Managing Director, Cadbury Nigeria Plc, Oyeyimika Adeboye, supervises the West African operations of Mondelēz International, one of world’s largest snack companies. In this interview with Deputy Group Business Editor, Taofik Salako, Adeboye provides incisive insights on the Nigerian operating environment, regional integration and other issues
Why did you choose debt conversion instead of options like rights issue that affords all shareholders equal opportunity?
We were not looking for money, we were looking to pay a debt. A rights issue meant we were going to get naira from Nigerian shareholders, which was not what we were looking for. What we were looking for was to liquidate an existing debt that was created by the system in Nigeria. How did we get into the situation of this debt? The debt came by because we had a Letter of Credit (LC) that the Central Bank of Nigeria (CBN) failed to honour. When we want to import, let’s say we want to import spare parts for our equipment, we raise an LC, which the CBN is supposed to honour, the supplier brings in the spare parts, and we pay the supplier through the CBN.That’s the normal process. With that process, there is no need to go into any foreign debt or anything. We had the naira, but these LCs kept accumulating from the transactions. The CBN kept telling us, they will honour it, they will honour it, year upon year. We were talking of transactions dating back to 2021 and the CBN has had no enough dollars to pay those banks, and those banks are coming to us to pay up. So, it was a matter of we needed to pay dollars, not that we needed to pay naira. My holding company came in essentially to bail us out, when they saw the situation we were in with the expectation that we would be able to pay back. But then it has taken many years, up to four years, and the CBN was not forthcoming. Our holding company then said it looked like your central bank was struggling; then the CBN also came out to say that there were no reserves. So, it was a case of how do we pay back our holding company. We started buying dollars from the market through our local banks and even then, they were struggling to get us enough dollars. With the delay and scarcity of dollars, we were running huge costs. At the beginning of the transaction, the exchange rate was roughly around N370 per dollar. We had the naira then at that rate to pay, but with the scarcity and delay, by the time we were paying our holding company, the naira had depreciated to N1, 000 to a dollar. So, whatever naira we had then had already depreciated and we were then looking for more naira to pay them. That was at the point that our holding company suggested the option of converting the debt to equity. So, the conversation around rights issue was not even an option when it comes to something like this.
…. So, that conversion was in favour of local shareholders too?
Absolutely, like I explained to shareholders when we met at the extraordinary general meeting, if we had not done that conversion in December 2023 when the exchange rate was about N1, 000 and we had done it in February when we met, the exchange rate would have been N1, 400, the amount would have been bigger, our liabilities would have been bigger and the interest we would have been paying while we were waiting for all these approvals, would have been bigger. It would have been worse for the shareholders, because if we did not do this debt conversion, we won’t be able to pay any dividend until we pay down the debt, because we would have had a massive debt with accruing interest that we need to service. You’ve seen what devaluation is causing to our profit and loss accounts. We made good operating profit but it was absorbed by financial costs, essentially exchange rate difference.
What’s your view on the changes in the forex market from multiple rates to market-driven rate?
My assessment is that so long as the forex is available, it works. If there is still scarcity of forex and demand is bigger than supply, then, all we are doing is chasing further devaluation. Unfortunately, CBN does not have the dollars to intervene, the only people that have the dollars are in the market, and where there is no form of proper intervention, it’s a free market and the price will go anywhere. If there is no enough supply to meet the demand, the rate will keep going up, it’s simple economics.
How do we ensure dollar liquidity?
I can tell you some things from the manufacturing side.The government needs to encourage non-oil exports, it needs to incentivise people that can produce and export. Also, the government needs to incentivise those who are producing locally to feed local. We import almost everything in Nigeria because some other countries had invested and we don’t want to invest. But we need to wake up to the hard truth of reality and encourage local manufacturing. Let me give you a simple example: packaging materials. A lot of packaging materials are imported. We have their components here but the infrastructure to make them isn’t here. What stops our government from encouraging the people to put the infrastructure in place here, so that they can make them here? There are lot of ingredients that we are importing. When I look at those ingredients, the basics are here in Nigeria, but the incentive to do them is not here. If government puts in place what I called measures to encourage local production; that will help a lot. Unfortunately, today, government sees local producers mainly for revenue generation, we are being taxed left, right and centre, and as you do that, you are like killing the hand that feeds you, because we are the real sector and what we need is the encouragement in a manner to benefit the economy. We employ a lot of people, we use ingredients locally, we use suppliers locally, encourage all the value chains to work locally. That’s going to bring enormous change. Look at it this way, we have operations across the world and I always ask my colleagues in other countries why are ingredients cheaper in their countries. India makes Bournvita. Bournvita in India is cheaper than Bournvita in Nigeria. You know why? Very simple, India has its own sugar, they grow sugar, they mill sugar, they refine sugar, they don’t import sugar. India has its own flour, they don’t import any wheat, they have wheat grown locally, milled locally; the government encourages it. Packaging materials, they have them locally. So, they aren’t spending dollars or anything. Everything is done in Indian Rupees in India. By the time they finished making everything, it’s cheap, so they can afford to export and make money from export. But in Nigeria, our sugar is imported, we are paying dollars for sugar. Yes, there are three sugar suppliers approved by the CBN in Nigeria – BUA, Dangote and Golden Penny; they are not growing sugar and making it in Nigeria, they bring in milled sugar and refine it in Nigeria. It’s imported. Flour is imported in Nigeria. Skimmed milk powder, dairy, is imported, we don’t have dairy in Nigeria, whatever we have is not enough, in India, they have milk, their government encourages dairy locally. That’s the true essence of backward integration, using your resources internally to feed internally. All those things help. So, the government needs to look at ways to incentivise local manufacturing. Yes, you can tax them, but then encourage them first. You can give them moratorium. We used to have pioneer status but now it has disappeared because people don’t see the benefit in it. People are doing things that truly can benefit Nigeria but because Nigeria is not rewarding that, the incentive to do it is not there.
Talking about incentives, can you please elaborate more on these in practical terms?
There are many ways to incentivise people. Let me use farmers and dairy farming as examples. You can have facilities given to them that are subsidised so they can invest in mechanised farming, they can grow their farms, because they don’t have the capital on their own to do that. A lot of our farming in Nigeria is manual, and we have good arable land. When I was growing up, we had mountains of groundnuts, cocoa and so on, all those things have disappeared. We think government needs to go back and do that, for local manufacturers.Then, for exports, we used to have Export Expansion Grant (EEG), years back when I joined this business, it was something that the government encouraged for genuine exporters with proofs of exports. For instance, at Cadbury Nigeria, we were processing cocoa beans, getting cocoa butter out; which we don’t use in Nigeria, it’s exported, it’s a globally traded commodity, people are demanding for it; back then, government was encouraging us with scaled incentives, such that when you export a certain quantity, you get certain incentives; that’s no longer there. Even as at now, 2024, we are still struggling to get claims for incentives that we had done some years ago. So, it doesn’t incentivise anyone to want to do such because the process is ridiculous and the more painful thing is that when you finally get it back, you can only use the document for duty, you can’t use it for tax, you can’t set it off against anything beyond duty. This makes the whole thing counterproductive. Let me give you an example: if you are in a business where you have duty certificate of about N7 million and your import duty is only N1 million, that means you get N6 million sitting around that you can’t use for anything, then it’s not worth it. So, the government needs to put a structure in place to promote exports, and there are people who can advise the government on this. We need a structure that incentivises exports, incentivises local manufacturing, incentivises farming in Nigeria, to put in place a structure that is manageable. And this is not about fertiliser alone, because that’s the common noise out there, we need mechanised farming. To feed 200 million people is not easy and for a man to take a hoe and be digging, that cannot feed 200 million people.
With mechanised farming, we will feed our population and export the rest, and we will get the dollars we are looking for. I asked our cocoa people to get some information about cocoa in Ghana and Cote d’Ivoire, two of the biggest cocoa exporters in the world and was wondering why Nigerian was not there in the top chart. What I found out, I was disheartened. We exported cocoa to Ghana, some of the seedlings that Ghana used to grow, came from Nigeria, but Ghana organised itself, focused on what it needed to do, established a cocoa board and put a structure in place to manage their exports. In Nigeria, we don’t have that. Many years ago, we had a cocoa board that was working and we were able to manage things better, but that board has literally disappeared and has no power. The people that are importing cocoa globally want structure, they want quality, they want to know who they are paying to; that’s what Ghana has done, that’s what Cote d’Ivoire has done, same for Brazil, all the countries that are the biggest cocoa exporters have structures; Nigeria can get in there because we have the land, but we are not focused on the structure. For us at Mondelēz for instance, last year we brought our Cocoa Life project to Nigeria to support farmers, to teach them how to grow, how to treat, how to preserve, how to dry, all the things they do in cocoa farming, we taught them. But you see, that’s like a drop in the ocean, because you can have the best cocoa in the world, if you don’t have people coming to buy their cocoa in the right way, the government will not be benefiting from it. Today, most of the cocoa money that is coming is not going to the government, it’s going to buying agents and middlemen that are working with farmers. In Ghana, Cote d’Ivoire, there are no middlemen, you sell your cocoa to the government, who exports the cocoa to all the buyers, that way the revenue is in the hand of the government. Government pays the farmers, in fact, the farmers are well looked after. About five years ago when cocoa price dropped significantly, the big cocoa countries – Ghana, Cote d’Ivoire, – came and demanded that they should be given an amount to be added to the cost of cocoa, so that their farmers could get a bit more, they got an extra pay beyond the price of cocoa then. Those governments could do that because they took charge of the processes.
But we’ve been having many subsidised interventions in trillions of naira without much to show for it, how do we ensure that these interventions actually get to the intended beneficiaries?
Simply, put in place a structure that has integrity, that is accountable, that’s what other countries had done. Then, we need to get ourselves to a place as a nation where people that are found to have done what they are not supposed to do or didn’t do what they ought to do are punished, I call that consequence management. Part of our problems in Nigeria is that we have all a lot of resources but they are wasted from all fronts; money disappearing into the pockets of people. We need strong consequence management. Corruption is all over the world, it’s not unique to Nigeria, we don’t have the bragging right to corruption, everywhere; whether it is America, Europe, England, anywhere in the world there is corruption. Where other countries have an advantage over us is that they have a process to make sure that you are brought to book, if you are caught stealing public money, you are brought to book, we don’t have that here, we have what I call a pretense but not a reality. When people start being properly penalised for doing the wrong thing, things will improve. Even if we have some structures in place as you said, but there is no accountability, put accountability in place, bring to book those that are not able to account for what they have been given and be serious about it. When you start making scapegoats of two to three persons, and people see that the government is serious, we will make progress. We have huge potential as a nation, we are blessed with huge resources; I keep going back to this arable land thing because you know we have countries in our region who are living in the desert, yet they are making money, so how much more we?
What happened to your cocoa subsidiary?
We still have the cocoa factory in Ondo, we just removed it from being subsidiary for convenience to be part of us. So, it is still processing cocoa beans, some we export, some we use internally, it’s still there, there is backward integration for us. The reality is that the export business benefits from our factory in Ondo, we buy cocoa beans from local farmers, we process these, and we are supporting local farmers who are on Cocoa Life Scheme as well.
So, in terms of local content, what percentage of your operations is local?
We don’t operate like that, I won’t give you a percentage that’s locally sourced. For example, all our people are local, and in terms of our input, cocoa bean is local; how do you define sugar that you buy in Nigeria but it’s imported, it’s local; skimmed milk powder, it’s local, we buy soya, we buy sorghum, all these things are local. But, are they really local? Because when you asked me about local input, I can tell you that the things I’m buying in naira are all local, my packaging materials are all local, but they are not made in Nigeria, I’m buying them from Nigerian suppliers, who bring them in. In the strict sense of what you are looking for, we’ve never calculated it because it will be difficult to do so until we get to a situation where some of those ingredients are being made locally. I won’t call the packaging material local, even though I’m buying it from the local supplier and paying in naira when I know for sure the component is not made in Nigeria.
We’ve seen a whiff of some companies that had been in Nigeria for decades exiting the country in recent period, is there any discussion about Cadbury Nigeria leaving Nigeria?
There is no any discussion about leaving Nigeria. If we had wanted to leave Nigeria, we won’t have done the debt-to-equity conversion, we would have had the debt and our holding company would have insisted in us paying the whole debt because if they were interested in leaving Nigeria, why would they want to hold more shares? At this point in time, there’s nothing like leaving Nigeria. We’ve been here for over 60 years, we are proud to be in Nigeria, we believe Nigeria is a good source for us, there are 200 million people, we are a snacking company, we have the consumers here, why would you want to run away?
If you were special adviser to the government, what are those things that you think will jumpstart the local manufacturing industry?
I could give you a long list, but let me start with power, which is a massive requirement. For us, for example, we are working with an independent power provider at the back who has a gas line and the facility to provide power for us. Power is so important. Our factory operates 24/7, when there is power failure it costs us money, so getting reliable power is very important. Reliable, affordable, sustainable power; I know that’s asking for a lot of thing, but it’s very important.
Then, the right infrastructure. We have a factory in Ikeja, to move products from Ikeja to my customers in Kano, the trucks take them, it takes the trucks one to two weeks; the trucks break down on the road because the roads are bad, we should explore train haulage, we should make the roads better. Then, security, some of the drivers do hire police with them because of insecurity. How does an operator operate in Nigeria when there is such level of insecurity? Security is very important. I can go on and on, I had already talked about local incentives for manufacturers; put incentives in place that will enable us to get ingredients locally, we can’t make everything ourselves. In Cadbury Nigeria we have several input, some of these input can be made in Nigeria if manufacturers in Nigeria are incentivised to do so.
Then, put incentives in place for schools. In our recruitment process, we go round to talk to students and we found out many students don’t want to come and work in a factory because they don’t see it as attractive. Our education system has been structured in such a way not to encourage students to come into manufacturing, it’s only those who are desperate that want to come here. They see sports and entertainment as big money, quick easy money. Then you go to medicine, but even now, our student doctors are leaving the country. And as manufacturers, we need all those scientists. In the back here, we need food technology scientists, we need engineers and we have so much need here. But the way we are growing our talents is somehow. As a manufacturer, the biggest thing is to have the right talent pipeline for the future, we don’t. The government needs to spend money in motivating education. When I look at the budget for education, it’s not small, but when I look at what we are getting out of education, I wonder how the money was spent. So, education is also very important for the future of manufacturing in Nigeria. Otherwise, what will happen is that people will bring their factory, bring their engineers, that’s what some companies do. China is investing in its talents and exporting its talents, we should invest in our talents too and use our talents here in Nigeria.
How do we improve the operating environment, from the legislative point of view?
Things like multiple taxes, they need to look at how these things are done. We pay corporate tax, withholding tax, education tax, we have all sorts of levies. We don’t have a problem, for example, paying education tax if we see where the funds are going, but we don’t see it. Is it spent on education, who is accounting for it? We have a Police Trust Fund, why are we paying police fund when we still need to put security on our vehicles going out, people don’t feel safe, our customers don’t feel safe, we’ve had a few of our distributors kidnapped, yet we are paying police fund for security. There are couple of multiple taxes out there that need to be checked. Then, you want to encourage manufacturing, at some point you need to look at how to tax. I’m in favour of indirect taxes, because indirect taxes mean everybody pays, direct taxes mean that only those you can catch will pay. It means companies like ourselves pay a lot of taxes, but the informal sector, are they paying taxes? Does the government have the statistics of the informal sector, I don’t think so. And then, some environmentally geared legislations to support the people who are doing the right things for the environment will be good as well. I know that Nigeria is now beginning to catch up on the recycling conversation, we need to do more of that.
Is merger and acquisition part of your growth strategy?
Yes, at Mondelēz globally, mergers and acquisitions is big for us and where the opportunity arises we will do so. We’ve explored some in the past in the last four years, we discussed some acquisitions, they didn’t work out right because the portfolio didn’t match what we want. As a going concern and in terms of our growth, acquisition is one of the things on our agenda absolutely. If we see companies that fit into our strategy, we will definitely talk to them.
Talking about regional integration and trades, how do you find these?
We have an operation in Ghana and ECOWAS works for us, we export TomTom to Ghana, we import Hot Chocolate from Ghana, generally it works. There is a banking process (Pan African Payment and Settlement System (PAPSS) that hasn’t worked, we hope that as the (new) CBN Governor settles to work, they can bring that back to life, which affords us the need not to pay dollars. If we are in ECOWAS, we should not be paying dollars to Ghana and Ghana should not be paying dollars to us, there’s a way we can trade with ourselves without involving dollars. The previous CBN team had started the process but that process is yet to come to fruition. It needs to work because until that works, we are still stuck with this dollar issue, which we should get ourselves out of, at least for ECOWAS. The African Continental Free Trade Area (AfCFTA), that’s yet to kick off, we are expectant, and we are ready as a business. Currently we import Clorets from Egypt. Like I said, we export some things to other countries across West Africa; we have a business operation in South Africa, there is chocolates coming from South Africa that we could bring to Nigeria, there is Bournvita from Nigeria that we can take to South Africa; but right now because there is no free trade zone, it’s expensive. There is demand for products from Nigeria but with the duty rate now, at 40 per cent, it’s not worth it, it’s too expensive. So, we need to get those things working for us to operate on a bigger scale, we will benefit. The same way as you look at Europe and European Union (EU), when they put a system in place and the entire group benefits, as a continent we need to do same for Africa.
Besides, then you have issues of Visas and all that. Other global free trade zones like Europe are successful because of less restrictions and people are able to trade across. But here, if I want to go and do business in Ghana, even though it’s ECOWAS, the requirements are cumbersome. We should make it easier. We should put a process in place to facilitate this. A classic example, we were at NAFDAC the other day and talking about approvals of some products. While Ghana accepted that NAFDAC approvals are enough for Nigerian made products for the Ghanaian market, NAFDAC was opposite, with a long list, like visiting the factory, carrying out inspection and all those things that make you wonder why does Ghana have a FDA; we have FDA in Ghana, we have NAFDAC in Nigeria, there should be some collaboration between entities like that.
Where do you see the company over the medium-to-long term?
I see growth. As I said, we are a snacking company, the population of Nigeria is growing and we hope that every other home in Nigeria will have our product in one way or the other, whether it’s a snack, beverage, biscuits, chocolates; we are a global company, we have global brands and some of these global brands we are beginning to bring to Nigeria. We are hoping that more people can afford our products and that more people will buy our products. In terms of focus, we have four main pillars: growth, execution, sustainability is very big for us and you’ll see that I talked about Cocoa Life and what we are doing around cocoa life, recyclable packaging material is also big for us; culture, we just won Top Employer Award, our investment in people is around our culture, what are the things we need to do to ensure we have the right brains, the right talents in our business as we continue to grow our business. For us, those four strategic pillars define us, how we see ourselves moving forward in Nigeria and it’s same thing in almost every country that we operate in, those are the key things that we use to lay the foundation of our growth in any country we are operating.
Any plan to expand your product portfolio?
Yes, we will continue to grow our product portfolio, we’ll look for what’s relevant to our market. In the last three years, we brought some new candies-coffee candies, caramel candies; Clorets is about five years old, fresh lime is also about three years old, we bring things in based on consumer demand, sometimes when we see what consumers want, we bring it, we are a very consumer-centric business, we shape our portfolio to what we believe are the things being demanded by the consumers.
What does it mean to be categorised as top employer?
One thing for us as a business is that we know that for the business to operate the people matter. Our people are our biggest assets, we can have all the money in the world, all the machinery, if we don’t have the right people, the people are not happy, we can’t keep them, we can’t retain them, then you know we have a problem. So, our focus has always been to make sure that in the area within your control, make sure people are happy and are well looked after. That’s what has helped us. Continuous focus, we have a good people team that know the importance of people to the business is critical.
In terms of technology transfer, how much of your technological operations are domiciled in the domestic workforce?
Our people are well-trained, we have a training tool from Mondelēz International University where people are learning online through a platform called Workday, there is a lot of training for our people through that platform. Then, there is hand-on, on-the-job training that we implement. When you say technology transfer, let me give you an example, our Bournvita factory in the back here, the technology there was introduced in 2016, we had engineers coming to support our team, it’s been a journey but our team are now handling the equipment themselves. Of course, when it comes to big maintenance and overhaul, we have to bring in equipment owners to come and loot at it themselves. There’s quite element of transfer that we have here. There are some things that we share with our global company because it makes sense in terms of cost, we call these shared services and there are some things that we do directly ourselves here.
What’s the future of the company from investors’ perspective?
We are not allowed to make forward-looking statements because we are a publicly traded company, any statement I make can be deemed to be a forecast and it’s not fair in the market, so we don’t make forward-looking statements. What I can say is that we’ve been here thus far, we are investing in Nigeria, and we will continue to invest in Nigeria because we believe in Nigeria.
In the area of corporate social responsibility, what has been the impact of company in the communities?
Today, I’m wearing this Bournvita shirt because we just gave awards to three schools in Nigeria, which won in a talent competition, it’s a pan-Nigeria competition with transparent conditions and any school is allowed to enter. The first three winning schools receive many awards; first, we throw a Christmas party for their children; second, the children get to choose the charity of their choice where they want us to invest in on their behalf and third, the school wins an amount of money that they can plough back into the school – they want to buy computers, they want to fix their labs and whatever they may want to do. That’s part of our social responsibility. We have what we call social mission through our brands, where we use our brands to support our communities. We have TomTom Breathe for it. Today in Nigeria, music and art is a big deal, Nollywood and all of that. Breathe for It Academy is basically something we created to sponsor people who want to invest in the arts. We have people who will teach them how to do the agreements, how to set up contracts, how to set up a studio, what you need to do to get an agent or a manager, all of the things an artist needs, those are investments we make. In our immediate community of Agidingbi (Ikeja), we have pipe borne water for the community which they can use in their homes everyday. We do quite a lot for our communities.
