FX Challenges frustrating imports of materials for billion naira local furniture business

Oduwole Kayode is the Managing Director and CEO of Fountain Fields, a local furniture producer. In this interview with PHILLIP ISAKPA, Editor of BusinessDay, DANIEL OBI and FRANK ELEANYA, Kayode listed some of the challenges that local furniture manufacturers in Nigeria face against foreign competition. He also said that deforestation is pushing Nigerian furniture manufacturers to import materials for their production. Excerpts

What made you decide to venture into furniture production?

A friend brought wood work machinery and left it lying desolate for a long time. I had a place at Mafolokun; we later agreed to set up the machine at the place. We were producing terrific products. The doors we produced in 1998 are still looking fresh where they were installed. At a point in 2008, I shut down the factory. In 2011, somebody asked me about the factory and I told him it was locked. He advised that I reopen it and modernize the doors produced. He told me about doors that have international acceptance and the global standards for making doors. He persuaded me to visit Turkey. I took his advice and visited the country during an exhibition. It was there I saw the very good machines. I placed an order for four of them. The machines came in 2012.

I also brought in expert technicians to not only help us set up but also teach our local personnel on how to use the machines. Visiting Turkey made me realize the improvements we had to make on our productions. What they do in Turkey was to make frames, but we introduced innovations to make the door stronger. We introduced honey combs which transformed the strength and longevity of the doors. At the moment, we import most of our raw materials from Turkey and the production of the furniture is done here.

From what you’ve said it appears you went in to door manufacturing accidentally and not deliberately?

I went into it to feel a gap or prove that there is no reason Nigerians cannot do something that is as good as everybody else. Why should I buy a door of poor quality? For me it was the desire to produce high quality doors. When we initially started in 1998, every job we did was by reference. It was a small thing but we were able to satisfy the clientele.

Most consumers believe that the quality of the furniture produced here in Nigeria are substandard compared to those imported from abroad, how have your company been working to change this mindset?

When you compare the doors made in China and Turkey, you will realize that the doors we make here are better with the same materials which are though imported. Some Nigerians produce same doors, but instead of honey comb, they put newspapers because they have no access to honey comb. And when you knock on the doors it sounds hollow. Our doors have pressure resistance and it can carry loads. These are things people don’t know. But we tell our customers upfront and they are becoming aware.

We also produce security doors. Our security doors are different from the imported ones that shine. Inside our door, there is 2.5 mm steel plate which is completely covered and what people are looking at is a door clad with wood. Merely looking at it from the outside, they will have the impression it is just wood. There is also security lock in three places.

You mentioned that you import the raw materials from Turkey. In these difficult times, how are you coping and what efforts are you making to source materials locally?

Things have changed. When we were producing initially, we were using timber exclusively but now timber is no longer there in commercial quantity. Heavy deforestation has taken place. About 15 years ago, Nigerians were exporting raw wood. There were a lot of people that went in to timber business. They will go to lumber yards and buy lots of wood for export. Our people were not treating the wood and before it gets abroad, it has started growing moulds. This made them lose money as the Europeans rejected the woods. Remember that it takes a lot of time for Timber to grow and mature. Sometimes the woods are not matured for usage and when they are treated they start folding.

We should be producing the skin for door cover locally because it comes from waste wood. The woods that you will throw away ordinarily are made in to chippings. We treat them and add resin and compress them and mould. But people just throw away all the saw dust.

I have been looking in to the possibility of setting up a chipboard making factory because it is a long term business as we will continue to need doors. The market for boards (the materials used in making cabinet) is so much here. In the entire continent of Africa there is no board making industry.

How are you impacted by the forex differentials?

The truth is that we are in deep trouble. My partners told me that they are expecting me in Istanbul for a conference and I told them I cannot come to Istanbul because I can’t replenish my stock. The materials we bought three years ago at N160 to a dollar. Now we are talking of N400 to a dollar. I can’t just replenish my stock and that is where the trouble is. Right now we have a multimillion project we are doing and we are just in phase one but the material in stock could only cover phase one and we are going to phase three. Over 2,500 doors and I have little idea on how to execute the contract because the money is not there to import.

Meanwhile I have been assuaging the client and what the client told us is that they have collected money from the house owners and they cannot change the prices overnight. I cannot fund the project now because we cannot sell below cost. We told ourselves to perform on phase one at all cost. But on the project, the prospect isn’t encouraging to execute 100 percent.

What windows are there for local sourcing of the raw materials?

It is closed because even if we want to buy from the market, there is MDF and we use HDF (High Density Fibre), the market will be exhausted because they are also not importing. So there is a dilemma. There is no substitute. We need to conserve our wood and this is where it is essential. What we should be looking forward to do is producing these cheap boards to be able to press the skins.

The entire West African sub region is a huge market. But what pains me is our inability to see beyond our noses. Everything we use here we import including toothpick. Banks have funds seating in their saves and they won’t give it. Now there is a difficulty to import skins for doors at the current exchange rate and nobody will buy the products at that high price.

What are the specific challenges you face with imported furniture?

For instance, we were working in an estate where Chinese company was working. They were working as finishing contractors. But we have the contract for the doors. We delivered materials to the site and have started installing our doors but the Chinese said we should not bother installing our doors that they will do that. But the trick was they wanted to undercut us and discredit our products and make the client use theirs. So they installed their own door and took picture of a material and sent to the client complaining of the quality of our material; insisting that the client should reconsider and use their material. Fortunately, we have already installed some 64 units of our doors. And people were excited about the doors we installed. Then the client was forced to compare our doors with the Chinese.

I always asked clients to visit our factory to see for themselves. We produce two doors every 7 minutes. An average machine in Nigeria presses 15 doors in 24 hours.  In a day we are capable of producing 96 internal doors. This means that if you give us a large volume of work, we have the capacity.

With the dumping, people are beginning to be aware that we produce better quality. Chinese doors are hollow but ours have honey comb that make them sustain pressure. We are not afraid of their competition because we produce quality doors and many architects and builders are beginning to be aware of this.

You have expressed fears about deforestation which necessitates the importation of materials, how are China and Turkey doing it that they are not affected by this deforestation?

They continue to replenish their forest. We cut and don’t replant. It had to take the UN to start enforcing us to replant where we cut. When a tree is cut, it takes years for whatever you replanted to grow. But our people just go in to the forest, fell the tree and go.

What is the value of this door making business? How big is the industry?

It is a multibillion Naira industry. If you go to Ijebu Ode, people make doors and contractors go there to order for doors. Some are at horrible quality but people buy them. There are wood markets all over because you can’t build a house without furniture and doors. Sometimes we don’t look ahead and plan. We just consume believing that nature will replenish. Things don’t work like that.

What can be done to improve on the quality of door making in the industry?

There are a number of quality door making factories around. But the edge we have is that I think like an architect in our production and this will carry us through. The facade may look the same but people will begin to find out there is a difference. Our doors prices vary because of skins and other materials added to it. If you put a nail in MDF, over a time it does not have the capacity to retain it. We use MFC (Melemi First Chip Board) for our stuff. It is water resistant and it sustains nails when screwed.

This is a growing industry, how would you advice the government to further grow the industry?

Simply, put a halt to indiscriminate importation of doors. There is no reason Nigerians should be bringing doors from abroad.

Can local manufacturers satisfy the market?

Where there is shortage, more manufacturers including foreigners will come here to produce and create the necessary employment. It checks quality and conserve our forex. Even if people like cheap things over a time they will realize that it is better to put your money on good quality as it lasts longer.

How cheap are your doors?

They are competitive and cheap. The quality is high and it is durable. We also produce kitchen cabinets.