Mr Taiwo Adeniyi is the Group Managing Director of Vitafoam Nigeria Plc. In this interview with Nairametrics, he speaks on issues bothering the manufacturing sector and other challenges in the nation’s economy.
Enjoy the conversation.
Nairametrics: As Nigeria goes to the polls next week for the presidential election, what are some of the issues you will like the incoming government to address to boost the manufacturing sector?
Taiwo Adeniyi: Top on the list of what we’re asking the government to attend to is the dichotomy between the various foreign exchange windows that we have in Nigeria.
We are expecting the government to bring in economists to look at the impact of the various decisions as regards foreign exchange on the economy, rather than an individual putting whatsoever, imagining it will operate for everybody.
Secondly, is insecurity in the country, everyone loves to do business in an environment that is safe. Many of us produce from factories all over the nation. Moving our products from one place to another is becoming extremely difficult.
Drivers now tell us that they cannot go to certain places and those that are ready to go are charging above the roof. This is making all of the cost elements go up from time to time.
Third on the list is energy. If you do a combination of these three elements, you will find out that if you cast your mind back to what has helped the nation to continue, these three elements form the major part of what has sustained the economy.
Nairametrics: What are some of the benefits of the privatization of the energy sector?
Taiwo Adeniyi: I don’t know whether domestic people will say they are benefiting from it. But in terms of industry, we have not benefited so much from it. We remove subsidies and we have been coping with our lives. But because of the pressure on foreign, diesel has now gone up the roof.
Infrastructure is the language of the day. If you involve the private sector and government to signal trust in the administration of the Public-Private Partnerships (PPP), I’m sure there’ll be a lot more participation. Because at the end of the day, is good for all but what you find is that those in the private sector do not trust the government.
You find these deficits in infrastructure all over the place, and it is making it impossible to run a business. Cost is skyrocketing by the day because it is what you buy that you sell.
Nairametrics: What other areas do you think the authorities should address in the manufacturing sector?
Taiwo Adeniyi: BoI gives loans to manufacturers and they do it excellently well. When BoI started giving out loans, I remember very well, for instance, Vitafoam Nigeria got the loan. One of the things that BoI used to do, then, was they would make a list of your foreign exchange requirements to CBN.
The CBN will grant a window to genuine manufacturers because they know that when you do that, you can source your materials cheaply and bring them to this environment. By doing so, you have created job opportunities and expanded the horizon.
I may not be correct. But I can also be sure that the foreign allowances to government agencies have never failed to get to them. I may not be too sure.
Government functionaries are not shouting that the CBN has not paid them foreign exchange allowances as we, in the manufacturing sector, are crying to the government.
So, why wouldn’t the government create a special window where genuine manufacturers can assess foreign exchange? The government knows them, appraises them and benchmarks them.
The government has implemented all manner of policies and yet it is not working. You find out that those items that are even on the exclusive list, get to this environment, cheaper than those of us that are produced locally because the window manufacturer gets foreign exchange and makes a mess of it.
I always say that in the wisdom of the fathers of this country and even the wisdom of this government, it invested heavily in agriculture.
But between us, who measures that window and who is it that monitors that? If I, as an agric investor, take out 20 tons of garlic and I sell it and I get $20, do I bring $20 back to this environment?
And even when I bring the $20 back to this environment, how do I sell the $20? That $20 is what I am supposed to make available for CBN to redistribute into the economy. This is not happening.
It is expected that a special vehicle window is created for the manufacturers for them to be able to have access to foreign exchange to operate their business.
Nairametrics: How are multiple taxation affecting the manufacturing sector in Nigeria?
Taiwo Adeniyi: We, in the organised private sector, have decided to put our problems in the bucket. I had listed the germane ones but If I had continued, I could have listed multiple taxations. The question we’ve been asking is, what is the Joint Tax Board (JTB) doing? I am sure they have DG, directors and people who go to the office every day that are supposed to be looking at these taxes.
These are people who could have looked at these taxes and seen how they monetise the tax heads. We have complained and shouted and nothing has been done about it. The other time, the Ogun State government wrote to us that we should come and pay a levy for everyone wearing Vitafoam T-shirts because it is an advert.
They wanted us to pay for the Vitafoam T-shirts in Ogun State. We told them that anybody they see with Vitafoam T-shirts, should remove them or collect the levy from them. Can you imagine that?
All sorts of things are going on in the name of generating revenue. We have told them if they try to muscle the horse that threshes the corn, it will die. If the horse dies, the little your getting, you will not get to you anymore. We can only continue to engage tax collectors.
Nairametrics: It appears your Vitafoam subsidiaries are also doing well and have a positive impact on the group’s performance.
Taiwo Adeniyi: The new baby to the group is Vitapart which we have just started. It is getting better by the day and we hope that this particular year, it will contribute significantly to the figure. Though it has started doing well, it is not to our expectations.
Nairametrics: In which ways has your company benefited from the African Continental Free Trade Area?
Taiwo Adeniyi: What is happening is that we have signed that agreement without looking at the nuts that bind it. Nigeria only signed it without wanting other African countries to go ahead of us. We are still trying to sort out all of the tariff elements. How do you treat the origin of goods from one African country to another?
These are details that have to be worked out. Some of the Nigerian businesses benefiting from the agreement because they have offshore businesses in those countries in Africa.
You’ll find that there is an exchange of goods between these Nigerian companies’ offshore businesses and their country of origin. But the real trade has not started because a lot of issues have not been sorted. The good thing is that we have signed the agreement.
Nairametrics: How is Vitafoam able to consistently remain profitable despite these headwinds?
Taiwo Adeniyi: We always pride ourselves on innovation and research. You may see two products in the market and they look so much alike. But you ask yourself, why is it that you don’t cost the same price?
There are intrinsic values we have in our products that stand out in the marketplace. We say to ourselves that our definition of quality is fit for purpose.
For as long as our product fits the purpose for which you have gone to the market to spend your money, you will continue to buy. So, what we have done is create a niche market for ourselves.
We don’t play in every market. We don’t run the same race as others. We have created a niche market for ourselves to say when you buy our product, you will not regret spending your money and that is what is standing us out in the marketplace. And that’s why we produce well and we price well in the market.
Nairametrics: How will you describe the group’s 2022 performance despite the challenges?
Taiwo Adeniyi: The group performance declined by 2.2% in terms of profit, but the top line grew by 31%.
We started the year with N192/litre of diesel. If you’ve got to look at the administrative costs or you look at the elements that contributed to that drop, you’ll find it under the likes of electricity and finance costs. Now when I say electricity, tariffs went off in the year, and diesel prices went up in the year. Now, also, you’ll find out that maintenance of machines.
The way it works is this: the same dollar you are struggling to get to buy your raw materials is the same dollar that you’re applying to buy spare parts for those machines to fix them and get them running. So, when you do a combination of those items, That’s what is responsible.
I will say that we didn’t plan for it, but if you look at exchange loss alone in that financial year, Vitafoam lost over N1 billion to exchange that should have directly gone into our profit and shareholders. If our government is serious, it should be of concern to them.
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