The Director of Operations, British American Tobacco, West Africa Area, Mr Charles Kyalo, in this interview with ABIOLA ODUTOLA, calls for the improvement of the ease of doing business in Nigeria. He also talks on other challenges manufacturers face in the country. Excerpts:
How would you assess the ease of doing business initiative of the Federal Government for indigenous industries?
Government’s endeavour to ease the cost of doing business is commendable. Aside from the initiative, it should fast-track the execution of the project. It is commendable that government wants to fix the Apapa road, but if it takes a significant amount of time to implement it, 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 in 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 on, 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.
Companies, including BAT, made forecasts at the beginning of 2017. Were you able to meet your projections for the year?
Specifically, manufacturing has been very challenging in Nigeria, particularly since 2016. This has been mainly due to factors which are external to the business; key among them is access to Forex to procure inputs.
However, the situation is getting better and we have seen some improvement in Forex stability in the last couple of months. As a key fast-moving consumer goods manufacturer, we have witnessed big challenges at the ports. Apapa and Tincan are the main port terminals in Lagos. We’ve had port congestion since May 2017.
How has the congestion affected your company?
The situation has affected both imports and exports, which take considerable time to exit the ports. In the past, we could conduct our business in four days but now it takes 20 to 30 days. This is coupled with the increase in the cost of truck rentals and diesel. Of course, the cost of generating electricity is still extremely high by global standards. Therefore, I would say that the manufacturing environment is very tough. It’s a very challenging environment.
On power and security, how challenging is it, especially comparing your operations here with other climes’?
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 BAT 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 is made worse by the poor roads leading to numerous truck breakdowns that make the journeys longer than necessary.
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 from Nigeria profitably. Once this is achieved, you can then talk about competing with the rest of the continent or the world.
The nation recently got out of recession, a downturn that lasted for more than a year and constricted many businesses. How did the company weather the storm?
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.
What are some of the critical lessons that you have learned in your work across the region and how can regional integration among ECOWAS member countries help to boost trade?
West Africa has a lot of potential, compared to other parts of Africa. There are still big opportunities for the countries to trade with each other. There is little volume of trade between the West African countries, which can be expanded. But most importantly, non-tariff barriers between the countries can be addressed to enable seamless movement of goods and people. Governments have done a lot but there are still areas where protectionism still exists. Any existing fears for competition within the trade blocs need to be addressed, to facilitate
business.
Do you see the proposed common currency among ECOWAS countries helping to foster trade and commerce in the sub-region?
Currency is just one of the measures that can remove such barriers. Interestingly, within the West African bloc, there are some countries that already have a common currency. 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.
