Odu’a Investment Company is doubling revenue and paying dividends to shareholders after years of low growth characterised by the company not being run as a business, but more as a government parastatal and the administrative limitations that brings.
The company, which would this year have existed for 45-years, is owned by the southwest states of Oyo, Ogun, Osun, Ondo, Ekiti, and Lagos, which joined in 2018. It was for many years seen as an appendage of state governments, reflecting in its subpar management over the years until recently when it appeared some efforts at establishing corporate governance were being made.
The company not only paid for its previous maladministration with loss of potential revenue and profits, but also lost significant stakes it had in some of Nigeria’s biggest companies dating back several decades. For instance, from having more than a 70 percent stake in Wema Bank, Odu’a now has 4 percent; and from 100 percent ownership of Great Nigeria Insurance (GNI), it now has only 9 percent ownership. It also owned 60 percent of Nigerian Wire and Cable; 100 percent ownership of Cocoa Industries limited, and significant shareholding in Guinness, Nigerian Textile Mill, and then West African Portland Cement (WAPCO), which is LaFarge Africa today. Much of the previous shareholdings have now been substantially watered down just like Wema and GNI.
“Regrettably, we cannot really point to what we exchanged (for the shares), because it was a legacy of how we have undermined those businesses notably through underperforming loans we had recommended,” revealed Adewale Raji, the company’s GMD/CEO in an exclusive interview with BusinessDay.
According to him, today, there are limited entities where Odu’a Group is a significant shareholder, whereas, this was an integral part of the company’s foundation and the vision of those who established it from its Western Nigeria Development Company (WNDC) origins.
“Why have we not grown? Deficiency of governance, one in which we made the mistake of treating the organization like another government parastatal or entity, a rent-seeking notion,” he said. “Most of these investments have withered away and even where we have holdings, it is minority holdings. That is what we are trying to recreate under a new strategy. Today, we know that when it comes to business, it has to be private sector tenets, best practices and governance that make them grow”.
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Even when the company could not grow revenue significantly in Raji’s first tenure on account of a board that had diverging objectives, he explains that on account of efficiency of operation, watching costs, blocking leakages and loopholes in the system, it became possible to record holding company profitability of N849million by the end of 2018. A 124 percent increase from N378million inherited for the end of 2013. At the group level, Profit Before Tax (PBT) at end of 2013 was N495million, which was increased to N1.061billion at the end of 2018, a 114 percent growth.
By achieving this level of profitability, the company was able to pay dividend to its shareholders in 2015, and that dividend was being paid for the first time in 7 years. According to Raji, the payment of dividend became an annual ritual and in the first five years, paid a total of N1.2billion as dividend compared to the previous seven years where nothing was paid. This he says made the shareholders have more interest in the company and making it drive the mandate, which is; Odu’a group should be the engine room for the economic development of the Southwest. In so doing, it is essentially to lift the economy of the southwest and those are the strategies the company is now trying to pursue.
The company is looking to the future with optimism, in particular, with a desire to key into areas of interest to the youth population, by exploring digital and Fintech solutions.
“Don’t be surprised if we start taking positions at incubation centres,” he said, hesitating to give absolute details of the digital investments the company will be unveiling. Areas of technology and innovation that interest the young generation are such where companies are able to come up with very good and decent returns, according to Raji. “Those areas have become of interest to us and we are going to be pursuing them accordingly,” he said.
The company will also be deepening its investments in old areas such as healthcare and agriculture, which according to the CEO have contributed to its ability to withstand economic shocks; either from the 2016 recession or the COVID-19 induced one of 2020.
“Healthcare does not know recession. Healthcare also has a very rare privilege, from a pricing point of view. Nobody would start bargaining with you in a chemist shop on the price to sell paracetamol,” he said. As people are more concerned about being healthy, just like food, they need to get medications in attending to human wellbeing and will remain profitable.
Even with all the disruptions occasioned by COVID-19 and the widespread demobilisations, “we never stopped eating or attending to our health needs,” he reiterated. This is why the company is deepening its presence in agriculture, healthcare and pharmaceuticals.
Also, as it was observed during the COVID era, how logistics, distribution and e-commerce became frontal, this has become an area of interest to the company, and will be different from the existing portfolios like real estate and hospitality.
Odu’a group has also created a new company called South West Agric Company limited (SWAGCO), an agric investment company with a core responsibility to access and mobilize funds to invest across the value chain; food crops, cash crops, livestock, as well as processing. The company is structured to operate alongside partners and not operate any farm on its own so as to avoid “getting stuck with management”.
The company has kicked off on an expanse of land in Imeko, Ogun state, which was previously used for Tomato cultivation but now repurposed for cassava cultivation that is to be processed into industrial starch and high-quality cassava flour. At the end of November 2020, the farm had cleared about 560 hectares and planted 218 hectares of cassava with a plan to reach 1200 hectares.
The project’s design is to cultivate 1200 hectares of cassava, on the basis of 100 hectares per month. In a cycle of 11 or 12 months, as they are maturing they feed the processing facility, which is a modular facility of 50 tons tuber consumption per day for industrial starch processing, 50 tons also for high-quality cassava flour. As the output for one month is being processed, the second month is already maturing. At the same time, the harvested portion is being replanted, which means there will be 300 days production on the site. This, he says is part of the company’s strategy to impact the area.
The Odu’a group has a combined 40,000 hectares of land across five states of the South West and if successfully transformed to thriving businesses, it will be possible to get more land from the owner states.
Energy is another major area being considered within the context of upstream oil and gas, as well as renewable energy. While the company currently has some holding in the Niger Delta Exploration and Production Company, its ambition is to get to a level where it becomes a co-promoter of an exploration and production company.
The interest in renewal energy is driven by the large rural areas under the geographical coverage of Odu’a and it has been identified that one of the reasons for rural-urban migration is that people consider life to be more abundant in urban centres, starting from electricity. If electricity can be made available, perhaps through renewable as being planned, it is expected that the rural economies will be significantly boosted.
Achieving its recent strides and being confident to have as much bold objectives as it now has is because of corporate governance reforms that have finally been implemented in the company. Also, in May 2020, a new board was inaugurated, which from all indications has keyed into the visions and aspirations of the company’s management. It comprises; Dr. Olusegun Aina – Chairman; Mr. Olusegun Olujobi – Ekiti State; Dr. Tola Kasali – Lagos State; Otunba Bimbo Ashiru – Ogun State; Chief Segun Ojo – Ondo; Seeni Adio – Oyo State.
More importantly, a major feature of recent reforms has seen Odu’a now having an executive board of three Group Executive Directors working with six Non Executive Directors and two Independent Non-Executive-Directors. This had made the board have greater capacity and capability than it used to be; a result of the corporate governance reform document passed by the board and ratified by shareholders.
