• Friday, March 29, 2024
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‘Localisation panacea to growth, wealth retention in Nigeria’  

PAUL ODUNAIYA 2 (1)

The lack of huge incentives and support to local manufacturing industries in Nigeria has led to the sudden closure of many of these industries, but a handful of them are still weathering the storm to grow the economy. PAUL ADEDOYIN ODUNAIYA, managing director/CEO of Wemy Industries Limited, manufacturers and distributors of hygiene products and owners of the Dr. Brown’s and Nightingale range of products within the Fast-Moving Consumer Goods (FMCG) market, is optimistic that long-term benefits exist in local wealth retention through the power of localisation where there is a very strong political will. He speaks with MIKE OCHONMA. Excerpts:

What is your position on the strong competition between the local manufacturers and their foreign counterparts in Nigeria?

We underestimate the power of localisation. Nigeria and Nigerians just want foreign companies to come here. But the problem with it is that for the foreign company, they will employ you, but most of the profit and benefits will be repatriated to their economy.

That means their resources stay here temporarily and move back to where it originated from. This is why the government wants foreign companies to be listed on the Stock Exchange, so that we can get more Nigerian shareholders to be on the board, thereby retaining the wealth in our country.

I travelled to China a year ago and I had to study to see how successful the country is. One of the powers of China even as powerful and large as they are is that, they retain the wealth of their country. Today, for anyone to take money out of China is very difficult because they invest back.

For instance, if there is an American coffee shop in China, you have a Chinese version of that coffee shop there. So, if you want to buy the American one, it is there, and if you prefer the local version, you can get it. So somehow, that money stays there.

From my perspective, that is part of what is making our exchange rate unstable. The CBN always has to intervene because these foreign businesses come here, invest money into the system and take more money out of the system; in the long run. In a situation where a foreign company invests a million dollars in Nigeria and at the end realizes five million dollars, our economy will suffer for it. The earlier our government wakes up, the better.

There has to be localization, and that is the only way wealth can continue to stay here. From Wemy Industries perspective, we want to backward-integrate. We want to develop our business, so much so that we will contribute our own quota to the economy so much so that, more wealth will be created and retained. This way, the cost of what we produce is affordable to the masses and more jobs will be created.

What steps or measures do you want government to take in that regard?

We want to use our platform to educate government, stakeholders that wealth retention, localisation is critical for our development. That’s why I am excited more about the ECO than the African Free Trade Agreement, because the ECO will strengthen our currency and enforce localisation.

Government should be wary of people always praying to let international companies come. It is great, but the danger is that, the knowledge base still stays with them; the wealth still stays with them, but when it is going out, they are taking more of our wealth out and that is how they are stealing wealth out of this continent. What we need is the indigenization of wealth.

I went to Cote d’Ivoire to open a base there only to find out that all the supermarkets and major shops there are all owned by the French, the Lebanese and the Indians. When a distributor saw me, she was so happy. She asked if our company is into manufacturing in Nigeria and I said yes!  She was so happy and said, she was so proud of me because colonisation is still happening in another form but I don’t want to delve into that. According to the woman, before she engages any company, she first sees an agent, and either the agent is a Lebanese or an Indian or a French national.

We are waking up obviously all the time, but we need to wake up a lot more. Well actually for the international firm, it is good for them to come; but it is not necessarily the panacea solution for our country. We need a Nigerian owned business to run these companies and develop the culture and so that wealth can be retained in Africa.

 How big is the diaper market in Nigeria?

I would say the market of diaper business in Nigeria is in the region of an estimated N280 billion in Nigeria. But even though I need to get my facts right, I still think it could be around that region because its potential market base which is in West Africa and the sub-Saharan Africa has the highest birth rate in the world.

Niger republic has the highest birth rate on earth, and Nigeria ranks among the first 10 countries in the world with the highest birth rate. In some parts of the country, we have six to seven children per family. So the diaper business is attractive in this part of the world. The only down side is, not a down side though, but it is an opportunity, that the purchasing power of our people is low.

So it means you need to produce at scale, at volume, so that, the cost and the price is so low so that our people can afford it. That means you need a colossal amount of capital and backward integration to make things affordable for them. But we don’t need to keep importing the diapers into the country. I think certain things we should just ban and I know it’s a bit unfashionable.

For example, the likes of Rwanda made policies that might not be to the liking of the international community, but to the liking of their people. So Nigeria needs to take those kinds of decisions. We already have companies that can make diapers in Nigeria; I think we should just put a ban to imported diapers. Because it is in our nature and culture to want to look for loopholes, I believe it is best to place a ban it in order to encourage the companies develop. May be within three years,  lock the borders for a time we can then re-open them, by which time the local industries would have become more developed.

We need to become a bit firmer and aggressive about our development and I think most African countries probably need to do that. The diaper market is huge and that is why other diaper brands have come to Nigeria. That means in terms of resources, West Africa and sub-South Africa have the highest resources and this is why the opportunity exists.

 What is your impression on competitors and personal overview of the hygiene industry?

We (the Dr. Browns brand) are among the major players in the diaper world, but we still have small share of the market. You know, the recession affected us greatly from 2016 to 2018. They said Nigeria has come out of recession, but there are individual businesses still in recession. For Wemy Industries, 2019 is the first time we are coming out of that recession. So our market share has shrunk to nothing but back to maybe 2 percent or 3 percent.

Molfix holds the largest share of the market now. We are not number one, but we used to be a close as number two to Procter & Gamble some years ago. So we are just getting back to our feet and we have to go back to recalibrate our production processes, to start doing what we know how to do best and see the best possible ways to meet the demands of the market.

 Do you think that the poverty level among families and young couples and lack of awareness or illiteracy has affected the diaper market in Nigeria?  

No. This is because if you think about it, diaper is a necessity just like the mobile phone we use today. You know nobody wants to be caught washing cloth nappies but diaper is convenient and disposable. So that is not in any way affecting the diaper market. I think that what affects the diaper market is disposable income, the better the economy, the better the business but it’s a necessity.

For sanitary pad, whether you like it or not, women will menstruate once a month.  At one point or another, a child will be given birth to, so we have such necessity products like the Nightingale Underpad which is needed during delivery. So these are essentials, these are cores of nature; these are natural things that will always happen, so you always need them.

We also have the adult diapers for the patients and the elderly. Men and women use this, so it’s in constant use. The only thing that affects the diaper market in Nigeria is disposable income and pricing. But as I said, if we do the right thing as a country, restrict imports, grow the economy, retain the wealth, then the disposable income of our people will increase. But as long as you just let the so-called unfettered foreign direct investments, which is good, without thinking through the implication, our wealth will continue to diminish.

Of course, there will be some refreshment of knowledge and things like that, but I think overall, people need to consider the implications of some kind of wealth like foreign direct investments because at the end of the day, what we want is an environment whereby we can operate successfully and wealth of our people is increasing generally. But the environment, we are in, is decreasing the wealth of our people which is hitting company’s margins and growth. So as I said, the way to retain our wealth is to buy local, not send your hard-earned money abroad. Anything that sends your hard earned money out of this country is reducing your wealth because you are investing your money out there.

As the economy gets tougher by the day, there is urgent need for management to begin to recalibrate their operational processes. So where is the place of training and marketing of your product after over 40 years that the company was set up despite strong competitions and the influx of foreign products including other factors?

I think the reason why we have not been larger than where we are is because we faced some crisis in the past which I have not mentioned. There was a situation whereby the savings of the company was with the bank called BCCI, if you are aware of that bank, it collapsed. So when the entire savings of the company collapsed, we were in the wilderness for about five years. There were some other issues related with other Nigerian bank which I don’t want to mention. They also stole our money and so it crippled the company. Maybe out of our 40 years of existence today, we had 14 years of being in the ‘wilderness’ before coming back to normal.

In terms of training and developing our people, we are very much into that. Wemy Industries is a different breed of family business, I didn’t want to join the business because we were raised to be very independent, we don’t depend on anybody, we depend on ourselves. So we try to train within limited resources, our distributors who do distribution for us.

There are more women entrepreneurs in our line of business than any other business because it is about maternity care; pads, diapers and wipes. You don’t need to train them too much and they are actually the best sellers of the product, so we see ourselves really empowering people. So people have worked as sales manager with us for a number of years, some of them have even become distributors for us, while others have left the job and started their own business.

This business is the kind of business that you will have to learn. You can easily set up with a small amount of money; buy the products, sell, make profit and then re-stock. As you said, I agree with training but being a distributor, you’ve got buyers, you don’t need too much, but to run a manufacturing operation and distribute, there’s a lot of technicalities and educational skills involved. You have to go to university I would say. A lot of the skills needed in manufacturing are financial planning, management and many more,

 What are those legacies set up by your father; the founder, which the present top management with you as the chief driver will like to sustain?

The legacy I can see is the relationships established for many years with international suppliers, legal suppliers and friends who are in the industry. Those are legacies because during the crisis, we found some of these foreign suppliers who had no stake in this business providing us credit just like that without asking for any collateral and they kept on just supporting.

Some of them we owed them money and yet, they keep encouraging us, sometimes they will tell us  “okay, just manage when you get money, pay it back”. So these long relationships that span between 20-30 years, have kept us in the business. They trust us enough to know that, no matter what we owe them, we will pay. The relationship that has been established on trust and integrity for many years is now bearing fruit in the time of crisis, you know, so they help us carry the burden a bit. If we didn’t have all these relationships during that period of crisis, I don’t how we would have managed to survive.

Not that everything was rosy, but the good relationships helped. Gestures like “okay take pay me later anyhow, okay just keep on pushing I know you are trying” really helped us. That you can’t buy! There are some things you can’t buy or learn yourself, and you can’t even learn it in business school at this point.

Wemy Industries Limited impact on the community where it is located in terms of Corporate Social Responsibility (CSR) in the past 40 years of its existence?

We have done a lot within the Motherless babies home close to us here, we support before the recession on annual basis, baby care we give them, the local Police in Ketu here, we do some CSR for them and some of them might need hospital care and things like that and we sponsor that. We have also done some things for AfriBaby as a charity that takes care of babies as well and we also employ a lot of local people from Ikorodu community for instance which I will say maybe are from the lowest and poorest part of Lagos state.

A lot of people from Ikorodu come here and work; we provide jobs for them and also have a social bent. This is a Nigerian business, it is not European, we are rigid of course, but we have corporate governance such that, we have to consider the nature and culture of the environment whereby if some people have some needs, we now say okay go; we have some staff here who have to deal with certain problems.

We value those kinds of workers. So there are certain things peculiar to the environment that we have to consider in looking after the people, when you do that for your staff, they become loyal, so we try our best to do that. I think the greatest CSR we can do for somebody is to provide an opportunity for them to feed themselves and live a good life.  That is what we want to be able to do more of.

If we can expand, we’ll employ more people, we can train more people even. For instance, some years ago, I employed somebody from Delta State, his name is Chukwudi which I remember calling him. He had just graduated with a first class and couldn’t get a job. I told him he has to come to Lagos. He said, he does not know anyone in Lagos, but I told him, “if you want a job you must come to Lagos”.

He did the interview in fact, not that he passed or was the best, but I know that the antecedent of getting a first class in school, you need a chance. So we do have the policy of giving the poor person that might not pass a chance because everybody needs a break.

I will take a chance with somebody that needs a chance. Sometimes, you know they didn’t pass, you know they are not the best, but somebody is just looking for a breakthrough and they don’t have an opportunity, so we try to do that. I will call that CSR, that’s to give someone a chance.

When I was in the United Kingdom with a different life, I wanted someone to give me a break. You want someone to look at you and feel, let me just give you a chance, not all of it works, some people will disappoint you, but some will take it and run with it.

It makes me happy when I see that kind of person now blossom and are now doing so well, and I will now say remember when you came, you didn’t do well here, you failed here, you failed there, now you are doing so well. That’s another form of giving back because we want to see other successful people in our environment.

AUL ADEDOYIN ODUNAIYA, managing director/CEO of Wemy Industries Limited
PAUL ADEDOYIN ODUNAIYA, managing director/CEO of Wemy Industries Limited

 What percentage of local content do you put in your product, raw materials?

It depends on your line; we have a number of lines. For our diaper line, the local content is about 12 percent to 15 percent. We still import large quantity of it, but we have plans to manufacture and source some of the raw materials locally. The quantity that we can potentially manufacture locally can be 40 percent which will eventually become 52 percent locally. That is why we are hoping to get capital may be for two to three years. And the reason why that maybe possible is because of the Dangote refinery that would be coming on-board soon.

That refinery should be able to provide certain kinds of raw materials, which is needed in production of our raw materials. So that will allow us to backward integrate, meaning that our local content for diaper will rise from 4 percent to 15 percent.

We have some other lines whereby the local content is a lot higher, so there is something called maternity net-pad whereby you use light volume of cotton and tissue and thread and that content is about 70 percent local content and 30 percent import.

We need to also do that to hedge our business as well. We use a lot of local cotton, in fact we need more cotton suppliers because the suppliers are really struggling to give us the volumes we need.

Some other lines are 40 percent and 50 percent local. They have a mixed bag. But over the next decade, we also want to help the economy so that local content increases. And what helps the local content increment is when you can expand because when your consumption increases, it attracts the foreign guys. This now becomes a major incentive to setup a plant in Nigeria because of the large consumption by local industries.

So you need a volume consumption to make the backward integration viable, as long as policies for backward integration is still there and strong, eventually it is also part of this local retention of wealth that will start to take shape.  Apart from the FDI side, there is also local content side. So the economy needs to grow; it needs to expand for that local content to expand. I think companies that can sell needs a lot of support but I think the problem is that the skill, the man power and the resources is hard. This job is hard, seven days a week you don’t sleep. It is hard. But if you get it right, it’s great, but it is hard.