VFD Group Limited recently held its 2nd Annual General Meeting in Lagos, during which the board of directors obtained shareholders’ approval to raise capital for expansion purposes. To better understand the situation, Nairametrics visited the company’s corporate headquarters in Marina, where we had a sit down with the Group Managing Director/Chief Executive Officer, Mr Nonso Okpala. Below are the excerpts of our conversation:
Can you tell us what your set targets were for the year, and how many of them you’ve been able to accomplish?
It seems everyone has been asking me this same question. Most of the interviews I have granted recently contained this particular question. (Laughs lightly)
Just to speak to your question specifically, we set out to achieve a PBT (Profit Before Tax) on the group level, of about a billion. I will say confidently that we are close to it. This year, we set out to achieve total asset in excess of N10 billion. I will say confidently that we’ve achieved that.
This year, we set out to fill up vacancies in key positions of our management team. I will also say that we have significantly achieved that.
Speaking also to some specific areas of government, we set out this year to enhance our board, enhance the profile of individuals on our board as well as to expand the board; to bring in more hands on deck and also to reflect the diverse holdings and interests that we’ve attracted. We’ve been able to do that with the admittance of predominantly Mr Olatunde Busari (SAN), and Dr Samuel Maduka Onyishi, as well as Jewel Okwechime. We also admitted an Executive Director, Mr Niyi Adenubi, who has been assigned a strategic portfolio to cover institutional business as well as investor relations.
The last on all the objectives that we set out was to look at our capital requirements as well as our status as a private company vis-a-vis a public company. During the last AGM, our board proposed to the shareholders and got approval to convert our company from a limited liability to a public liability company. We also got approval to raise N7 billion; N2 billion via equity and the remaining N5 billion via debt. The equity components will be broken down into two: N1 billion of rights and another N1 billion via a private placement.
So, these are specific things that we set out to achieve. To a large extent, I’m confident that we’ve achieved them.
In your annual report, you made mention of plans to take up a stake in a national bank. Why not an international bank?
Our history was that we were always short on capital but very long on skillsets. We are a group of individuals well-placed in the financial services industry; good exposure, good skillsets, but limited capital to execute our targets. Over the last nine years or so, we’ve been able to grow capital to match those skillsets. But we are not yet there.
So, you believe that before you fly, you need crawl, walk, and then run. And that’s the growth process we are going through. But I will assure you that we are not short on ambition. We are quite ambitious as it is.
And we believe that within the next twenty to thirty years, we will significantly reposition the Nigerian economy and restructure it.
Now, to speak specifically to your question, we believe it’s right to start from a regional perspective so that we can first grow skills and expertise. Because when you look at the capital requirements for a regional bank vis-a-vis a national bank, it’s N10 billion as against N25 billion.
We are very particular about our return on investment that we make to our stakeholders. And we think that in the growth phase, it’s very safe to go for a regional banking license which goes for N10 billion as against a national banking license which requires N25 billion.
It’s also a reflection of the mapping of economic activities within Nigeria. We think that the South West geo-political zone has a great deal of commercial opportunities and we can use that advantage to grow.
We are definitely heading for an international bank status, but the objective is to start from a regional banking perspective.
Can you mention the bank that you are hoping to take up stake in?
Well it’s difficult for me to mention. But I’ll assure you that we have various options on achieving it. We have option A, option B, option C, as well as an option D. We also have considerations for the greenfield approach, which is to approach the CBN with the capital required and make an application for a regional bank.
So, in view of the role that your organisation plays in the Nigerian economy, would you be willing to venture into the oil and gas and even agriculture space?
I’ll answer this question from two perspectives. As an investor yes, I’m interested in making investments outside of the financial services industry. On that level, there is a holding company that I, as well as some of my colleagues, have put investments in. Ultimately, that company seeks to make investments outside of the financial services space.
But as the GMD of VFD Group, our objective and ambition are restrained within the financial services sector.
But correct me if I’m not wrong, VFD Group has a subsidiary that is into the auto spare parts business. That is not in the financial services sector; is it?
We have an interest in Germaine Autos as well as interests in real estate. Now, those two investments are very strategic. The objective is simple – we believe that the product of the future and products that will be significant to the financial services sector, are mortgage type products, and auto loan type products.
We think that you can’t successfully and sustainably deploy those products without having these operational components that can support it. So, the real estate company will support your mortgage payment while the auto company will support your auto loan payment. To put it in a very simplistic manner, if you are advising significant auto loans and you have the interest that sell that to your customers, that’s an added advantage for you. If you have a company that in case of default can repossess your vehicle and refurbish it, that is an added advantage. Yes, they are not financial services companies, but on a strategic basis, they serve the group’s interests in the financial services space.
Does VFD Group have any plans to play in the Pension Fund Administration space?
We definitely have plans for that. However, it’s not immediate. I think that will come up during the next AGM. Part of our plan is to have presence in every sector of the financial services industry, and the PFA is one of them. So yes, we have plans to go into it.
Would we see a listing of sub units of VFD such as Germaine or VFD Microfinance Bank?
Based on our current understanding of the opportunities that exist, we think that the first step in respect to listing should be the listing of the group. We think that it’s more aligned with the interests of minority and majority shareholders alike for the group to be the main source of funding of the activities of the subsidiaries. Once that’s done, the next stage of growth would be spinning off these subsidiaries to a point where our stakes are significantly diluted and then given the status to run as independent companies so to speak. At that point, we can consider listing our subsidiaries.
What is your outlook for the coming years, especially being an election year?
Well, most pundits would say that the elections require some form of conservative estimation and forecast. But here in VFD Group, we are quite bullish about next year. We think that with the flexibility of our structure and our partnership, that every situation in itself provides a unique opportunity. So, I would say that we are quite bullish. And depending on how the elections go, I think there will be a revival of the capital market. We also think that the volatility will provide certain opportunities for us. We also think that fixed income instruments might significantly appreciate and for us it’s a good thing because it means increased yield for our investors. It is also worthy to mention that most of the restructuring and developments of our subsidiaries will gain maturity in 2019. So, we are looking at a company like Germaine Auto Centre pushing towards a PBT of a billion naira per annum and our lending business pushing towards a PBT of N20 billion per annum. These are opportunities we see and think will manifest in 2019 and we are delighted about it.
Do you have any Pan African ambitions, expansion-wise?
Part of our thirteen-year strategy — which is broken down into three years, five years and another five years — is to build capacity for an enduring and a maturing company. That first three years will end on the 31st of December 2018. The next five years will be focused on growing our interests within the Nigerian economy while the remaining five years will be focused on exporting the successes that we have recorded to other African countries. That said, we definitely do have ambitions on the continental level. We are excited about the future.
FG needs to focus on business environment reforms – Sanusi
While speaking at the Kadinvest 5.0 Summit in Kaduna, the former CBN Governor gave salient suggestions to revamping the economy.
Former CBN Governor, HH Muhammadu Sanusi II has said the Nigerian government needs to focus on reforms that enable a better business environment and also called for economic diversification through maximizing technology as means to generate revenue away from crude oil.
Muhammadu Sanusi II disclosed this at the Kadinvest 5.0 Summit in Kaduna on Tuesday morning. Sanusi said the Nigerian government’s role in the economy should be small, both in absolute and relative terms. Sanusi cited Nigeria’s GDP per capita and tax revenue per capita, at $2,400 and $75 respectively, while development spending is just $36 compared to Kenya at $280 tax revenue per capita, and development spending of $280, despite having 90% of Nigeria’s GDP per capita at $2,151.
“Government needs to multiply its tax revenue, the government needs to spend on business environment reforms,” he said.
(READ MORE: Can Agriculture replace Oil in Nigeria?)
Solutions for Nigeria:
He said that the diversification made colonial Nigeria an economic success, based on the trading sector and the diversity of Nigeria’s export base, including palm oil, groundnuts, cocoa, tin, hides and cotton, and others. He added that the diversity of export meant Nigeria was less vulnerable to terms of trade shocks driven by one export in particular.
“Nigeria has suffered boom and burst periods due to oil valuations. It affects us in direct and personal ways. The government needs to understand the importance of wrong and adverse economic decisions on the human being,” he said.
Sanusi cited inflation numbers, saying Nigeria ignored inflation numbers of 2%, instead of breaking down the CPI and seeing how it affects millions of people who spend on food from minimum wages and how a 2% inflation growth wipes out earnings.
He compared Nigeria’s growth in the past 40 years with countries similar to countries like Malaysia. He added that Malaysia’s export base has been diversified from commodities to manufactured goods in the past 30 years.
By 1979, Malaysia’s top 2 exports were Crude Rubber and Cork and Wood. By the year 2000, Malaysia’s top 2 exports were Electrical Machinery and Office machines/Automated Data Processing equipment. Malaysia’s GDP per capita grew in the same period from $41 to $4,045. Compared to Nigeria’s GDP per capita, which increased from $345- $2,655 from 1985-2015, but failed to diversify export base as Crude Oil was Nigeria’s top export for the period.
“We were growing, but we did not diversify and that explains the huge level of poverty. It also explains the vulnerability of the economy to shocks,” he said.
Sanusi added that the failure to diversify explains the relativity of Nigeria’s slow pace, compared to Nigeria’s growth for the same period.“We have not moved in all these years. This is the difference between us and Asia, they moved!”
(READ MORE: Sanusi gets another major appointment)
On growth and structural change:
Sanusi made a case for a change of mindset with technology adaptation. He added that the wide usage of smartphones does not mean Nigeria has leapfrogged development, as we are not a producer of technology but primarily, a consumer.
He added that Nigeria is yet to leverage on the investments in the telecoms sector. “Infrastructure in Africa has become increasingly decoupled from tech training. Someone who uses a smartphone to produce a Nollywood movie is producing! We need to invest in human capital to boost technology innovation, the smartphone is a ticket to wealth… Every excuse Nigeria has to not grow, Indonesia and Malaysia had. We need to move away from a consuming attitude( with technology) to production,”
On Power generation for productivity:
“In a low-income environment, income elasticity is far more important than price elasticity. People would pay for electricity if they could use it to earn,” he said. “Look at electricity as an economic resource, look at how much you could make. There is a difference between not earning a thing and earning something.”
He cited how China focuses on two major metrics, which are; the number of employed and the number of those with access to electricity, citing the per capita contribution of electricity to production needed to move people away from poverty.
He encouraged skilled jobs that leverage technology, which would enable growth and also remove the pressure of Oil money on the states.
“Youths need an environment that has been created to give them skills. We need to invest in broadband as an economic resource,” he said citing the importance of skill transfers in developing broadband infrastructure.
On patterns for structural changes:
Sanusi said East Asia has moved from agriculture to manufacturing and later services, majorly from the informal to the formal sector. However, in Nigeria, the bulk of a similar change has been in the informal sector.
“Manufacturing GDP in Africa has fallen from 14% in 1990 to 10.1% today. Formal job creation has been modest. This is partly because of a mistaken view that Africa can simply leapfrog manufacturing to become a service-based economy. We have declining activity, while the rest of the world has increased activity”.
He added that an enlightened industrial policy will translate to meaningful job creation. He concluded that Nigeria needs to link infrastructure development to economic growth. “You have to make sure your projects are linked, you don’t just build a road here, a rail line there, an airport there without knowing how there are going to translate into an economy.”
He also mentioned that Nigeria’s Public Debt has risen, and due to high inflation he cannot see how the CBN can keep expanding its balance sheet. He urged the FG to spend more time creating the environment through reforms that will attract the investments while also fixing the balance sheet.
Just in: NLC insists nationwide strike, protest to go ahead from September 28
The NLC has set Monday, September 28, 2020, as the date for it’s proposed strike.
The Nigeria Labour Congress (NLC) has insisted on going ahead with its earlier planned strike and protest, with effect from September 28, 2020, following the failure of the Federal Government to reverse the increases in electricity tariff and fuel price.
According to a monitored media report, this disclosure was made by the NLC President, Ayuba Wabba, after the National Executive Council meeting of the labour organization in Abuja.
While restating that the proposed strike action by the organized labour would still go ahead next week, he also disclosed that the decision was unanimously taken by the chairmen of the 36 states and FCT chapters of the NLC.
This is coming as the Trade Union Congress of Nigeria (TUC), extended its 7 day strike notice to September 28, to tally with NLC’s deadline for a united labour action against the increase in electricity tariff and petrol pump price.
While faulting the timing of the increase, the NEC at a meeting held at Labour House Abuja, directed the councils at 36 NLC states and Abuja to intensify mobilization of workers and other Nigerians.
Ayuba Wabba, advised the federal government to, in the interest of industrial peace and social order, listen to cries of workers and other suffering Nigerians and rescind the increases, warning that failure to meet the demands would make the planned strike and mass protest inevitable.
He said, “The National Executive Council of the Nigeria Labour Congress comprising members of the National Administrative Council, President and General Secretary of members of the affiliate unions and our state council chairpersons and secretaries of the 36 states and FCT met today (yesterday) and resolved as follows: NEC resolved to reject in its entirety the issue of hike in electricity tariffs by almost 100% as well as the fuel price increase in the name of full deregulation.’’
‘’This decision is premised on the fact that these twin decisions alongside other decisions of government including the increase of VAT by 7.5%, numerous charges being charged by commercial banks on depositors without any explanations will further impoverish Nigerian workers and citizens, including their families.
“Therefore, this increase, coming in the midst of the COVID-19 pandemic, is not only ill-timed, but it is also counterproductive. NEC also observed that the privatization of the electricity sub-sector seven years down the line has not yielded any positive result. Whereas, the entire privatization process, the entire sector was sold at about N400 billion, we are also surprised that government within the last four years injected N1.5 trillion over and above the amount that accrued from this important asset.’’
CBN reduces MPR from 12.5% to 11.5%
The Governor of the CBN has announced the reduction of MPR from 12.5% to 11.5%.
The Monetary Policy Committee (MPC), of the Central Bank of Nigeria (CBN), has voted to reduce the Monetary Policy Rate (MPR), from 12.5% to 11.5%. This was disclosed by Governor, CBN, Godwin Emefiele, while reading the communique at the end of the MPC meeting on Tuesday.
The committee retained CRR at 27.5%, stating that the recent inflationary pressures is not driven by monetary policies, rather as a result of structural policies.
Highlights of the Committee’s decision
- Reduce the MPR by 100 basis points, from 12.5% to 11.5%
- Adjust asymmetric corridor, from +200/-500 to +100/-700 basis points around the MPR
- Retain CRR at 27.5%
- Retain liquidity ratio at 30%
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According to Emefiele, the Committee reviewed the choices before it, bearing in mind its primary mandate of price stability, and the need to support the recovery of output growth. Consequently, the Committee noted that the likely action aimed to address the rise in domestic prices would have been to tighten the stance of policy, as this will not only moderate the upward pressure on prices, but will also attract fresh capital into the economy, and improve the level of the external reserves.
The Committee however, noted that this decision may stifle the recovery of output growth, and drive the economy further into contraction.
On easing the stance of policy
The MPC was of the view that this action would provide cheaper credit to improve aggregate demand, stimulate production, reduce unemployment, and support the recovery of output growth.
In addition, the Committee noted the tendency of an asymmetric response to downward price adjustments by ‘Other Depository Corporations’, thus undermining the overall beneficial impact of a reduction, to the cost of capital.
After all considerations, members were of the opinion that the option to loose will complement the Bank’s commitment to sustain the trajectory of the economic recovery, and reduce the negative impact of COVID-19.
He also stated that, liquidity injections are expected to stimulate credit expansion to the critically impacted sectors of the economy, and offer impetus for output growth and economic recovery.
Based on the foregoing, the Committee decided to reduce the MPR by 100 basis points to 11.5% and adjust the asymmetric corridor to +100/-700 around the MPR.
MPC projects economic growth
Recall, that the Nigerian economy contracted by 6.1% (year-on-year) in the second quarter of the year, as a result of the disruptions caused by the COVID-19 pandemic. The MPC however, projects a positive growth in the last quarter or at least Q1 2021.
“With a persistent focus on activities meant to reverse the contraction, the MPC projects growth at positive levels in Q4 2020, or latest by Q1 2021, based on the anticipated positive results from the coordinated and sustained interventions by both the monetary and fiscal authorities.”