Companies that survived 60 years along Nigeria’s unstable journey
…What did they do right? …Why firms collapse in Nigeria
October 1, 2020 marks Nigeria’s 60th existence as a country. Expectedly, diverse opinions have been expressed regarding what the country’s past and present leadership have done right and wrong. Pundits have not missed the opportunities to itemise the unearned benefits and how those would have placed Nigeria among the leading countries of the world.
A notable aspect of this country’s structure is its industry the players of which have received mixed fortunes from independence to date. That is why as the nation marks its diamond jubilee, BusinessDay, West Africa’s premium source of business, financial and market intelligence beams its searchlight on the country’s industry map to highlight significant changes that have characterised the nation’s industrial space.
In some way, the nation’s industry map has not been without winners and losers. This is because quite a number of companies which exist today began their operations in the pre-independence era, while some came into existence after independence. Why are we interested in the nation’s industry map? It could be that certain national policies implemented at a particular period supported the growth of some of these companies while others could not survive the implementation of such policies.
Nigerians, who are in their 60’s and 70’s, regale the younger generations of the serene atmospheres of most industrial complexes; the functional economy which operated at near full employment where before you graduated, jobs lined up in wait for would-be graduates.
In 60 years, Nigeria has passed through a civil war, many military coups and June 12 cancellation that caused national instability and fleeing of companies, terror attacks, regional upheavals, etc. Yet, some few corporations have weathered these storms and remained alive in these years.
Some of these olden days’ companies, many of which have since gone under include the UAC, Leventis, Kingsway, UTC, Standard Bank, Barclays Bank, Lever Brothers (Unilever), PZ, John Holts, CFAO, Dunlop, Michelin, Volkswagen, Peugeot Automobile, Cadbury, NTC, May and Baker, RT Briscoe. There were Airlines like Okada, Sosoliso, Flash, Triax, Nigeria Airways, ADC, Afrijet, Albarka, Bellview, Capital, Dasab, Slok, EAS , Harco, Harka Oriental, Hamza Air, Wings Aviation , Spaceworld, Chrome, New Nation, etc, etc.
Many are sad that no one can today show them the once famous Ajaokuta Steel Mills, the Itakpe Iron Ore, Delta Steel Company, Oshogbo, Jos and Katsina Rolling Mills; the famous Northern Nigeria Kano Groundnut Pyramids, Cotton, Hides and Skins; the Western Nigeria Cocoa; the Eastern Nigeria Palm Oil Produce; the Midwestern Nigeria Rubber and Timber produce, Okpella Cement Factory, Ughelli Glass Industries, etc.
In terms of location, Nigeria’s pre-and post-independence industry map has not changed much with states and cities like Lagos, Ibadan, Kaduna, Kano, Abia, Anambra and Rivers accounting for over 80 percent of the nation’s industrial and commercial activities.
On the flip side, quite a number of these companies have collapsed, and are only referenced when analysts and policy makers discuss what the nation did not do right.
First Bank Plc (1894) for instance has celebrated 125 years in Nigeria while Sterling Bank is exactly 60 years. Sterling Bank was established in 1960 and was originally known as NAL Bank. In 1992, it was partly privatised and listed on the Nigeria Stock Exchange. In 2006, it merged with Trust Bank of Africa, NBM Bank, Magnum Trust Bank and Indo-Nigeria Merchant Bank and changed its name to Sterling Bank plc.
In between, we have John Holt, the oldest non-bank company that has survived to this day, having stepped on Nigerian soil in 1897. Union Bank (1917) which nearly went under few years ago, is the third oldest surviving company in Nigeria.
The United Africa Company (UAC) of 1931 is next in longevity while Shell, first oil company to come to Nigeria and is still doing well, came in 1937 as Shell D’Archy. Wema Bank is sixth oldest surviving company in Nigeria, having been established in 1945. It is followed in the longevity ranking United Bank for Africa established in 1949.
Julius Berger comes knocking at number eight having been established in 1950, which was 10 years before Nigeria’s independence. The Germans must have seen tomorrow, having realised that such a large country with vast potentials would need massive construction of global quality. This seems to have hit the bull’s eye.
Oando (1956) is the second oil-based company (petrochemicals and energy sub sector) to take position and remain in position to this day, according to research. The Central Bank of Nigeria (CBN) though a government concern, was established in 1958 when Nigeria achieved self-rule. This action is significant because it marked the first biggest step to Nigeria’s freedom, financial freedom. Aero Contractor came in 1959, a year before Sterling Bank that came in 1960.
First Bank of Nigeria Limited has attributed its success story to innovations and reinvention of products and services aimed at satisfying customers’ needs and aspirations. Adesola Adeduntan, the Bank’s Managing Director, stated this on the sidelines of the second anniversary of FirstGem, a female-focused product in Lagos.
He said: “At FirstBank, our purpose is to put our customers and stakeholders at the heart of our business. For over 124 years of our existence, we have focused on providing excellent financial services to meet the needs of our esteemed customers. We continue to improve on our products and also create new ones that suit their specific financial needs.
“The reason why we have been successful is our ability to invent and reinvent ourselves. You can only be successful like that when you put your customer at the centerpiece of all your actions. That is the secret of our success. We are very clear on the space we want to occupy.”
As of December 2019, the Bank had assets totalling N5.9 trillion. The Bank’s profit before tax for the 12 months ending 31 December 2019 was approximately N70.8billion. FirstBank’s ownership is diversified, with over 1.3 million shareholders. It converted to a public company in 1970 and was listed on The Nigerian Stock Exchange (NSE) in 1971. However, as part of the implementation of the non-operating holding company structure, it was delisted from the NSE and replaced with FBN Holdings Plc. in 2012.
FirstBank has been named “Best Bank Brand in Nigeria” for six years in a row – 2011 to 2016 – by The Banker magazine of the Financial Times Group; it was awarded “Most Innovative Bank in Africa” in the EMEA Finance African Banking Awards 2014; it has clinched the “Best Bank in Nigeria” award by Global Finance Magazine 15 times and the “Best Private Bank in Nigeria” by World Finance Magazine seven times. Some other recent awards received by the Bank are “Best Banking Brand Nigeria, 2019” by Global Brands Magazine; “Best Mobile Banking App – Nigeria, 2019” by Global Business Outlook and “Best Financial Inclusion Program – Nigeria, 2019 by International Investor.
John Holt is a Liverpool-based firm which arrived Nigeria as early as 1897 when the colonialists were establishing their real intentions, trade. John Holt actually bought out his employer to set up a trading company which was then into the sale of palm oil, palm kernels, rubber and cocoa. Being a company based in Liverpool, the shipping centre of Europe from where ships sailed to West Africa, it was easy for it to capture trade in Nigeria.
The company became a major agent for producers in Europe and also shipped raw materials from Nigeria (West Africa) to Europe.
In 1961, the company became a listed company on the NSE in 1971. John Holt is worth N217.9 million as at the end of the third quarter of 2020.
John Holt deals in fast moving goods and other household goods, thus occupying a household name in Nigeria.
The company has continued to adjust and adapt to Nigerian conditions, complying with trade laws to remain above waters.
Union Bank is a large commercial bank, serving individuals, small and medium-sized companies, as well as large corporations and organizations. In July 2009, it was rated the 556th largest bank in the world and the 14th largest bank in Africa. As of Mar 31, 2018, the bank’s asset base was estimated at N1,381 billion (US$4.1billion). The shareholders’ equity at that time was estimated at N286 billion (US$851 million).
The bank competed very well with First Bank for decades until few years back when it was becoming insolvent and had to be rescued. This seemed to give its competitor a big break.
The bank’s history can be traced to 1836 when London bankers and British merchants obtained a royal charter from William IV to conduct banking business in the Caribbean. These group of investors then formed Colonial Bank. Following an act of parliament empowering the bank to open more branches beyond the Caribbean, Colonial bank began operations in Nigeria in 1917. Operations started with banking centers in Lagos, Jos and Port-Harcourt. Further centers were opened in financially important areas, in 1918, the bank opened additional centers at Ebute-Metta, Onitsha, Ibadan, Kano and Zaria and then added another branch at Burutu in 1921. During this time, Colonial’s banking activities also covered other cities in British West Africa including Accra and Freetown. In 1925, Barclays Bank acquired Colonial Bank, changing the bank’s name to Barclays Bank (Dominion, Colonial and Overseas) and later Barclays Bank (DCO). During the period between 1925 and 1950, commercial expansion was hampered by the Great Depression and World War II, though the bank continued to operate steadily opening a few branches but also closing some branches. In the 1950s, the bank increased operations in Nigeria and by the beginning of 1960 it had a total of 41 branches.
In 1969, Barclays Bank DCO was incorporated in Nigeria, as Barclays Bank of Nigeria Limited, to comply with new banking laws enacted in 1968.
In 1971, the shares of the bank stock were listed on the Nigerian Stock Exchange. In the same year, 8.33% of the bank’s shares were offered to Nigerians. The following year, the Federal Government of Nigeria acquired 51.67% ownership of the bank, leaving Barclays Bank Plc. of London with 40% ownership. In 1979, that 40% was sold to Nigerian individuals and businesses to comply with then recently enacted banking and investment laws. The bank changed its name to Union Bank of Nigeria Plc, to reflect its new ownership structure.
In 1993, the Federal Government of Nigeria completely divested its ownership in the bank. Subsequently, Union Bank of Nigeria Plc. acquired the former Universal Trust Bank Plc and Broad Bank Limited. It also absorbed its former subsidiary Union Merchant Bank Limited.
Kingsway was its major brand name. The United African Company of Nigeria or UAC was another household name in Nigeria competing with John Holt. It is now a Nigerian publicly listed company based in Lagos. Its areas of operation include manufacturing, services, logistics and warehousing, agricultural and real estate. UACN’s food operations include UAC Franchising, UAC Restaurants and UAC Dairies. It also has equity stake in UACN Property Development Company, a quoted firm, CAP Plc, makers of Dulux paints and Portland Paints, manufacturers of Sandtex paints.
The company, whose name was changed to United Africa Company Ltd in 1943, retained the name until 1955 when it became The United Africa Company of Nigeria Ltd and started acquiring, over a period of five years, a large part of the business of UAC International. In 1960 C.W.A. Holdings Ltd, England also a subsidiary of Unilever, acquired the interest of UAC International in the company. Further re-organisation concluded in 1973 and resulted in the acquisition of a number of wholly owned fellow subsidiaries of C.W.A. Holdings. In 1968, Niger House, the new head office of UACN was completed. The 12 storey building was built by Taylor Woodrow and has adjacent structures including an 8-storey building at the rear.
Following re-organisation, the company conducted the acquired businesses as operating divisions, which are now in voluntary liquidation. The company took the name UAC of Nigeria Ltd in 1973. In compliance with the Nigerian Enterprises Promotion Act 1972, 40 percent of the company’s share capital was acquired in 1974 by Nigerian citizens and associations and in accordance with the provisions of the Nigerian Enterprises Promotion Act 1977, an additional 20 percent of the UAC’s share capital was publicly offered in 1977, increasing Nigerian equity participation to 60 percent. The name UACN Plc was adopted in 1991.
The company is so big that it can report a huge loss of about N9Bn and still remain afloat.
Shell may have paid over $120Bn to Nigerian government in the past 20 years alone.
This is because in 2018 alone, Shell says it paid over $6.397 billion to the Nigerian government and its agencies in 2018 by Shell exploration and production companies in Nigeria comprising The Shell Petroleum Development Company of Nigeria Limited (SPDC) and Shell Nigeria Exploration and Production Company Limited (SNEPCo). The payment represents a 48 per cent increase over payments by the companies to Nigerian government in 2017 which was $4.322 billion.
SPDC was originally known as Shell D’Arcy and later as Shell-BP which was jointly financed by the Royal Dutch/Shell Group of Companies and the British Petroleum (BP) Group on an equal basis. The Company discovered the first commercial oil field in the country at Oloibiri Bayelsa State, in 1956 and through a sustained exploration effort had since discovered more oil fields that have firmly established Nigeria as one of the world’s major crude oil producers with significant gas potential.
The Shell Petroleum Development Company of Nigeria (SPDC) is the pioneer and leader of the petroleum industry in Nigeria. It has the largest acreage in the country from which it produces some 39 per cent of the nation’s oil.
The company’s operations are concentrated in the Niger Delta and adjoining shallow offshore areas where it operates in an oil mining lease area of around 31,000 square kilometres.
SPDC has more than 6,000 kilometres of pipelines and flow lines, 87 flow stations, 8 gas plants and more than 1,000 producing wells. The company employs more than 4,500 people directly of whom 95 per cent are Nigerians. Some 66 per cent of the Nigerian staff members are from the Niger Delta. Another 20,000 people are employed indirectly through the network of companies that provide supplies and services.
The mission of SPDC is to be the operator of first choice in Nigeria through its commitment to strong economic performance and to every aspect of sustainable development.
SPDC is the operator of a Joint Venture Agreement involving the Nigerian National Petroleum Corporation (NNPC), which holds 55%, Shell 30%, Total Exploration and Production Nigeria Limited (TEPNG) 10% and Nigerian Agip Oil Company limited (NAOC) 5%.
Together with its Joint Venture Partners, SPDC is capable of producing some 1 million barrels of oil per day on an average. Through its community investment programme, SPDC is demonstrating its commitment to improving the quality of life for all those who live and work in the Niger Delta.
Shell has become a conglomerate, striding across the oil industry and across the Niger Delta region. It’s influence can be felt in that fact that it is blamed for every single thing that goes wrong in the oil region, even when it is also behind almost every successful thing that takes place there.
Unilever Nigeria Plc was established by Lord Leverhulme 1924 as Lever Brothers West Africa Limited. It was primarily into the trading of soap. Today, the company is among the world’s leading consumer goods with over 400 brands to its credit. The company has witnessed many mergers and acquisitions which have turned it into a diversified company which is into manufacturing, marketing of food and personal care products.
PZ Cussons was established in 1884 by George Zochonis and George Paterson as a trading company. Today, it is one of the most diverse single market which provides personal care, home care, electricals, food and nutrition. It is listed on the Nigerian Stock Exchange worth N15.9 billion in market capitalisation.
Cadbury Nigeria is listed on the NSE and as at the end of September 2020, it was worth N13.1 billion in terms of market capitalisation. The company is owned by Mondelez International which controls 74.97 equity stake in Cadbury Nigeria. Set up at the outset to source cocoa beans from Nigeria and in return, serve the local consumer market with Cadbury branded products. Its flagship brand is Cadbury Bournvita which was introduced in 1960. It has other iconic products such as Tom Tom and Trebor Buttermint.
May and Baker popularly known as M & B was established as Nigeria’s first pharmaceutical company in 1944, with its headquarters located at 17A Tinubu Street, Lagos. It was listed on the Nigerian Stock Exchange in 1994 and presently worth N5 billion by market capitalisation. It is into pharmaceuticals and beverages. Pharmaceutical products include anti-diabetic, anti-hypertensive, multivitamins, among others.
Why companies die in Nigeria
Most experts have tried to point out what kills companies in Nigeria. The worst hit seem to be companies which seemed to crash after the owner had died and Nigerian government-owned companies where corruption reigned supreme.
Entitlement mentality: The most pointed at is the entitlement mentality that came with independence. The nationalists were known to have won the hearts of the nationals in mobilising them for the struggle by painting rosy pictures of what freedom would be like. The nationals or citizens believed that with Independence would come less work, higher pay, better life, easy money, more roads, power, education and a right to work in government.
When independence came, it thus became difficult to convince the nationals to sacrifice one more time to achieve economic prosperity and financial freedom, different from political freedom. The new heads of corporations thus were under pressure to employ their followers.
Corruption: Next is corruption which seemed to spring from the first point above. The new African heads of the companies and government-owned corporations felt they were the new masters and insisted on enjoying like the Whiteman. They seemed to meet financial obstacles and thus started stealing to make up.
The next generation after each set would steal even more, until soldiers got angry and sacked the government and changed the heads of the corporations but the new heads seemed to loot more, until this day when looting seems to be the only objective of getting into power.
Weak structure: Most companies lacked governance structure which seems to be the black man’s major weakness. The way political parties lack governance structure and internal processes is how companies are operated without strong standard operating procedures. This has led to crash of several companies.
Lack of succession plan: This is another major setback in privately-owned companies. The company would wear the character of the owner but as soon as he dies, the new managers would crash the enterprise. Some have said the owners hardly groomed their children well enough to take over, only for unprepared sons to mismanage what their fathers laboured to establish.
Policy inconsistency: This has been pointed as the strongest challenge facing companies in Nigeria. The political leaders usually seem far away from having economic and business experience. They thus make laws and change them at will, whereas businesses need long term plans. The budget of the country may be passed in the middle of the year with new rules for businesses.
Some financial rules on remittance of profit abroad, taxes, and expatriate quota may come suddenly and affect the companies.
Insecurity: Many say insecurity has limited operational freedom of many companies and has also shot up cost of doing business in most locations in Nigeria. The premises of many companies in Nigeria look like war zone. Some CEOs have been freed with ransom so many times and all these add to costs. Some preferred to relocate from Nigeria or were forced to shut down.
Ease of doing business; Nigeria ranked 186 at a point before task force actions improved it by about 20 steps. The meaning is that capital sees Nigeria as dangerous place to go to. An investor in Washington would thus not be in a hurry to invest in a country with such high survival risk and when they do, it would come with high insurance premium.
It is thus worthy to appreciate the few companies that have survived in Nigeria along with the country in the past 60 years. The Federal Government can celebrate them and probably give them a kind of incentive.