Mr Taiwo Adeniyi, Group Managing Director/CEO of Vitafoam Nigeria PLC, in this interview, highlights the challenges of doing business in the country, several innovations the company introduced to meet customers’ expectations, and should be the target of the incoming government. Excerpt:
As Nigeria prepares for the presidential election, which areas would you like the incoming administration to address in order to enhance manufacturers’ output?
Rightly as you have said, the elections will be done very soon. We have started engaging the government, and hopefully, it will make use of all of our engagements. Top of the list of what we are asking the government to attend to is the dichotomy among the various foreign exchange (forex) windows that we have.
We expect it to bring in economists to look at the impact of the various decisions as regards forex on the economy, rather than an individual just putting whatever it is.
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Second, is insecurity: Everybody loves to carry out their businesses in a safe environment. Many of us have factories all over the nation. We produce in some places and we want to move these to another place, and that has become extremely difficult now.
Drivers now tell you that you cannot go to a certain place and those that are ready to go are charging above the roof, and this is making all of the cost elements go up.
Third on the list is energy. In fact, if we do a combination of these three elements, you’d find that if you cast your mind back to what helped the nation to continue to be a nation, these three elements formed the base. The questions we keep asking ourselves as manufacturers are, what has been the benefit of the privatisation of the energy sector?
We started the last financial year with a diesel price of N360. In fact, it went up to that. It used to be above N200, even N192 at a time. All of a sudden, it went from N192 to N250, and we thought that was it. From N250 it went to N360, now it is N800-N1000. Now you can imagine that you are already in the financial year and that all of these costs are skyrocketing.
Infrastructure is the language of the day. We all talk about infrastructure, that if the government can and there are ways. If you involve the private sector, if the private sector can only signal trust in the administration of the PPP (public-private partnership), I’m sure there will be a lot more participation, because at the end of the day, it is good for all.
But what you find is that we don’t even trust the government. Today you will go and you will be told that if you fix Oba Akran Road, you are going to take a tax holiday.
The day you’ll apply for that paper of tax holiday, woe betides you if people that made law at the time you were signing that contract document are out of office. You will start all over. It is then someone will tell you that it was corruption when they were signing the document and that is why you got away with it, saying you must have given a bribe.
How do you want the government to tackle the forex issue for the manufacturing sector?
The Bank of Industry (BOI) gives loans to manufacturers. They do it quite excellently. When BOI started giving out loans, I remember very well, when for instance, Vitafoam got a loan from BOI, one of the things BOI used to do then was make a list of your forex requirements to CBN. Then CBN would grant a window to genuine manufacturers. This is because they know that when you are able to do that, when you are able to source your materials cheaply to bring to this environment, you create job opportunities and expand the horizon.
So what we are asking the government to do, I may not be absolutely correct but the forex element of the House of Assembly has never failed one day getting allowances to them. But I can imagine that there is a special window that ensures that. The same thing with the judges, I may not be too correct, but I can imagine that nobody is shouting from there as we are shouting in the industry.
So create a window where there is access to forex. But between us, who measures that window? Who is it that monitors that if I, as an agric investor, takes out 20 tons of garlic and I sell and I get $20. Do I bring $20 back to this environment? Even when I bring the $20 back, how do I sell the $20? That $20 is what is supposed to be available at CBN to redistribute into the economy, but it is not happening.
How is it that Vitafoam is making a profit and your subsidiaries are thriving despite the challenges? What are you doing differently in your operating environment?
Well, if there is anything Vitafoam is doing differently; you may see two products looking so much alike in the market, but you ask yourself why they don’t cost the same price.
There are intrinsic values we have in our products that stand us out. We say to ourselves that our definition for quality is fit for purpose. For as long as our products fit the purpose for which you are going to the market to spend your money, you will continue to buy it.
We have created a niche market for ourselves to say, look when you buy our products, you will not regret spending your money. This is what is standing us out in the marketplace. We produce well, and we price well.
In the 2022 financial year, the group declared a 31% topline increase, a 2% decline in profit. How will you describe the group’s performance despite the challenging environment?
The thing you must understand as I explained earlier, I think we started the year on N192 per litre of diesel. Electricity tariff went up in the course of the year, the same with diesel price. Also, you’ll find maintenance of machines.
Those machines are not made here, so the same dollar you are struggling to get to buy your raw materials is the same dollar you are applying for to buy spare parts for those machines; to fix the machines and get them running. However, if you look at the exchange loss alone in that financial year, we lost over a billion naira to exchange difference that should directly have gone to profit.
If we really have a serious government, it should be of concern to them. If Vitafoam, as small as we are, lost over a billion naira that should have gone to shareholders, they should be concerned. A percentage of it, 31% of a billion should have gone to the government too. That is over N300 million. So that is what is responsible for what we have reported.
The revenue generation outside Nigeria, are you not tapping into this African trade?
We have signed that agreement without looking at the knots that bring it together. We already signed because we didn’t want other countries to go ahead. Truth be told, as I speak with you we are still trying to sort out the tariff elements. How do you treat the origin of goods from African countries? These are details that are still being worked out.
A renowned economist recently said manufacturers pay 74 different taxes in Nigeria. This boils down to multiple taxation. What is your reaction to this?
Thank God an expert has spoken. What we have done as organised private sector is, we decided to put our problems in our pockets. We have earlier listed the germane headwinds. If I had continued, I would have gotten to multiple taxation. The question we have been asking is what is the Joint Tax Board doing?
I’m sure we have people who go to work every day that are supposed to be looking at these tax heads and asking how we can harmonize the various tax heads, but nobody is doing it. We have shouted and complained but nothing still. We are like toothless bulldogs just barking but nothing comes out of it. The man is correct, all manners of tax. We don’t park outside the premises anymore because we were asked to pay a separate tax for that.
Which areas of the company’s operations would you prefer for more improvement?
We will keep improving. We are not there yet because we are also careful about the environment we operate in. You don’t want to produce a product that nobody will buy.
What are you doing in terms of sourcing your materials locally?
The materials we use are byproducts of petrochemicals. Unless and until our petrochemical industry operates in this country, there is no alternative.
There is no individual that will go and invest in setting up a petrochemical company. This is why we still import a lot of those materials. The natural rubber that we use cannot be sufficient for production, and the price will be way over the roof.