Experts believe that there are many uses to which pension funds should be put if well managed. One of them, Mr Adebayo Jimoh, the Group Managing Director/Chief Executive Officer, Odu’a Investment Limited, in this interview with BISI OLADELE, says the cash can be given to the money and capital markets to enhance economic development.
Odu’a Investment Limited is a major player in the economy and also a member of Association of Developing Finance Institutions in Africa, an offshoot of African Development Bank (ADB), whose business is development financing? Is the group funded by the government or the private sector?
Development financing is purely the business of the government. It is the business of the government because it needs to provide an enabling environment and resources that are attractive. By the word attraction I mean finances that have long gestation period because most issues of development are not short-term. And if they are not short-term, the returns on them are also not short-term. They are long-term projects that touch on the life of every sector of the economy, essentially the rural sector. But it has to be funds that have attractive interest and it has to be single-digit interest with handsome moratoria period that could create breathing space for the investors. It should not be a choking fund. Neither should it be a risk-free fund; it should be in-between a choking fund and a risk-free fund. The aspect of development finance requires a huge fund which the Federal Government provides. lf you look at the African Development Bank, it has a charter that compels every member-nation to provide funds in a pool so that the development bank now identifies critical areas of intervention that would have long lasting effects and benefits for a greater majority of people within the sub region.
What other sources of financing do governments in African countries have? Are we exploring enough of these funds, particularly in Nigeria?
Essentially, apart from the internally generated funds coming from the resources of government, bonds that government raises, hedge funds that industrialists and people that want to invest put into a system like a basket, there are also the special development funds of some continents, such as the European Development Funds and the American Development Funds. They are special funds meant for specific interventions like afforestation, HIV/AIDS, funds for educational development, skill development, funds for intervention in areas like polio, funds for development in floods and natural disasters. All these funds are available through some specific international agencies but there are checklists; there are some processes and conditions, specific requirements.
The most important one is the counterpart funding. Although European funds come free, you must be able to provide your own counterpart fund to ameliorate what the overseas funds will provide which will be able to accomplish the task.There is no half-measure in development finance fund. If the project, for instance, is N100 billion, the international agency, say from the China Investment Bank, wants to give an aid to Nigeria for construction of a bridge and the cost of that fund is N100 billion, they will provide N70 billion and the Federal Government must show the capacity to provide that counterpart fund. When they start, they must accomplish it. But we, most times, make mistakes because these funds do not necessarily come out in cash as liquidity. Most of them come as materials, equipment, resources, people, infrastructure and even consultancy. So, a development fund is a conglomeration of several input and most times the benefit are not necessarily for the receiving country. The benefit could be for the donor country, especially in the areas of food aid because they try as much as possible to find ways of exporting to support their home grown institutions. For instance, if they are farmers and they have excess harvest, they will say they want to give you aid and you will start clapping, but it is not necessarily free. There is no free lunch anywhere.
Are there funds like these which are home-grown in Nigeria?
Yes. Our pension funds serve as a good example. But, unfortunately, it is being abused. These are supposed to be funds that are to bridge development gaps. If our pension funds go into the capital market rather than being kept in stagnant banks and are growing wings to fly as we are seeing, what do you think will happen to our capital market if N30 billion comes into the capital market? There will be serious activity. If these funds are made available to the lending institutions, the simple economic principle of demand and supply will apply. There will be more funds going into the economy than even the demand, and what will happen to the interest rate? It will come down. The real sector will have access to these funds. People will buy into the bonds that our states are taking, and if our liquidity improves and Central Bank of Nigeria (CBN) is able to monitor that, it will help our economy than going to take loans in hard currency at very lower rate but when you bring the money into this country they will give them out at higher interest rates. So, there are funds in this country, the pension funds, the stock market funds which are supposed to be used for providing these interventions for our activities back home and that will at least bridge the gap on the foreign loans that we get.
How would you describe the state of development financing in Nigeria compared with other African countries?
I would say that there are two institutions that have done very well in Nigeria over the past three years. The first one is the Bank of Industry (BoI). It has been able to identify some specific sectors that require interventions and I know that it is able to support some small and medium enterprises (SMEs) in the textile industry, in the arts and craft, some SMEs in the power sector. I also know about the Bank of Agriculture (BoA). These banks have done well in providing funds at single-digit interest for investors in that sector. Looking at it from that angle, those development finance institutions have performed well and I commend their management. Beneficiaries are accessing these funds and they are also paying back because these funds are being better managed unlike before when people saw them as national cakes and never repaid. They also provide them with support, including extension information services and follow-up to ensure that the funds taken are applied into what they are supposed to use them for. They even offer input and not just necessarily cash. I will say that the critical ones among our development finance institutions have done very well.
Did any subsidiaries of Odu’a Investment access such funds?
Yes. We are able to access the funds for graduates of our farmers’ academy where we were able to secure loans for our graduating students in agriculture through the Bank of Industry.They have been able to fulfill their obligations. Default rate is minimal.
How well are the graduates of Odu’a Academy applying these loans?
They are doing well. We have graduated over 500 farmers from our academy in Ede, Osun State and they have been able to access this fund through the Quick Intervention Fund of the Osun State Government. Also in Awe, I can conveniently tell you that the first two sets of graduates have been able to access the funds through their cooperatives.
How about patronising the private sector, particularly in developing infrastructure in Nigeria?
No government can do it alone. Actually, what I mean by government’s major task of providing funds for financial institutions to use is that the institutions will engage the private sector to utilise the funds. The private sector cannot provide the development funds because they want to make profit. The policy of Public-Private Partnership (PPP) is great and that is what can be used to develop this country. However, what we have noticed in this country is inconsistency in policy for most of these infrastructural development programs. There is a need to have a standard rule of law guiding the operations the government will have with the private sector so that it can become more encouraging for Foreign Direct Investment to come in and support that. But if they know that there are no standard policies whereby another government comes in and proposes another condition to reverse the policy, then it cannot work.
What about business financing, particularly in the real sector where Odu’a Investments Limited has some subsidiaries? In what ways do you think businesses in Nigeria can access better funds to help them run more profitably?
To access funds by business enterprises in this country, there is a need for all businesses to do the NEEDS analysis before they can identify what they need the fund for and will be able to match the resources that they will take with the actual output in terms of what they will be able to produce with those funds so that there will not be an hitch whereby loans are taken and can hardly be repaid. There is a need to gather data, have information along with a strong business plan. Jumping out to source for funds is not desirable. People usually say they are travelling abroad to look for investors or funds, but they need to first get information as to the opportunities available in Nigeria. What are they going to use the fund for? Most times they lack this information or some of the business plans that are prepared are just updated without really re-visiting. So, I am saying that it is not just about the need to source for funds that is important, but what you are going to do with this fund and to make for sustainability of the operations of the company. It is also important for the company to prepare a good bankable document that will show that what I am investing this fund on would provide optimal returns on my investment. Without that, most institutions go out for funds and before you know it, they run into serious problems and that is what has led to AMCON to have taken over several companies, including some companies that you don’t think should be in the basket of AMCOM. It is a misnomer, but I am honestly advising investors to check their data properly before they jump into loans or funds that are available in the market for investment. The bank manager will always smile when they want to give you these loans, but if you refuse to pay then that becomes a problem.
With the high interest rate on bank loans, how will you describe the future of this business and business financing in Nigeria?
If the high rate regime continues and the inflation rate is said to be coming down, it does not tally. It creates a bleak future for industry because the industry will not be able to get into meaningful activities that would enable them to make profit, to have returns and pay back these loans. There will be a limit to which you can increase your prices if the interest rates are low and the money supplied into the economy is also being highly regulated, whereas the interest rate in banks are still high, so there is a mismatch. So, it’s a bleak future for industry if the interest rate continues this way, there is no way by which they can cope. Coupled with the fact that the cost of doing business is rising, in terms of power, security, water, people, and even normal communication. All these fixed cost are very high. My appeal is for the banks to find a way of at least, bringing down interest rate and the CBN through its monetary policy regime, can do this. The answer is to look at ways of meaningfully utilising our pension fund in a proper manner than being stolen and taken outside this country to other countries. Those countries are now benefiting from it than us. There are some countries whereby their banks will even beg people to come and take loans at zero per cent rate because they are awash with cash.
But why don’t we have such banks in Nigeria?
We do not have such banks in Nigeria because the people are afraid to put money here. There are controls, checking, monitoring processes of deposits and the supply into the economy is still very low, and there is huge demand because our infrastructural needs are still many. We do not have institutions to check many things here. We do what I call fire-fighting. We are yet to build institutions that will regulate, monitor and create activities for industry, for the people, society and we will continue to move round in circles.
This conglomerate has shifted focus to real estate in the last few years. Why?
I will just say it is a paradigm shift from what we used to do because we just shifted from just trading in the capital market and we saw that the capital market was going to have problems and we needed to identify a good sector because we have the advantage after a strong SWOT analysis of the strength, weaknesses and opportunities of Odu’a. We have advantage to go into real estate investment because we have good locations and we also have the wherewithal to partner with a lot of other people, because most of our associate companies, our subsidiaries, are all in the building sector of the industry. They include WAPCO/Lafarge is in cement, Nigerite is in roofing, Askar is in paint; Nigerian Wire and Cable. We are working in synergy with these institutions that are still very strong. Again, there is huge demand for what I call gated estates in this country. There is more demand for shopping malls because our people are becoming more enlightened, coupled with the fact that the five Odu’a owner-states have started urban renewal projects, and all what Odu’a can do is to support the urban renewal projects by also building to support the people that are coming out to look for opportunities into these new areas of real estate buildings.
Your administration has built massive properties. Can you share the value of the real estate portfolio of the conglomerate?
The value of our real estate portfolio as at the last time evaluation was done about two years ago was close to N76 billion. We have been doing some investments since last year. I think that is a very strong level in our real estate development which I believe can even grow better by the time we do others, because we still have a lot of real estate redevelopments to do in some strategic locations. By the time we finish with the Heritage Mall, we are thinking on moving into those locations and the five states. And I can tell you that Abeokuta is our next port of call where we are also trying to replicate a shopping mall like the Shoprite there.
Very soon, you will be inaugurating the Heritage Mall, which is believed to be the largest shopping mall in the Southwest. What informed your choice of Ibadan as the location? Why not Lagos?
What informed our choice of Ibadan is basically the fact that Ibadan is a very strong growing economy in terms of people, in terms of opportunities and in terms of the historical nature of it, being a regional capital of Southwest Nigeria, and if Lagos already has three malls, of course, based on our research and business plans, the next port of call is Ibadan.
As a major player in the real estate business, what are the challenges facing that sector?
The major challenge facing the sector is the cost profile. You will recall that early last year, the Federal Government was very worried with the high cost of input for building, especially cement and the government had an intervention by calling the manufacturers of cement and there came the issue of undercutting and underpricing between some of the manufacturers. But I will say to you that cement is still better, but there are other aspects, such as the metal, iron rods and the steel. That leads me to the need to call on the Federal Government to revisit the steel industry. The steel industry has to come back because close to 80 per cent of our steel and iron rods materials are still imported, whereas we have the resources, just like we have the resources for manufacturing cement, that was why the Federal Government was able to control the price of cement because close to 90 per cent of our demands are been manufactured locally. If they are able to do that for the Ajaokuta Steel Industry, Delta Steel, they should go back to the drawing board and revisit our steel industry. It will assist in bringing down the prices of most of our building inputs. A lot of our aluminum profiles are imported from China while we have the aluminum smelting industry in Akwa Ibom State. There is a need for the Federal Government to get that place fully privatised and all our steel industries too, so that they will start operating perfectly well. The government should venture into afforestation and start producing woods that will be used in buildings. The greatest challenge is cost of materials.
How have you been able to raise the profile of this conglomerate since you became the GMD about seven years ago?
The first thing I think we have succeeded in doing is to raise the morale of our people. We have been able to improve the level of capacity of our staff. Most of our staff are now well-groomed in addressing issues of investment, infrastructural growth, capacity building and issues in industry development. We are also providing assistance for our states in terms of training. As we speak, I can say we have provided several trainings to enhance the capacity of our people and by extension, those people we have the opportunity to empower. Secondly is the environment. I think it is a thing of joy that the greatest legacy of the Yorubas (Cocoa House) that was dead for over 18 years is the pride of everybody including some states, as they have Cocoa House as part of their logo. In terms of reaching out to our states, we are building shopping centres in some states. In Osun State as we speak, we are building a big shopping mall called Aje International Market in Osogbo, The first phase comprises 600 shops and it is almost ready and will be inaugurated in April. We are going to do the same in Ondo State. It will comprise 3,000 shops but we are doing them in phases. We have built our relationship with the youths, scholarship schemes for graduates, undergraduates, nurses, and empowerment schemes for the farmers’ academy because the youths are the future and they should not be idle. Another program which is coming up is just an icing of the cake for us to always remember our great heroes in the past, is a museum which is completed now and Prof Wole Soyinka has agreed to commission it and we are going to do a lot more. What we have been able to put in Odu’a now is a standard you can only grow.
