Aderemi Abdul-Bojela wears many hats in the business world. He founded United Technologies Limited, a company that began manufacturing air conditioners and refrigerator equipment in the 1980s.
He is an innovator with a passion for research and development, he leads a consortium of companies that has produced a consumer credit guarantee Scheme (CCGS) for made-in-Nigeria goods – guaranteed to help manufacturers overcome inventory challenges and enhance the purchasing power of the average citizen.
In this interview with ZEBULON AGOMUO, he spoke on the success of the scheme since 2000 when it started, and what the proposed FGN- CCGS is targeting at. Excerpts:
By way of introduction, may we know you better?
My name is Aderemi Abdul-Bojela. I am a Nigerian and the founder of United Technologies Limited, a company that is into the manufacturing of air conditioners, and refrigerator equipment.
I started my industrial experience in 1980, when I built a factory in Ijebu-Ode, Ogun State, my hometown, between 1976 and 1980, after I returned from the United States of America. Then, I signed an agreement with Daikin Industries of Japan, a major air conditioning manufacturer and I can say as of today, it is the number one manufacturer of air conditioners in the world.
In 1978, we signed a technical assistance agreement and we started producing Daikin air conditioners in Nigeria in 1980.
The journey was not smooth-sailing at the beginning because our intention was to distribute Daikin air conditioners in Nigeria, but government policy changed stating that any manufacturer that wants to produce electrical electronics in Nigeria, must have an assembly plant and this drove us into manufacturing proper and that was what led to the signing of an agreement with Daikin of Japan.
We started producing in 1980 and by 1985, we had a commanding stand in the market, basically because of the superiority of Daikin technology, design, and esthetic at that time. By 1986-1987, Nigeria started discussions with the IMF (International Monetary Fund) on the structural adjustment programme.
By the year 2000, we began to experience some fundamental changes in the manufacturing industry. We were no longer competitive because of the import of goods; our prices were way higher compared with imported items and there were issues with personnel and other market-related issues.
We sat down and told ourselves that if we wanted to remain in this industry, we needed to do in-depth research and development to make headway. I am a principled R&D (research and development) person because I always research any project I have planned before proceeding.
We looked at the economy and asked ourselves, why is it that Nigerians cannot buy goods and services on credit as it is done in advanced economies? What we discovered is that many of the Nigerian banks at that time were not designed to provide that service.
Many of them were colonial heritage banks, purely trading banks for goods import and export. To support the local industries became a challenge for the banks.
We identified that consumer credit can actually change that dynamic, that is, consumer credit tied to what is made in Nigeria. You can see that having had a background in manufacturing, we were now providing the solution for manufacturers to survive because manufacturers face a lot of competition with those importing goods, and this is because imported items are cheaper than locally produced ones.
Also, the purchasing power of Nigerians is very low and if you introduce a consumer credit of this type, what it does is that it enhances the average purchasing power of an average citizen and that is how the journey of this Scheme started in the year 2000.
What is consumer credit platform?
It is a platform that is connected to banks, insurance companies, credit bills, cooperatives, and all. If you register with the Scheme, you can actually buy the product when you need it because you are a member of the CCGS (consumer credit guarantee Scheme), you walk into our partner store to pick the appliance you want and because it is a CCGS partner store, you will be given a form to fill in your details; where you work, etc and drop it. Everything is automated.
What are the key effects of the consumer credit guarantee scheme on Nigerian manufacturers?
Principally, it’s to promote and multiply the effects of those things that would help diversify the economy. It would help create jobs; it would enhance and broaden tax collection; it would also stimulate the economy, and affect other auxiliary parts of the economy.
The benefits are not only to the government but also to the individuals; it would increase the quality of life of Nigerians. You don’t have to wait for two years or three years to buy appliances in your home or to buy cars and that is how the economy in an advanced economy is being run.
For example, when President Barack Obama came into his administration, the American economy was in depression, almost in recession. What did he do? He restructured and gave economic stimulus to the banks and automobile industry and even though credit was already available, he gave Americans another ten thousand dollars as an added incentive for them to buy made-in-America cars.
And that’s how General Motors and some other key industries were bailed out and it is the same thing we are trying to do here.
The Nigerian economy is currently on the low and we cannot continue to do the same thing year in, and year out. We need a tactical innovation to help leapfrog the economy from where it is now to where it ought to be and the CCGS is the scheme that will allow that to happen. It addresses virtually all societal issues.
How does this credit scheme improve the quality of life of an average Nigerian?
As earlier said, we moved into the banks to find out the reason why customers were not given mass credit and we discovered that the banks were not designed to do that, they were import/export trading banks.
There were also issues of technology and related issues that had to do with identification, credit checks, and all those instruments that enable banks to follow up on their customers were not available at that time.
We however, devised a means that if the banks are having challenges with identification, they can actually give loans to people who are in groups and are known to their leaders who can stand for each member of the group like the cooperatives, associations, etc.
Look at a cooperative for instance, they have a management team and members under each team, some of them 100, some of them 2000 strong members. We can actually give the money to the cooperative which will in turn disburse it to their members and if any member should default, he/she is known by the executives and will always get them to pay back.
By 2010, we had crafted the Scheme and presented it to the federal government in alliance with First Bank of Nigeria Plc. They saw the merit in it and it went through the economic council and the executive council and got approval.
Unfortunately, the cabinet of Goodluck Jonathan changed and the new minister of finance at that time had a different focus. We came to the conclusion that at a point in time, three things are crucial to any project.
One: Idea. Is the idea very sound, is it good, is it of benefit to the economy of this country? The second one is Implementation: No matter how good your idea is, ifit is not properly implemented, it will fail and three, Time: Time is the most important of all these three items. You might have a brilliant idea, and you might have a brilliant implementation but when the time is not right, it will not take off.
We decided to continue working and perfecting the project and from 2012 to date, technology has changed dramatically. It enhanced what we had done and we incorporated a lot of things into the scheme and made it extremely seamless to implement.
What we now have is a consumer credit guarantee for made-in-Nigeria goods.The reason why we said made-in-Nigeriagoods is that we don’t want to promote imports, we want to promote the consumption of locally-made goods. By doing this, we are creating jobs, and having tax revenue, the economy will be buoyant, the GDP will increase and there will be better security.
The issue of security has to do with unemployment, idle youths that have nothing to engage them, and so on and these are the merits and the multiplier effects of this Scheme.
The Scheme will also allow Nigeria to industrialize because Nigerian manufacturers can now mass produce and scale. This means that the cost of their production will be low and they will be competitive and can put imported items and Nigerian items side by side because those imported items are produced at scale from their native quantities but here, we don’t produce at scale because our quantity power is low so if we produce in large scale, who is going to buy them?
That’s why consumer credit is positioned to address those challenges. With the Scheme, manufacturers can produce and scale we already havethe CCGS machinery to help them sell what they have produced.
What are the benefits to Nigerians?
For emphasis, let me explain again how it works for the benefit of Nigerians. If you need to buy something and you work in a place, you earn a salary, you don’t have to spend your entire salary to purchase items you need.
If you want to buy you can actually say I’m willing to pay ten percent of the price as a down payment and I have ten thousand naira to pay and I will spread the ten thousand for the next 12 months.
It relieves you of the burden of paying 100 percent at once. Which means you can use your remaining resources to do other things. The banks will be responsible for the disbursement of the loan and if you have an existing account it goes through that account.
Will there be an outlet that people can walk into?
The manufacturers would have outlets and they’ll also be online and in the market place so you don’t necessarily have to go into a store.
How do you plan to sensitise Nigerians on the benefits of CCGS?
There would be a lot of promotions, and enlightenment and we are not going to jump into the market without a plan. We have specific products we want to begin with like electrical electronics, furniture, textiles, automobiles, etc. Those are key industries that would bring immediate benefit to the economy.
What will be the role of the Federal Government in this scheme?
The role of the government is to back the banks and to provide risk integration to the lenders, by absorbing their losses. It is a ratio issue. If for instance, you collect premium from one million people and out of that one million, ten default, the premium you collected from the people will help cover the losses and so the government takes over the loss, and pays the banks for those who defaulted after which they collectpremium from the borrower.
The way it works is this: before you join the scheme, you pay three percent. Let’s say you want one hundred thousand naira, you pay as an insurance premium, three percent of one hundred thousand, then the manufacturer who has the problem of inventory movement also parts with some percentage.
It’s like a discount for the manufacturer in this Scheme. The bank also pays a certain percentage as a premium. With the premium from all three parties, we will have a very robust reserve so that if anything happens, we will take from the reserve and pay the bank. In a nutshell, the role of the Federal Government is to cover the lending institution.
Have you had a pilot run of this Scheme and was it successful?
Yes, we did a pilot with First Bank in 2010 and it was successful. We worked with two cooperatives to do the pilot and we recorded a 100 percent success rate. After the huge success with the pilot run, we then took it to the Federal Government to have a look at what we had done in 2010/2011.
We spent two years running the pilot and we said we had to launch this across the country, which is why we took it to the Federal Government to provide the guarantee.
The banks were afraid because they did not have the capacity to deal with one million people at the same time. However, with a promise from the government to give them the backing based on the risk mitigants we had put in place, that their money would not be lost, they were convinced.
So, three groups are paying a premium; the borrower is paying a premium, the manufacturer is paying a premium, the bank is paying a premium and we put this premium together as a buffer. One million people borrowed money, and one thousand people default. The rest that paid the premium would recover the loss of that money. That is the economic logic.
It has been said that governments in developed countries focus on business enablement. Please elaborate with specific examples.
Well, this programme will assist Nigeria to move into manufacturing effectively. For people who want to invest or manufacturers abroad who want to invest in Nigeria, once they have a guarantee through consumer credit that their products will sell, they will be willing to come, and it will change the environment.
The reason why they are running away is that they come to Nigeria and can’t sell but there will be an enhancement of income through this Scheme, and people’s salaries will be enhanced.
The minimum wage is thirty thousand naira and if you enter into this Scheme, your lifestyle will be as if they added a hundred thousand naira to your salary because what you need you can get and you don’t have to pay upfront.
What is the guarantee that your money is safe with the borrower?
We have put machinery in place that you cannot just run away and even when the person passes on, there is always life insurance. Even when one loses one’s job and for six months when one is job hunting, payment is also guaranteed.
When you join the Scheme there is a five percent provision that you will save in this Scheme. For instance, if you want a loan of one hundred thousand, what you are going to pay, let’s say your interest is five percent, you will be paying back a hundred and ten thousand but you are expected to add another five percent to make it hundred and fifteen thousand.
That five percent is your money but it’s part of the risk mitigant that we put in place so that if there is a default, we will look at everything you paid back plus that five percent so that we can exit you.
But if you don’t default that five percent is your own and we can advise you on it. We can say you have this five percent that you have saved for three, four, or five years would you like to go into a mortgage, would you like to buy a car? You already have a downpayment through this Scheme.
So that is part of the instrument of enhancing the quality of life of Nigerians. It would come to your consciousness that when joining this Scheme, infour to five years’ time, I will have access to a mortgage, buya car or buy stocks for the future. So, it’s an all-encompassing value-added Scheme that would have a multiplier effect on the economy.
Has any other African country executed a similar Scheme?
I can’t think of any for now, but I think perhaps South Africa has something but it’s not similar to what we have. What we have is to protect the economy of this country by saying that we must buy made-in-Nigeria products.
We have been singing it, Fela also sang it as a slogan and now it’s a slogan that is translated into a reality and that is what this Scheme is all about. Now, these are incentives for us to buy made in Nigeria.
In a few months’ time we are going to have a new government; how will you advise the government to key into this Scheme?
It is actually for the government to implementand on our part, we will provide the technology and management to run it. The technology is in two parts. Are you familiar with Alibaba in China? It is the e-commerce side and ours is ready to go today if we sign with the government.
For now, we can’t launch it until we finish the tying-in with the government. The second phase of technology is what will drive the entire team, the manufacturers, the credit companies, and the banks; everybody will be on the platform.
For example, you buy something that is made from Thermocool and you bought it from Victoria Island, everyone knows where you got it from, you know the manufacturer’s code number of the electronic and so on and even if it is stolen, you can trace it, and this benefit is because you are on the Scheme.
You mentioned something while we were talking about innovations and technology that is driving development. Can you elaborate on it and what it means for the economy?
Yes, looking at the advanced economies, what drives them is innovation. I made an example with the United States of America. In the 1800s, they had steam engines and made use of trains, which was the mode of transportation but towards the end of 1800s some people started toying with the manufacturing of combustive engines and to a large extent succeeded but how do they produce them profitably?
Most factories at that time were actually workshops, but there was a man called Henry Ford who innovated and mass-produced which changed the American economy. How do you change the economy?
When you mass produce you drive the price of the product down, you employ more people, and then of course when you are employing people you put more money in their pockets.
The question then is how do you sell what you produced? Henry Ford visited some banks and said I have these products in large quantity and I want all Americans to buy them. This is how the credit came in and they formed a union together and said to Americans if you want to buy this car come to us and we will give you credit. That is what changed the American economy.
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You mentioned that imported items are cheaper than made-in-Nigeria products. How do you want Nigerians to patronise more expensive goods?
Once Nigerian manufacturers achieve mass production, their prices will go down and this Scheme is going to monitor the quality of their products even if it’s not 100 percent as good as the imported ones, it will certainly be close and overtime when they make money, they will invest in research and development and improve the quality of their products.
The African Continental Free Trade Area (AfCFTA) will be the next target for our manufacturers and they will begin exporting to Togo, Ivory Coast, Central African Republic, etc.
Nigeria is eminently qualified to be the industrial base for the whole of Africa, we have the market, we have the people, we have the technology, and so on and Nigeria will emerge as a major manufacturing hub for the rest of Africa.
No other African country has the characteristics of this country as Nigeria is virtually in the heart of Africa because you can move in any direction. Nigeria is the shortest distance to the North, South, East, or West of the continent. That is the advantage of the location of Nigeria with over 200 million worth of demand.
