The business community is Nigeria’s future, it’s very important – outgoing EU ambassador

Michael Arrion is on his way out of Nigeria as European Union (EU) ambassador to Nigeria and leader of delegation to ECOWAS. Before departing the shores of Nigeria after four years, he visited Port Harcourt to wave goodbye to the business community under the auspices of the Rivers Entrepreneurs and Investors Forum (REIF) where he granted an exclusive interview to IGNATIUS CHUKWU, dropping several bombshells.

You have just been decorated with a chieftaincy title in the Niger Delta, as you depart to Europe, to demonstrate the special love the people of this region had for you. What is your response to such honour?

I am full of appreciation and I said so to them. I must state clearly that nformal contacts are very important; and engaging with traditional rulers in Nigeria is key and we have been working closely. They have played significant roles in Nigeria’s development. The business community is very important. They represent the future of Nigeria.

We in the EU see Nigeria as a partner, not as a market. We can through partnership improve the economy and create jobs for the youths; we (EU) are ready to invest, but competitiveness is the key. The EU is looking at the world; we can invest anywhere in the world including Nigeria. So, you have to demonstrate that you are better than other nations. You have to create the conducive environment to convince European investors. Let’s use car manufacture as an example; there are 47 nations bringing the parts that make a car; Boeing is made from 42 countries; why not Nigeria become the 43rd? Tiles are made in Liberia; why not in Nigeria? This is how to reason to compete.

Nigeria, please create enabling environment for industries; you have comparative advantage in cotton, palm oil, leather, garments, etc. As for those who put together this evening, REIF, I say, you are welcome to Brussels.

You are leaving without Nigeria signing the (Economic Partnership Agreement (EPA) despite your painstaking efforts in that direction. Do you consider this a failure as you leave?

EPA is an agreement between the EU and West African states (ECOWAS), an agreement between two common markets. It is actually a reciprocal and asymmetric agreement between two common markets. It is asymmetric because EU countries have more duties than ECOWAS. Our duty is to give you more duty-free access to EU. So when you sign, you can export whatever you want to export except arms to Europe in any quantity. It is asymmetric because your duty is to open your market up to 75 per cent in finished products and protect 25 per cent for 20 years. We give you immediate duty-free and quota-free access to EU of everything and for everything, but only concede 75 per cent in 20 years, by traunches of five years. What is excluded in the 25 per cent are all the finished products that you have ability to produce like food, textile, furniture, cement, pharmaceuticals, and lots of lots of consumer products. What is covered by EPA is semi-finished products, machineries, industrial equipment where you will have to, like in agreement with ECOWAS tariff, reduce duty on machinery to boost industrialisation. 

Another important aspect of the EPA is the simplification of the “Rules of Origin’ where just one transformation will give the West African status of origin to any product produced in West Africa. In other trade agreements, it must be at least two. What this means is that if you make just one addition to an existing product you are deemed to be the original manufacturer and then export to EU duty-free. This will turn Nigeria to a hub for production because many manufacturers outside Africa would rush to West Africa to set up factories to benefit from this window and export to Europe.

So, we just see advantages in this EPA. The World Bank has produced an impact assessment and concluded that this EPA will actually make absolutely no harm to the industry of Nigeria. So, far, 13 counties of ECOWAS have signed and we believe that the Gambia in the new regime would soon sign. You may have seen that Mauritania has signed an association agreement with ECOWAS and will adopt the CET. So, Nigeria is the only country not signing.

Why is Nigeria not signing?

I don’t know, ask them. I cannot understand why Nigeria is not signing. I think there are people who do not want transparency in trade. I do not understand why Nigeria does not want to have a trade agreement with her first supplier and her first client, the EU. The trade balance is even positive for Nigeria.

As you leave, what do you consider your biggest achievement?

It is what the EU did in the 2015 elections. We accomplished what we consider a credible election and credible results. We believe that the result was the true expression of Nigerians, relatively transparent, and well done by Independent National Electoral Commission (INEC). We supported INEC a lot and passed a lot of messages of peaceful elections and made sure that local observers were everywhere in the polling stations. We reinforced the capacities of INEC. It was not only the EU but we led the process with the democratic institute as well as the republican institute of the US. We together helped Nigeria to have a smooth democratic transition. I would say this is my modest achievement in four years.

Does the EU actually foresee Nigeria breaking up as forecast by some other world powers?

No, no, no. I really believe in the unity of Nigeria despite the fact that you cannot discuss with a Nigerian without him expressing difference to other Nigerians. I think Nigerians are patriotic. I witnessed the centenary celebrations of amalgamation of the two protectorates and I that is where I understood that ‘Inadequate ERP adoption limits operational efficiency by businesses’

Enterprise Resource Planning (ERP) packages are traditionally not cheap, especially when organisations try to acquire all infrastructure and software upfront. This has often denied organisations the opportunity of taking full advantage of the potentials an ERP system will offer. Pedro Guerreiro, managing director for West Africa at SAP in this interview with Caleb Ojewale, talks about the company’s commitment towards providing more cost-effective solutions for organisations of different sizes to be able to implement an ERP system to achieve increased operational efficiency.

You were SAP’s managing director for Lusophone Africa (i.e. Portuguese speaking countries) before taking up the role to be in charge of West Africa, was has the transition been like?

The transition has been pretty much straightforward, we’re talking about two economies that on the base are very dependent on oil price, and both are investing in very specific sectors in attempts to diversify the economy. Agriculture is something key in Luspohone countries, and even more key in Nigeria. There is also a focus on manufacturing, in reducing the goods that need to be imported, and all of those are drivers in these economies. There are strong public sector needs in both economies but obviously not so much availability of funds in those areas, so help from international agencies is something that also helps in both economies. With the transition, obviously Nigeria is a much bigger economy than what you find in Lusophone, and with the size of the economy you also start to feel that there is more demand, entrepreneurship, and more things happening in Nigeria than in the Lusophone.

Since taking charge of SAP West Africa which of course covers Nigeria, what is your assessment of this market in the utilization of Enterprise Resource Planning (ERP) systems?

This market has tremendous potentials, and there is already a great penetration mark. The average big company most likely uses SAP, and the same applies in the public sector.

On the other side, we also have many customers in the lower mid-market, which could have a handful or dozen of users, or even companies that have thousands of users. So, that penetration exists obviously, particularly with the demand that the economy needs, business processes, best practices and with the digital economy, there is much more to do.

Narrowing down to Nigeria, compared to other West African countries, what is your appraisal of the utilisation of Enterprise Resource Planning here?

Not enough. (laughs)

So what do we need to do to get there and overcome hindrances to scaling up?

Companies need to be more aware of that need and make it a priority. As the MD of a company, you think of your business model, and your go to market, however, IT these days in a digital economy is key for those business models to be revamped so as to find new ways to make business. Achieving this comes not only on enterprise resource planning, which SAP is known for, but there is a lot of other things that SAP does which goes beyond that. We have 25 industries, very specific business processes and solutions.

Take for instance a Telco which does not necessarily need to deploy ERP but customer oriented types of applications which SAP also has in its portfolio. Even in banking; core banking, management of portfolios, loans, investment banking, commercial banking, and agricultural banking, all of these processes are covered in SAP.

Another example is in agriculture where we have processes in SAP that go from the farmer, to the investor that buys commodities to place in the futures, and all of that supply chain in between. Generally, there is definitely a lot Nigerian companies and public entities can still be doing.

Is ERP penetration enough in Nigeria enough? I’ll say all of this space is open not only for ERP but industry specific solutions and that’s what I think is important from awareness point of view and the role SAP can play.

SAP today even if seen as a big company, there are some small mid-market operators that can use our solutions and there are also the big guys that need our solutions.

You mentioned utilisation in the agricultural space, can you expatiate on this?

If you think of the agricultural space, on one side you have your ERP needs because you still need ERP to manage your finances, accounting, people, procurements, and your sales but that is the core enterprise resource planning. But you need much more than that; you need to able to reach out to thousands of farmers, you need to engage them and to plan their production. You need to be able to provide them with seeds, create them lines of credits, loans, and manage this entire ecosystem. For this, we have solutions on the cloud, and on premise that manage all these processes.

From the perspective of the investor that commits with the futures market, a certain amount of commodities at certain price then his goal is to control that all of the farmers get access to the seeds, commit to production, understands what type of land they are using, and he can predict that indeed he can place those orders in the market for that price and make money. So, all of this coordination is what ERP helps a business to achieve.

If you play in the futures market and you want to make sure you get the required production, you can earn millions or lose millions. If you don’t have all your supply chain put together; understand every variable from the farmer to that order that you put in the futures, and understand how to coordinate all of that, you will either lose money or you can earn millions; all subject to how accurate you are. So, I think it is almost intuitive.

What options exist for a firm wary of financial implications in adopting ERP?

The average Nigerian firm thinks about SAP and goes; for God sake, I don’t have the money to go and buy infrastructure and hardware, I cannot pay all of this money to get SAP’s license, cannot pay all this money upfront for an integrator to come and implement SAP in the system, there is a lot of capital expenditure that I need to do upfront, but the reality is, it doesn’t work that way today.

We have what we call on enterprise cloud where you pay by month for the infrastructure and service used; also referred to as Infrastructure As A Service (IAAS). Then we have the Software As A Service (SAAS) which instead of buying a perpetual license that costs a tremendous amount of capex upfront, you buy a subscription based SAP hardware. If an organisation has hardware that it doesn’t have to buy, software it doesn’t need to buy, but just subscription then a monthly fee for an implementing company, then the upfront money is like a line item on expenses which is much easier and lower than outright acquisition.

To put it succinctly, what is the actual benefit to people deploying your cloud services?

The benefit is that instead of committing a lot of funds upfront, which could be used for the core business, what they get instead is a monthly fee that is much smaller. For instance, an oil company, where would they rather commit funds; to get more production, or to get I.T.? So instead of spending so much at once, they can spend a fraction, and use the rest on operational expense.

Are there custom made solutions for SMEs, considering they form the bulk of business activities here in Nigeria?

We have what is called business by design which is exactly for these types of mid-markets. It is a cloud based ERP and it is scalable for the S/4Hana. We also have industry in a box, utilities, in a box, telcos in a box. These are preconfigured solutions for industries that help mid-markets to get something that is already best practice, can implement, deploy and roll with.

Since SAP works with a number of partners that implement the different programmes, some of them already have specific niches and they know exactly what the market requires.

Every IT company claims their platform is airtight and secured against hacks and other forms of attack, but, what confident boosting measures are in place at SAP?

SAP is a $22 billion company, so we have resources. We have 340,000 customers, 84,000 employees and out of those; 15,000 of our staff are working in the support organisation which makes our service offerings solid.

I earlier mentioned enterprise on a cloud, which eliminates the need to buy hardware infrastructure as it can just sit with SAP. This can be done two ways, either on a data centre in Nigeria or in our data centres. Sometimes I tell the customers, I understand you want data in Nigeria for security etc, but think about it, where would you prefer to have the data? In your environment or get it in an environment where there are German engineers continuously trained to all the threats that exist on a bulletproof type of building. Do you want to replicate that kind of model in your company? No, you can’t. This is not easy as it is a huge investment and it’s hard to believe that you can keep up to speed at the same level with the average German engineer, working in Germany. They have continuous training and access to information that is not as easy to come by for a customer. It is not your core business; your core business is manufacturing or banking etc. The core business of these people (engineers) is working on a rocket proof data centre. So your data is probably safer on an environment like that than on your own premise.

Obviously, this type of subscription based infrastructure makes sense because we actually have the best engineers working on securing your data. And of the 15,000 people that we have (working on security and support), they are also looking out for patches etcetera that need to be built everyday and deployed for our customers to have their businesses protected.can try off-grid solutions. You can have solar farms in every city, but not necessarily interconnected at the beginning but you can do that later. Germany does not have much sun but Nigeria has all the sun it needs. You can do renewable energy with solar.