As Registrar/Chief Executive of the Financial Institutions Training Centre (FITC), Dr. Oladimeji Alo stamped his authority on the operations of banks and insurance firms. Today, the scholar chairs Berger Paints Nigeria Plc board. In this interview, Alo, an advocate of corporate governance and professionalism, speaks on economic development and the operating business environment. Capital Market Editor Taofik Salako reports.
Talking about corporate governance, some are demanding that regulators should not regulate the tenure of directors. Rather, companies and their board should decide how long the directors or any executive should stay contrary to what we have now in some of our codes?
I think it is an ongoing debate and I believe that the regulatory authorities have every right to ensure that boards are effective and an aspect of the effectiveness is that those who are on the board have a sense that they have tenure. If you have a case where someone has passed a particular age, he may not be effective. Our rule states that once you are 70 you should declare it, it doesn’t mean that you are not going to be re-elected but every year you have to be re-elected and you have to keep declaring it. That is an issue. For the other sectors like banking and finance, they have ample reasons for suggesting that there is a maximum number of years you can spend and, for me, it has to do with the nature of the business. So, the debate is open but as long as the director is effective and as long as the regulation in force allows it, the director can function on the board.
What are the policies working in favour of domestic manufacturers?
Well, one policy that we are quite delighted about is the effort to push made-in-Nigeria goods by asking ministries and parastatals of government and functionaries to patronise made-in-Nigeria goods. For us, that is very good because we are an indigenous company. We are the first paint manufacturing company, established in Nigeria way back 1959 and we believe that such a policy will favour us. The other thing I am happy about as an individual is that for once, we are having some sense of transparency in governance and the emphasis on doing things right. We can’t get it all the time at once, we are making progress and I am delighted at the progress we are making. Today, everybody knows that a day of reckoning would come. You can do whatever you like to do but one day someone would call you to account. Unlike what you have in the immediate past where there was a season of impunity when people do the wrong things and nobody could challenge them. Now everybody is afraid, everybody is conscious that one day, somebody can ask you how you came about the money you are flaunting and how you used your position in office. So, for me, these are good signs. We hope we would make more progress in that direction.
Looking at it from the other side, which policies are adversely affecting businesses?
For me, I was not quite happy at least in 2016 with the foreign exchange policy of the government. A situation where we had several exchange rates and the attempt the government made to force the rates even worsened matters. But you can realise that since the beginning of this year, things had improved and the rate had improved. But a lot has to be done to let the rates close. Let us have a single exchange rate. You may have a second warrant which is just the parallel market rate, but you cannot function with four exchange rates in any country. We need to do more with respect to earning foreign exchange. Our dependence on oil has gone too far, we need to encourage the production of other things locally that we can export to earn foreign exchange. Also, we need to do more in encouraging industry. In this country, we actively discourage industries; we actively discourage manufacturing that is not good enough. We need to encourage industries by making sure that the policy we have favour them in terms of access to the forex market, in terms of regime of tax that we have, in terms of what I considered to be the mutual relationship between government agencies and manufacturing company. You know, many of the agencies of government see private entrepreneurs as if they are enemies, as if they are criminals. They proceed in dealing with them with the assumption that they are criminals. That is wrong, that will not get us anywhere. They must proceed with the assumption that these are partners in progress and they require the government’s support. A greater challenge we have in Nigeria is that those in government and those in government bureaucracy see themselves as policemen to catch the thieves and they see private entrepreneurs as people willing to beat the laws that is not going to work. In other climes, those in government, in bureaucracy of government see themselves as those who provide the enabling environment of business. I need to see that happen in Nigeria.
If you are to advise the government on some quick wins, what would you say, especially of the top three things they should focus on, going forward now?
Number one, for me, is that there is too much waste in Nigeria. Too much waste! We need to reduce the waste that we have and you know about it. If you ask me, we don’t need two houses of legislature, collapse them into one. If you ask me, we don’t need full time legislators, make them part-time legislators, if you ask me, all the trappings of wealth we display we do not have the resources to support them. A legislator is going for a meeting and he goes with four SUVs, you know that is waste! There is waste at every level. That is my point number one.
Point number two is that we need to get serious about the future of the country. We are not investing enough in the future of the country. We seem to be consuming for today. You see how much we spend on recurrent expenditure, just paying salaries andwe don’t even have the money. We need to spend more on capital expenditure and prepare for the future of the country because the future of the country belongs to our children and in terms of population, they have a larger population size in Nigeria. So, we should act today with the future in mind. We are not doing that now. Third point, we need to work towards political stability in the country, too many things heating up the polity. People are raising all manner of issues and generating crisis where it is not necessary and most of the people who are doing that are those people who benefited from the rot of the past and all they want is confusion so that nobody would ask them questions. We need to have stability. Certain questions should have been settled in Nigeria today. Those questions should be settled to enable us focus on our future as a country. If they do those three things, for me the sky will be our limit.
What are those questions that should have been settled?
For instance, federalism should have been settled. I don’t know where you can run a federal system as if you are running a unitary system that should have been settled. For instance, things like giving the state the freedom to operate and allow them to engage in healthy competition that should have been settled. This régime of going to Abuja to share money, regime of local government coming to office twice in a month and all they do is to share money, that has to stop. The regime you collect VAT and you collect about 65 per cent from Lagos State and Lagos gets about 15 per cent of what is collected has to stop. You need to encourage the state that generates this income to have greater share of it, so that other states will then be creative to look at what they can also do where they have competitive advantage. What we have today is a Godfather distribution sharing system. It will not work. What we need is a production system in which every constituent unit of the country believes that they have things to develop and that if they are developed, they will have larger shares of it. For instance, I support derivation principles, I support that those who produce oil should get far more than what they are getting now. And others should go and look for what they can produce. Together we shall all contribute to the net. For me, these are issues that can move this country forward, not what we are doing now.
Let us come to the issue of investment environment. There are fewer Nigerians investing in the capital market now and our savings ratio is one of the lowest in the world. So, what can we do to improve savings and investments?
I think one thing is that you can only share what we have. The level of disposable income of Nigerians had gone down in the last two years on account of the recession and there is need to promote the culture of savings. People should save. Again, we need to do more in our capital market. There has been too much abuse in the capital market, too much inefficiency; there are so many unnecessary costs of doing business at that market which need to be looked into. Of course, they are trying as there has been lot of improvement, but they still need to do more. Now, when you do that, you are going to make it a viable mechanism for people to raise capital to do business. So, for me, these are the things we need to do.
You talked about raising capital. Is Berger Paints considering coming to the market to raise capital?
Not immediately. We raised capital in the market four years ago. Right now, we are not considering that, but probably when we finish our new plant and we are up and running, maybe the owners may consider that option.
What are you doing in the area of backward integration?
We are very committed to backward integration.This is because we believe that, that is the future for us. Unfortunately, we are in a sector where those things don’t even exist in Nigeria. Only few of our raw materials are even found in Nigeria. Of course, it would even be cheaper for us if we are able to source our raw materials in Nigeria. And so, what we are doing is to invest in research and to see how many more things we can get locally. So we believe in backward integration and we are actually pursuing it effectively.
What’s your view about the tax system?
Well, honestly we have no problems with the current tax rates because it is okay. It is not too high but what I have problem with is the tax system in this country is the agencies that administer them. They have to be reformed. Their attitude to business should change and they need to be more efficient. I have no problem with the tax system. Every country has its own regime and Nigeria tax regime is not bad at all. But how do we implement it? How do we operate it? That is the areas we need more focus.
What is your company’s growth strategy for 2017?
What we are trying to do is to expand our distribution channels. You will realise that last year, we started what is called the outsourced business partners. We discontinued with distributionship and open dealership and depot for ourselves. We appointed individuals who are business men and business women in their own right who own the depot, have their own staff and get general discount from us and they act like our channel of distribution. We have about 30 now, and we are still going to have more this year. Also, we are going to spend more on branding our products, rebranding our products to be top of mind with respect to those who use our product. Again, we are going to be much more effective with our sales team. Gone are the days when a sales man can hide under the performance of another sales man. We have reformed that now. We are going to track the performance of our sales team even better and we believe that it will be better. Don’t forget that our new plant is one of our strategies for the coming year. We believe that once we are able to produce the product of the highest qualities that you can get anywhere in the world we would be ready to compete in the market.
Your Annual General Meeting (AGM) was well organised. What is the secret?
Well, I think the point is that we seek to follow strictly the rules and regulations of the authorities – Securities and Exchange Commission and Nigerian Stock Exchange and we do things to the letter that is why we are able to do such a very businesslike AGM.
I am sure you are aware of the other side of shareholders’ activism and what we have been seeing at various AGMs. What would you advise the regulatory authorities and directors to do to curtail abuses and make the AGM achieve its purpose of interface between owners and managers of the business?
Well, for me, as an individual, who is a student of corporate governance, I believe the AGM is a business meeting and shareholders has one major opportunity to confront their representatives on the board to ask questions and demand answers, ask for transparency, ask for accountability and that should be the focus of the AGM. We should not be distracted by gifts, by food, by snacks and all those things. Those things tend to distract people. A business meeting is a business meeting and must focus straight on business. You could notice that everybody who wanted to ask question was given ample opportunity to do so. I even asked that if there were additional questions that were the businesses of the AGM because not all of them have the opportunity to meet us daily, even though we have a website and things are published there. An AGM is a statutory meeting where they have unfettered liberty to ask questions and receive answers and, so, we should not allow anything to distract from the object of that meeting and that was exactly what we did.