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Chief Innocent Ifediaso Chukwuma is Chairman and Chief Executive Officer of Innoson Group of Companies that produces plastics and automobiles. In this interview with LEO SOBECHI, Chukwuma examines the effect of discriminatory government policies on indigenous manufacturing in Nigeria.
AS a manufacturer of waste management equipment, do you think state and federal governments are taking the recent NIMET seasonal rainfall prediction serious?
First, you should acknowledge that these people are experts and they know much about what they are talking about. They have given these notices about impending heavy rainy season and the expected flooding. Now many states are interested in buying waste management equipment. However, there are other state governments that do not seem to understand that it is an important thing to do.
My advice based on the predictions of NIMET (Nigeria Metrological Agency) is that stakeholders, especially state governments, should take advantage of the reality of climate change to buy waste management equipment to protect their environment and avert destructive floods. I say this because you find that when drainages are blocked, there are chances of flooding which cause big damages. But if the gutters are open and domestic waste products are managed well, even when there is flood, not much damage to lives and property would be recorded.
Some government functionaries complain that local manufacturers cannot meet demands, especially for waste disposal bins and trucks. How would react to this?
Most people that insist on importing such equipment are those that want to siphon money abroad. All what they need could be sourced within Nigeria. It is not only Innoson Technical Company, there are other companies producing such equipment in the country. But we can only advise because if they want to keep importing, we cannot stop them. They may have their reasons but they should know that whenever they are importing such equipment made overseas in preference to our own products, they are encouraging those abroad while discouraging indigenous manufacturers. If they give us the necessary support through patronage, we would develop the industry more, so that our people would also get job opportunities.
We also export outside the country. The waste bins being used in Ghana presently were produced here. We have dustbin trucks manufactured at Nnewi factory. We have plastic dustbins and buckets manufactured in Enugu. And many states in Nigeria are using our products today.
What challenges do indigenous manufacturers face?
First, the federal government has been doing a lot to solve the problems confronting indigenous manufacturing industries. Electricity is number one. For instance, as at the time we started this factory, we always had 20 percent supply but supply has increased. In fact, we are approaching 80 percent supply from the national grid.
But while you import some plants or machinery, how do you grapple with the problems of port processes and custom clearance?
While I cannot complain of so many challenges in those areas, our concern is that there is increase in importation of plastic raw materials in Nigeria now. They said that any plastic raw material being imported into Nigeria should attract a levy of five percent, duty of five percent in addition to five percent VAT (Value Added Tax). That is a total of 15 percent extra charges!
Now, the problem we have with that is that other countries that usually come to Nigeria to purchase those items no longer come basically because of the five percent increase in levies on importing raw materials to Nigeria. Here is the direct effect of that 15 percent increase in levies. They now go elsewhere to buy those goods since the ones made in Nigeria have become very expensive.
In other countries outside Nigeria, it is only five percent duty that is paid. So, you see, those people that decided to take their factories outside Nigeria get their raw materials at just five percent duty and they can afford to sell cheaper. It is true Eleme Petrochemicals Company produces raw materials but the fact is that they do not have all the raw materials we need. Government ought to impose levy on only those raw materials that could be sourced in the country from Eleme, while others should attract normal duty rate. It would be acceptable if they can place levy on those raw materials Eleme could produce. But our grouse is that Eleme does not produce the major raw materials for plastic manufacturing. Petrochemical raw materials are many.
How are indigenous manufacturers reacting to that development?
We are producing but our foreign customers are no longer patronizing us, they have diverted to other countries. In fact, the increase is too high; we are now producing for only the Nigerian market. Before now, our products serve the whole of African market. I knowm that the Manufacturers Association of Nigeria, (MAN) has been trying to explain this burden to the federal authorities but as we speak nothing positive has come out of that effort.
How supportive has government been towards indigenous industries?
Most government establishments purchase our vehicles; they are giving us good support in that area. Government has done a lot of things to support my factory, starting with state governors, especially Peter Obi and Sullivan Chime. All of them are encouraging the progress of indigenous production.
As in the textile industries where the Lebanese and Indians are major competitors, how much competition do you face from their nationals in plastic and automobiles?
I don’t believe it is healthy to encourage monopolies. We need competitors to get the best out for the people. If more people join indigenous manufacturing, I believe it would ultimately be more beneficial for all.
But our cries on the five percent levy must be heard. It makes us lose export opportunities and patronage from other countries. Government should as a matter of urgency remove it. Five percent apiece for duty and vat is okay for raw materials, but the addition five percent levy is a killer to indigenous manufacturers in Nigeria.
Do you think generous discounts to foreign buyers can keep them coming?
If you give discount below your cost price, you are gradually closing down the factory. Now, is it better to shut down the factory? Or are you saying that is the intention of government for putting that five percent levy on industrial raw materials? Instead of growth, this levy will pull us down.
Have you tried to diversify, like producing pellets for other industries like Nigeria Breweries?
When you get into manufacturing newly, you find your market without trying to push out those that are in the business before you. We developed markets outside Nigeria so well, but because of the five percent levy, they now started going to other places.
Did the Federal Government come out with this policy without consulting manufacturers?
I do not know if they actually consulted manufacturers. But we, the ones on the ground doing the manufacturing, do not like that levy. May be they consulted people who are not into manufacturing. Real manufactures would tell government that the levy is counter-productive; it is choking our business.
If you have the ears of President Goodluck Jonathan, what special appeals would you make to him about teething problems faced by manufacturers especially those in your sector?
Two things; the president should know that five percent levy on raw materials will not help the economy. Government gives free duty on CKD (Completely Knocked Down) vehicle parts for only 40-seater buses and above. That also would not help us. If they want to give free duty to mass transit vehicles, it should be left at that without segmenting on the basis of seating capacity. Companies that produce 30, 35, 38 or 40 seater-buses will enjoy the free duty. But to insist that it is only 40-seaters and above that be entitled to free duty is targeted at encouraging just one company and only TATA produces buses of 40-seating capacity.
Some of our buses here are 37-seaters. Tell me how a company would pay duty on 37-seater buses and not for 40. Does that then mean that we have to go and change our factory system, rebuilding the factory to accommodate the manufacturing of 40-seater buses? It is grossly unfair. If government wants to give free duty for commercial buses or mass transit buses, it is welcome. But basing it on the seating capacity is mind-boggling.
Talking of tyre manufacturing, is the enabling environment there for sourcing of raw materials in Nigeria?
Nigeria is a virgin place for manufacturing activities. Anything you can think of in Nigeria is possible so long you will do it well. Raw materials cannot be a problem when Nigeria has good rubber. No factory can source all its raw materials internally. That Ajaokuta is comatose is unfortunate but it is not a big hindrance.
Are you not worried by the state of road infrastructure in Nigeria, especially the southeast where your factories are based?
There is no way all the roads would be in perfect shape all the time. Some of the roads could be good this year and next year becomes bad. Government is trying and work is on-going to repair some of the roads. I do not expect all the roads to be good at the same time; there will always be wear and tear.
Some manufacturers complain of poor personnel quality in the country, what is your experience with workers?
Whenever we employ we send our employees on training. After the training, he is qualified and goes to work. You can train anybody to your satisfaction; it depends on how you train. Most manufacturing firms in Nigeria do not spend money on training; without training how can they work satisfactorily?
Your Hummer buses and those from Toyota have been a subject of comparison. How is your company coping with the competition?
Toyota is more than 100 years; we are only three years. We are not fighting anybody but just doing our thing our way. They do not even know that I exist. Innoson buses are not affecting their sales. Everyone has his own market share, the market is large.
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For the Managing Director and Chief Executive Officer of RSL Derivatives Global Services Limited, Mr. Lekan Abiola, tenants discomfort themselves but enrich their landlords when they pay their yearly rents in lump sums. In this interview, he speaks on the Rent A Month initiative being promoted by his company. He maintains that the initiative will not only take the pressure off tenants but also provide them the opportunity to improve their finances and further contribute to the growth of the economy. Excerpts:
Briefly tell us about RSL Derivatives Global Services Limited?
What we do on a very simple note is what is called credit enhancement and we use a method called alternative risk transfer. In doing this, we have partners that we work with among which are banks, insurance companies, trustees and even the credit bureaus.
As part of our services, we have introduced some products that the banks can relate with before we begin to expand across all the banking loan products. One of such products is the Rent A Month. There is another one we call the RSL School Busy Fees. We are working hard to bring to the market a structure that will allow banks to lend to small scale industries across board at even a discounted rate under the same structure. The company is out to be able to use different methodology to address the risks associated with banks lending to customers in this kind of the market.
How original is this service to the company?
I have had the opportunity to work with a leading marketing research firm in Africa, an insurance company and in the banking sector. The initiative is a product of my experiences and those of others that are partnering with me in this project. Thank God for the advent of the internet; we have also seen what other people are doing elsewhere in other countries. We looked at other models across the world and have redesigned those models to help create solutions that the market can relate with; to help the banks address seemingly backend of defaulters that is becoming an issue in the market; to help tenants to be able to source for the kind of funding that they require; to help small scale industries to be able to access funds at a lower cost and help them grow.
Talking about Rent A Month specifically, how does it work?
Before I address that issue, let me explain quickly our philosophy. Our philosophy as a company in development terms is what we call community of help. We think that if we can bring every party involved in a particular problem together, we can evolve a solution. And in this wise, who are the parties first of all? In the rent market, you have the landlord, the tenant, and the agents. Now, what does the tenant want?
The tenant earns his income or salary on a monthly basis but the landlord wants his rent on an annual basis. The tenant is crying that he doesn’t earn his salary on annual basis. The agent is in-between and says that he has no problems with whatever agreement they reach.
That is what we are trying to bridge. The problem is funding and the banks are the ones that are licenced to fund. Now, the idea is for the banks give the landlord his money while the tenant pays them back monthly. But the banks are saying that this market that you are talking about is not structured and wants to know their fallback position if the man defaults.
As a credit enhancement company, we came into the market and created what is called Default Protection Pool (DPP). Our proposition to the banks is ‘if we profile somebody and he is okay by us and we recommend him/her to you, if you lend to him and he defaults, we will pay.’ With that, the banks have accepted to lend to people for purposes of rents payment and that is where we are. We have created that kind of buffer for the banks to be able to lend. We have given the banks 100 per cent coverage of their default. This is called alternative risk transfer using an enhancement proposition for the banks to be able to lend. And I hope we can begin to grow the value of this product across all banking products as we evolve as an institution.
What is the cost element to the customer?
The customer pays the bank fee. One of the banks that we work with now charges about 2.17 per cent interest every month on reducing balance. Another bank charges about two per cent. And we know that more banks are coming in and the more they come in, the lower the interest. In fact, a bank said to us that if we cover them 100 per cent, they would reduce their rate further by five per cent. But for us to get there, all the stakeholders must come together and ensure that it works.
How are you covered as a company in the deal?
The assumption is that this environment is very debt oriented; that borrowers default a lot. But to us, it is merely an assumption as nobody has really gone to the market to test it. What we believe is that if you put the right mechanism in place, if you don’t short change your process, if you assess people based on what their financial capacity is, they would not default as long as their employers or whatever they do pay their salaries as at when due. So, ensuring that we get the necessary information about a client is what we must do. We have been able to address that through our structure and system. We have about five steps that customers must pass through before they get money.
What are those steps?
They are basically assessment processes that are really not things that we would not want to make public. But they are trade steps we must follow so that people don’t default. We have a way of assessing both salaried and non-salaried persons to ensure that we have a clear picture of what their income structures are and that we are protected.
Having said that, we have a very robust monitoring system to ensure that our customers are up and doing. Once you take a loan through us, we see you as our partner and friend. That is why we have a policy that says that if the default comes through an accident, the customer is covered. But when a customer defaults deliberately, we seek to address that through the rule of law. Meanwhile, the Default Protection Pool also gives an incentive, a small bonus, for not defaulting.
Our message for Rent A Month is not for those who can’t pay their rents; it is for those that have the money and can pay their rents as at when due. But we are saying that you can invest that money in something that would yield you good profit and take a loan to pay your rent at very minimal interest. A lady came and asked us to give her N500, 000 loan and she would give us N150, 000 return every month. Now, if you finance the rent of such a person and she invests the money she would have used to pay her rent, she would be growing her income and adding serious value to the economy at the same time. Lagos State, for example, is a N1.6 trillion per annum rent market. If you invest that amount into this economy, you can imagine the number of jobs that would be created, how many people that will invest in the capital market, and how many trillions that will go into the development of housing in Lagos State alone. So, what we are saying to people who have the money to pay their rent is ‘use your bulk money for something else’ that would yield you income. You can use the bulk money to buy a land; the following year, you do the foundation; the next year, you take it to the roofing level; and before you know it you have built your own house. So, the essence of rent a month is to help Nigerians channel the bulk money they use to pay rents to more economic benefitting propositions in the market. That is our commission to this environment.
Does RSL Derivatives offer mortgage services?
No, we don’t! We are only saying that people should convert that lump money that they want to pay to the landlord into something profitable while we take care of their rents for them. The idea is that if somebody is addressing your rent for you, you have the lump sum that you would have paid to the landlord to do other things. I have seen people come to us and say that they want to borrow money to start a small business. But we don’t do that. We only facilitate our banks to lend to rents. But the money you are going to give to your landlord, why don’t you use it to start a small business. That is the value we are creating in the market; it is beyond rent.
What has been the response of Nigerians to the service since inception?
It has been very good. Our clients have been increasing. We receive hundreds of calls everyday from people making enquiries. People are already benefitting. Schools are signing on the school fees product. Banks are now coming to discuss with us.
We are educating the market on basic requirements. We are already in Lagos and Abuja and we have plans to establish in Port Harcourt, Kano, Kaduna, and Ibadan.
We believe that the more people understand what the banks want before they lend, the more our volume of customers will increase. We believe that the market is huge but we need to adequately educate the people, which we are currently doing. As we continue to roll out, we will continue to expand the scope of our services and also our branches and let everyone come in.
WORRIED by the harsh policy on the automobile industry, operators have appealed to government to assist the industry to revive its businesses.
The outgoing President of Association of Automobile, Boatyeards, Transport Equipment and Allied Employers of Nigeria (AABTEAEN) and Chairman of GM Nigeria Limited, Mr. Anthony Arenyeka, at the 33rd yearly general meeting of the association held in Lagos, said “most members of the association have as their core businesses, the assembly and/or importation, distribution and sales of motor vehicles, motor cycles, other automotive products and ship building.
According to him: “A building block to the story of woes is the effect of government policies or lack of policies and how these have affected the destinies of members in the year under review.
“Government has been envisioning great plans for these industries, but the impact has been of little or no significance. The major factors constituting stifling growth include unabated importation of second hand truck vehicles without age restriction, lack of differential policy that distinguishes authorised distributors from grey and informal importers.
A member of the association, Pastor M.O. Afolabi, of Boulos Enterprises Limited, expressed worry over the premature ban of okada. He said he understands the need to do away with the use of it because of the havoc it has caused, but that the timing was wrong, adding it should have been done with a lot of enlightenment on the danger and the stakeholders carried along with a view to discouraging further importation.
FORMER Chairman of the Economic and Financial Crimes Commission (EFCC), Mrs. Farida Waziri, has called on the National Assembly to repeal the laws on corruption and enact more potent laws, describing the current laws as archaic.
Waziri who spoke in Abuja at the public presentation of a book “Law of Evidence in Nigeria” authored by renowned Legal Luminary, Chief Sebastine Tartenger Hon, a Senior Advocate of Nigeria (SAN), stated that the on-going war against corruption in the country cannot be won until all the inherited colonial laws on crime are repealed.
According to her, the existing laws on crime did not envisage the terribly corrupt situation the nation has found herself and therefore needed to be repealed while ones are enacted that would help curb corruption.
She explained that the current laws can not wipe out corruption because of too many escape routes for corrupt people to escape from punishment.
“It is a notorious fact that corruption is being fought partly with archaic laws, the laws that are no longer suitable for the unpleasant situation we have found ourselves”.
“At the time most of our laws were being enacted by the colonial masters, nobody envisaged cyber crime, nobody envisaged internet fraud and nobody even envisaged manipulation of computer to defraud because those things were not there at the time”.
“I use this singular opportunity to call on our members of the National Assembly to rise to the challenge. They should give us potent laws that can confront corruption and corrupt tendencies headlong. We must not shy away and we must not spare any effort to review and reform our laws to suit our present purposes”.
“I charge our legal practitioners too to be concerned with the nation’s archaic laws and no effort should be spared to ensure that the laws are periodically reviewed and updated to meet the demands of the present age and developments”.
“For over 40 years, our Evidence Act was left at the mercy of crooked manipulations in the law courts especially in criminal matters”.
“In reviewing our laws, the National Assembly should make sure that the laws cover all segments of the country”, she said.
She threw her full weight behind the reform of the judiciary being undertaken by the Chief Justice of Nigeria whom she described as a no nonsense woman and called on Nigerians to give her maximum support.
Mrs. Farida also showered encomiums on the book author, Chief Sebastine Hon SAN for his contributions to the upliftment of the law development in the country and urged other lawyers to emulate his patriotic gesture.
THE new wind of change ushered in by the privatisation process may have raised the hope of electric meter manufacturers in the country, who have had little share of the market in the recent years.
The Nigeria Electricity Regulatory Commission (NERC) recently announced the starting of a new metering scheme tagged Credit Advanced Payment for Meter Installation (CAPMI).
With the new regime, it is believed that the move would help to fast-track and find a lasting solution to the difficulties consumers encounter in the process of acquiring prepaid meters, as well as addressing the menace of over-billing.
When the idea of prepaid meters was conceived by the former President Olusegun Obasanjo’s administration in 2005, it was commended by well-meaning Nigerian’s as a process that would bring back sanity into the electricity industry in Nigeria. It would be recall that prior to return of democracy in 1999 the process pre-paid meters had been on ground precisely since 1995 with Lagos and Abuja to be use as specimen but with the Obasanjo administration the idea was then materialised changing the scope of sampling areas.
The will of the government to get things done paved way for the enactment of Electric Power Sector Reform Act, 2005, an initiative that made the Power Holding Company of Nigeria (PHCN) succeeding National Electric Power Authority (NEPA).
Eight years after, the development has recorded little improvement as average Nigerians still experience incessant power outages as against the expectation of having regular energy supply. This has succeeded in creating huge market for “generating set” which had become a booming market today.
The Guardian gathered that with the power problem in the country many companies and cottage industries have collapsed under the burden of getting alternative power supply such as generating set powered with diesel and petroleum’s products at the expense of manufacturers.
NERC has been at the forefront of ensuring that meters are available for consumers to be able to utilise the new transformation in the Nigerian power sector.
This development has necessitated the establishment of an indigenous metering company, Momas Electricity Meters Manufacturing Company with the mandate to manufacture electricity meters, develop vending and management applications and perform support services.
The company was drafted to deploy, install and manage pre-payment metering solutions for PHCN for bulk domestic and corporate organisations.
The Guardian’s visit to the company revealed that Nigeria may be set to make history as the indigenous metering company will have the production capacity of 50,000 meters produced monthly, approximately 600,000 annually to supply Nigerian consumers and indeed sub-Saharan Africa.
However, with is antecedent in providing services to all the PHCN distribution companies (Discos) with comprehensive metering systems and services, it is expected that the company through her production capacity should be able to deliver prepaid meters to the end users without any difficulties when the new investors takes over after the privatisation exercise.
Besides, the company has developed a data based management structure that will allow consumers easy access to credit their meters through the use of mobile phones without necessarily need to touch the meter.
The chairman of the company, Kola Balogun, stated that the issue of local content should be a signature tone to virtually all the sectorial practices so as for the country to attain its rightful position in the comity of nations.
He noted that the company has been able to develop a state-of-the-art intelligent meters that will allow two ways communication and as well as open a real on-line transaction between the users and the operators.