The Managing Director/Chief Executive Officer, International Maximum Resources & Chemical Industries Ltd., Prince Madugba Raphael Chiadikobi, says Nigeria can leverage the untapped opportunities in the tourism/hospitality industry to diversify its economy. In this interview with Assistant Editor CHIKODI OKEREOCHA, the industrialist, ex-banker and hotelier says hospitality is lucrative, with Lagos alone capable of generating over $3 billion (about N846 billion) yearly, if the government puts the right things in place. According to him, there is a need to fix power, which is a pain in operators’ necks, and also reexamine some Central Bank of Nigeria (CBN) policies.
How would you assess the economy so far?
To be honest with you, we are making progress in one area: security. There is no business that can thrive when there is crisis. The moment you are able to sort out the issue of security, more people will have the confidence to invest. But if there is no security you won’t dare. That is the area I can give our President and his team a pass mark. But when you come to the issue of food security, it also boils down to security, because most of the agricultural products come from up north and when there is no peace there, they will not come. Most food items are very expensive now, particularly tomatoes.
How are operators in the hospitality industry coping with the scarcity and high price of tomatoes?
It’s a very bad situation. If you are making a sauce before with N2,000, you are going to make it with N4,000 now. If we served you a meal at probably N1,000 or N1,500 before and you come now and we say it’s N3,000 you will flare up. That is natural. But the reality on ground is that the government is not helping issues. The first thing I told you when you came in was that we woke up this morning to buy Automotive Gas Oil (AGO) or diesel at N180 per litre. How can you survive under this? So, if the government can get the energy sector right, leave the rest to us. If the energy sector is fixed, our problems are half-solved. Why it is not difficult, from my own perspective,is this: What is the source that we are using to generate this power? They say it is gas. And they are still flaring this gas till tomorrow, wasting it. What stops the government from building the turbines where these gases are, so that nobody will go and cut the pipe that is directing it to the power plants? That is one point. Then, we have more than eight states in Nigeria that can produce coal. What stops them from building turbines and using coal to fire them and generate electricity?
How does the energy crisis affect operators in the hospitality industry?
Terribly! It affects us much more than any other sector. In the banking sector, their generators will be on from probably 7.00 am till 10.00 pm and they power down. The ATMs operate with solar. But the hospitality business is 24/7, you don’t power down. Even if it is one guest you have, he expects you to put on the light for him. So, it’s affecting us in every area; it affects our margin. Even the noise pollution alone, if not that we are using sound-proof generator; we have three generators, two are sound-proof, one is basic. The cost implication is very high, and sooner or later most of us that claim that we will give you light 24/7 will have to adjust. This is because where you bought 50 litres before probably for N6,000 we buy now it N9,000.
Some people are calling for a review of the power sector privatisation. Do you think this is the way to go?
For me, it was a wrong step to privatise it in the first place. Government should have taken total control of the power sector, improve it, and then ask the citizens to pay. We are paying, but we are not getting electricity. Where I leave in Ogudu I have not experienced power for three days, but I pay bills. Here, since yesterday, we have not seen light. So, it was a wrong step in the first place. Previous governments never planned for the rainy day. That is one of the credits I am giving to the current president because he is trying to diversify to solid minerals and agriculture, although, Return on Investment (RoI) on agriculture takes longer time. The profit is not all that fantabulous.
How can tourism/hospitality industry contribute to economic diversification?
Hospitality business is a very lucrative business when things are done right. So, the government should look into it very well. In Nigeria we celebrate mediocrity more than merit. That is one of the problems we have in this country. As big as Apapa is, the only five star hotel here is Rockview. As I talk with you after that Rockview we are next to them. This is not my own assessment, but of people who have been dealing with them that came here within these two months of our test run.
How much can the government can generate from this sector if some of these issues you highlighted are resolved?
I cannot give you an exact figure, but within Lagos, from our own feasibility study, it’s more than $3 billion (about N846 billion) annually. This is based on the feasibility study by the firm we commissioned to do feasibility study for us.
As a former banker, how would you assess CBN’s policies?
The CBN policies, especially the one on foreign exchange (forex) is very oppressive and draconic in the sense that most of us that have children abroad we cannot send money to them. Not all of us are politicians and not all of us are living on stolen funds. I was calling my bank this morning that please I need to buy about $3,000 for my children; that I want to pay their rents because the month has ended, they were asking me all kinds of questions. So, the policy is very draconic in the sense that a CBN ought to just give the directive, formulate policies and allow the system to run. Like the Bible will say, let the chaff and the wheat be growing together and at the right time they will be separated. By tightening everything you are killing businesses and when there is no business to be done, the next thing is unemployment, anarchy and crime. When Sanusi was there; I so much liked his policies, honestly. Sanusi as I said was one of the best CBN governors Nigeria ever produced.
Why do you say so?
As an experienced banker, I was questioning people in the bank. For instance, which sectors in Nigeria were supporting all those billions net profits banks were declaring? Those were purely engineered balances, only on paper. As at 2005 when Soludo said all banks should recapitalise to N25 billion, most of them did not capitalise, all they did was to credit shares, ask their members of staff to fill the forms that they have bought them or even given them soft loans. But when Sanusi came, he was an insider; he knew what they were doing. So, when he was telling people that a first generation bank was having problem, people never believed him. I told people that second generation bank went to the capital market in that 2005 at N10.90, almost N11. Within six months after raising the so-called N25 billion, they even claimed they raised N35 billion. Then, they went back to the market and hiked their share to N17, N25 and I said this was a lie. When they went public the first time it was sold at N10.90. I bought 100,000 unit shares. In fairness to them, two second generation bank are the only banks that are giving good returns to their shareholders. Others are balderdash. As big as one first generation bank is, it’s rubbish. I got my dividend yesterday. I have about ninety something thousand. They gave me N7,000 dividend, and these are the shares they sold N37 per unit in 2007. So, operators in the system were not honest ab initio and any foundation built on falsehood one day will crash. So, what Sanusi did was to try to clean up the system for which people castigated him that he came to witch-hunt. Today, a bank sacked 1, 040 members of staff. Last time, it was a third generation bank, about 300. So, I don’t know where we are heading to.
Why did you veer into hospitality business after 19 years in banking?
I was in the bank for 19 solid years, and during that time I was nursing the ambition to go into the tourism/hospitality industry. I was asking myself after bank what next? I started from the paint industry. I have a paint factory at Ogba, Lagos. We produce domestic and industrial paints and paints used for vehicles. The paints industry wasn’t all that moving properly so, I veered into another arm of the business by bringing in chemicals. That one later began to have problem as well because of the adulteration of chemicals. The China market may be a bit profitable, but the problem is that they have fake and substandard quality compared to the European market. I travelled to England with my children in 2005. I lodged in one hotel in Paddington, Central London and I loved the design and I felt I could replicate that in Nigeria. That was the motivation. You know it’s difficult to do business in Nigeria. The environment is not friendly, the government is not friendly. If you want to begin any business in Nigeria you must have nine lives to survive; it all depends on your determination, the zeal and energy you put into it.
When did you leave banking?
I left banking 11 years ago, precisely on May 31, 2005. While I was still in the bank, I had the paints industry. My paints industry started in 1999. So, I was working and earning salaries and investing it in the paints industry in the hope that whenever I leave I won’t start from ground zero; so that I will see where to hang because experience has shown that when a salary earner leaves employment and jumps into business the first one or two businesses he will do he may have problems because he is not used to that environment.
What has been the response so far?
In Apapa here, what you have mostly are brothels. This is the GRA side. Here we have a swimming pool, as deep as nine meters. When you lodge in any of our rooms, we make sure that you are comfortable. In other hotels, they just give you towels and tissue papers that is all. But here, no matter the room you’ve taken, in as much as you are parting with value to us, we provide you with the same items and even go further to give you dettol to show that we appreciate your patronage. Our rooms are very fantastic, expansive and affordable; we did not economise space. Compared with neighbours here, our standard room is their big room; they charge N15,000 per night while we charge an introductory price of N7,000 for the same room size. The one they take between N15,000 and N20,000 we take N10,000. We have 33 rooms.
