Charles Kyalo is the Director of Operations, West Africa Area, British American Tobacco. In this interview with Francis Kadiri, he expresses doubts that a common currency for West African countries will end the trade barrier prevalent in the sub-region. Kyalo also foresees a bright market future for the industrial sector in Nigeria, provided the hydra-headed problem of frequent outage is well tackled, among others. Excepts:
As an international manufacturing and trading organisation, do you share the view that the proposed common currency among ECOWAS member-countries will remove trade barrier and consequently foster trade within the sub-region?
Currency is just one of the measures that can remove such barriers. Interestingly, within the West African bloc, some countries already have a common currency. So it is not a complete solution because it comes with other expectations, of how to manage devaluation or inflation in those countries. There are many other structures, which need to be in place to make it easier to move goods and services across the region.
Unless countries within the West African bloc, which already have a common currency, are willing to reverse it, or unless the countries, which do not have are willing to adopt the existing common currency, the challenge will still be there.
You cannot talk about Africa without mentioning Nigeria. Nigeria is impossible to ignore. The projections, based on current trends, are that by 2050, Nigeria will be bigger than the United States, in terms of population size
How has tobacco manufacturing business fared in the face of the country’s huge infrastructure gap, compounded by insecurity and the problem of sourcing power, among others?
If you choose to operate in Nigeria, like we did, there are certain challenges you should prepare for. One of them, and of course the biggest, is power supply, particularly electricity supply to power your plant. In comparison to British American Tobacco companies in other countries, the power cost in Nigeria is massive. We spend five times more to power the plants in Nigeria than in other countries in which we operate; so it is very expensive. It is one of our biggest cost elements in manufacturing and makes it difficult to compete with other factories because we are already starting at a very high cost base. The cost of providing security, especially escorts for export products going to the various borders or to the port is also high. It’s made worse by the poor roads leading to numerous truck breakdowns that make the journeys longer than necessary.
The Buhari administration introduced the policy of ‘ease of doing business.’ Considering your manufacturing experiences, would you say the initiative is effective?
I applaud the government’s endeavours to make it easier for investors to operate in this country. However, the execution of the initiatives needs to be fast-tracked. For example, it is commendable that government is fixing Apapa road in Lagos, but if it takes a significant amount of time to implement, many businesses will have challenges keeping their businesses running by the time it is completed. Government can provide alternative means, while the roads to the ports are being fixed. It is very tough, but I am optimistic that things will change.
How has BATN been able to tap into the immense investment opportunities Nigeria offers, considering the size of its economy and Gross Domestic Product in West Africa?
You cannot talk about Africa without mentioning Nigeria. Nigeria is impossible to ignore. The projections, based on current trends, are that by 2050, Nigeria will be bigger than the United States, in terms of population size. So, the potential of doing business in Nigeria only needs to be improved upon, as the resources needed for trade are available. The key challenge is to fix the issues around infrastructure, and significantly improve the ease of doing business. Of course, BATN has chosen, despite all the challenges, to remain in Nigeria and use it as our base for West Africa. We supply all the countries in West Africa from our plant in Ibadan. We are going to continue with that and reposition ourselves while the economy is picking up, as we want to be part of the solution.
Do you think that the nation has adequately taken advantage of its manufacturing sector in view of its massive population?
There are always opportunities for Nigeria to do much more in terms of manufacturing, because of the abundance of skilled labour, raw material availability and access to a large market in West Africa. The big challenge that needs to be addressed is power supply because you will never be able to compete with anyone globally if you do not have power, and consumers out there have an option to buy a made-in-Nigeria product or foreign products. So, if the other manufacturers already have the head-start on lower cost base, you will not be able to compete because your product will always be more expensive than those of the other suppliers. Investors need to be supported to set up plants and train the people, so that they can acquire the skills and improve their efficiencies. Incentives need to be availed for manufacturers to export out of Nigeria profitably. Once this is achieved, you can then talk about competing with the rest of the continent or the world.
Many companies in Nigeria today are adopting the backward integration model as a way of cutting down the huge cost of raw materials. How important is the strategy of your operations in Nigeria?
Indeed, we are vertically integrated. BATN is involved across the entire value-chain, from tobacco leaf growing, cigarette manufacture, sales and distribution. We have many stakeholders within the tobacco value-chain.
In Nigeria, we have contracted tobacco leaf farmers, who partner with us in leaf growing. We have our factory in Zaria, where we process the tobacco leaves before manufacturing them into the final product in our Ibadan factory. The farmers are our key partners. Additionally, we partner with logistics providers, warehousing, distributors, wholesalers and many other companies, among others. No doubt, BATN’s impact is felt on very many facets of the
economy.
Not too long ago, Nigeria exited recession, which lasted for more than a year. How did BATN overcome the challenges?
The recession affected everybody in Nigeria. There is no company that did not feel the effect. It was one of the most painful experiences for Nigerians; we all went through that. For business, we had to tighten our belts. Input costs went up by over 60 per cent, driven by Forex, and we needed to find ways to keep the business afloat. Thankfully, government reacted and took the right measures to get the country out of the recession. The economy is back on the growth trajectory. We just hope that those plans will continue to work seamlessly to engineer growth.
