impressive. How did it come to be?

The banking industry, I believe, has been positively impacted by the fiscal and monetary actions taken by the government to accommodate the socio-economic impact of the pandemic on the people and business landscape. These include a forbearance programme, the easing of the monetary policy stance to promote a low interest regime, and the launch of the N2.3 trillion stimulus package under the Economic Sustainability Plan (ESP). These steps eased pressure on customers to effectively service loans held and thus reduce the risk of loan defaults across the industry.

In the case of Fidelity Bank, our proven capacity to monitor the business environment and identify risks as well as growth opportunities proved invaluable. In this regard, the bank had conducted various scenario assessments prior to Nigeria recording its index case and identified business sectors expected to be impacted by the pandemic. As a result, we were primed to quickly adapt our strategies for business continuity and market focus in time with government’s enforced lockdowns. While it has not been a walk in the park, our focused delivery of an evolved business strategy was responsible for our positive performance this year.

There are insinuations that some banks have relied solely on the Central Bank of Nigeria (CBN) for funding in recent times. How will you describe the liquidity position of Fidelity Bank?

While I cannot presume to know the level of reliance some banks have on CBN’s funding, I can attest that, that is not the case with Fidelity Bank. Our nine months – 2020 results showed an increase in our liquidity ratio to 35 per cent from 32 per cent in our audited Half year 2020 results. Our liquidity position remains strong, above the required regulatory threshold and we expect to maintain this in line with our historical stance.

Which are your niche areas and how have they helped to impact on the bank’s performance over the years?

The bank has undergone a significant evolution of business culture over the past few years with a view to improving operational efficiency and expanding market share. Our principal ethos of Customer First, guided operational realignments and a comprehensive procedure review towards improving efficiency, have helped. The bank’s technology drive and digital transformation initiative are however the core platforms so far leveraged to achieve our short-to-medium term business goals. On the operational end, automation and robotics have replaced manual and repetitive processes to cut down on processing times and improve efficiency. This has allowed us the chance to expand our customer reach, without sacrificing our high quality of customer service delivery.

The bank has also introduced several products and enhanced service features well suited to the needs of our ever-growing customer base. Our digital offerings lead the industry in terms of innovative features with close to 90 per cent of our transactions now handled outside our brick and mortar branch network. The result of the success of our adopted digital culture has been evident in the performance trend witnessed over the past few years and even sustained despite the impact of the pandemic.

Banks have been cutting costs through rationalisation of staff strength and pay cuts in the wake of COVID-19 pandemic. How did Fidelity Bank respond?

Fidelity Bank has not been forced to take such actions since the advent of the pandemic, largely due to our digital journey as highlighted earlier. Our current reliance on digital platforms had already helped us improve our operational efficiency significantly over the past few years. Our transition to remote work protocols under our business continuity plan was activated once the pandemic hit our shores, and this has further helped us save costs. For instance, we had a drop in our cost-to-income ratio to 66.3 percent as at September 30, 2020 from 73.4 percent as at December 31, 2019.

What should investors expect from the bank this year?

We expect to remain true to our promise as an institution that keeps its word despite the challenges faced particularly this year. The fact that our strong operational and risk management structure proved capable during this period of heightened uncertainty is a testament to the institution. Our performance so far this year has also matched guidance which is evidence of our ability to sustain our trajectory even as the year draws to a close.

What assurance there is that the bank will sustain this trajectory after you are gone?

Our performance as an institution has been as a result of a core evolution of our business culture built on a platform of upgraded operational structures. Fidelity Bank is poised to advance on its growth trajectory as our business institutions have been built on fundamental principles which would outlive any individual. Recently the bank announced changes in its Board of Directors which include the appointment of a new Chairman and  MD designate and other directors. The recent appointments to the board are well timed and a fundamental step in the execution of the bank’s corporate strategy. The new leadership will maintain the pursuit of the corporate vision of business growth in line with shareholders’ expectations.

I believe investors should expect to witness more success from the bank at an even faster rate of growth. We should see significant enhancement in the core business structures of the bank which should translate to impressive growth performance down the line.

You are timed to exit by year end. What will be your parting words for investors of the bank?

It’s been the honour of my career to have been selected to undertake the stewardship of our great institution and I am humbled by the faith placed in me during this time. The successes recorded were indeed a team effort which will continue as the new leadership selected from this team takes over the mantle.

I hereby make an earnest request that we maintain the same level of support to the new leadership and executives as they take up the responsibility to lead the bank to greater heights.

What are some of your achievements?

While I must once again note that all the successes of the bank under my stewardship were a team effort, there are a lot of points to be referenced as regards the improvements witnessed in the bank’s performance. I would however focus on our Digital Transformation initiative as the most impactful, amongst others during this period. The initiative has touched every facet of our business from all back end activities to all product types and service features offered to customers. Enhanced digital platforms have helped achieve quantum improvements in operational efficiency, while providing a platform to handle the rise in customer size and transactions. This however does not diminish other successes such as our brand equity growth in the market, retail and SME market capture and profitability trend during this period.

Where are you heading from here? Is it goodbye to banking?

I may not want to give away all the details of the immediate and long-term personal plans, however, I intend to continue to remain fairly active in the financial services sector albeit in non-executive capacities. This is to ensure the knowledge and experience gained during my career so far, remain accessible to the industry. The corporate place is not somewhere you can exit with finality at my age of 56, because companies are looking for people with corporate experience. Corporate governance has been taken to higher levels while responsibilities of directors have made it very critical that anyone who runs a company, especially publicly quoted ones, must be people who are deep in understanding of governance. I won’t rule out being in the corporate environment but in what capacity I don’t know.

What role did mentorship play in your career path and who are those that really helped you to climb the ladder?

Quite coincidental you asked this question because I am also the Chairman of Mentorship Advisory Committee of the Chartered Institute of Bankers of Nigeria (CIBN). I do not know why they selected me but maybe they know that mentorship has played a key role in getting me to where I am today. I also use my experience to talk to people about the power of mentorship, especially at our training school.

Though I was very familiar with mentorship and indeed enjoying mentorship, it wasn’t until I went to a programme at Harvard that I started to realise the need to formalise and put a structure to mentorship.

To buttress this, let me share a story with you. I was meant to read medicine or become a soldier but by providence I entered university to read Agricultural Economics. After the first year, I was to switch to Medicine, but my department won’t release me and I was really disturbed. As fate would have it, I came across several people who read Agricultural Economics and were successful bankers. In fact, one of them is Mr. Nebolisa Arah, who was a General Manager in the defunct International Merchant Bank Limited at the time and later became the first CEO of Fidelity Bank. I was very impressed with them and decided to stay put and read Agricultural Economics because I figured that I could be successful as well with the course.

These persons were the earliest influences that I had in becoming a banker. As you can see, mentorship is not just classroom work but more of influences of people you look up to.

Later in my work life, I attended a Leadership Development      Programme at Harvard and drawing on the experiences and exposure from that programme, I decided to approach Dr. Raymond Obieri whom I had admired and looked up to from afar, to be my mentor. He was surprised at my choice of him because it wasn’t that we were close or formally acquainted at the time. He graciously agreed to mentor and advise me and he continues to do so till date.

So, my advice is that we should seek out people that we want to aspire to be like and have them mentor and advise us, no matter our levels and position in life. Apart from Dr. Obieri, I have been influenced by a lot of others including Mr. Tony Elumelu, Mr. Fola Adeola, the late Tayo Aderinokun and others too numerous to mention.

 Tell us about your early life

I was born in Otukpo, Benue State and spent my early childhood there. I speak Idoma and my Igbo mother tongue very fluently. My late parents were successful entrepreneurs and brought me and my siblings up with strict Christian and moral values. I schooled at Army Children Primary School in Otukpo, Wesley High School, also in Otukpo and then proceeded to the University of Benin.

Will you document some of your experiences in the industry for posterity?

Yes, I would document my life experiences like Jack Welsh’s ‘Straight from the Gut.’ I will talk about what I learnt in leadership, not just telling my life’s story. I will also want to use my corporate experience to teach people about leadership, failures, successes and lessons because in this career, I think I have learnt a lot. I will surely write a book.