Kwairanga: FG Should Review Taxes in Favour of Manufacturers
Immediate past chairman of Ashaka Cement Plc, Dr. Umaru Kwairanga, in this interview, suggested that the federal government should review its tax policy to favour manufacturers. Eromosele Abiodun presents the excerpts:
Congratulations on your election to the Council of the Chartered Institute of Stockbrokers (CIS). What does it take to be on the Council?
First, It takes the support and vote of one’s colleagues and peers in the stockbroking profession. To get that support of course, you must have demonstrated a commitment to the Institute and its ideals and visions and you colleagues must believe that you can help actualize those ideals and visions when elected to the council. I think over the years I have been actively involved in the activities of the CIS and my peers believe that I possess the experience and drive to be on the Council and move our institute forward.
What is your assessment of the CIS under the current administration?
I am impressed by the various innovations that the current leadership has come up with to improve the standing of the stock broking profession. The initiatives taken to broaden the reach of the Institute, ensure the provision of qualified and certified professionals to the investment and broader financial services sector is especially commendable. The administration has also been very proactive in its drive to boost the Institute’s income through subscriptions and grants. These things of course are still work in progress so I will have to reserve my assessment of them to commending the initiative and hoping that the implementation will be successful.
As a new council member, what roles are expected of those of you serving on the Council?
Our major roles as council members include charting the strategic direction for the institute and exercising proper oversight over its activities. To perform these roles council members need to commit time and energy to the Council and also need to come with new and effective ways for the Institute to achieve its mission and mandate.
As a senior stockbroker, what would you consider as the major challenges facing stockbroking profession in Nigeria and what is the way forward?
The major challenges I would say include continuing investor apathy following the last crisis of the market in 2009, paucity of products, increasing demands on operators by regulators and a difficult operating environment. Let me expatiate a little on each of these. Since the last financial crisis, local investors have been reluctant to come back to the market and have cede more than half of the market activity to foreign investors. This is not good for our profession as a stock market built on foreign players is not sustainable. Local investors need to be encouraged to take advantage of the opportunities the stock market offers. One constraint of course is that our market is largely equity based. There are on-going efforts by all stakeholders to broaden the product offering to bonds, derivatives and other asset classes but we are still a way off from the market of our dreams in terms of product offering. Every stockbroker will also tell you that on -going plans by our regulators to increase the capital base and enforce minimum standards are challenges to them. The directives are for the good of our market but they are tasking .The last point is of course familiar to all business operators in Nigeria-inadequate power supply, dearth of qualified manpower, too many demands from government agencies... I can go on and on.
How would you advise an investor against the background of the current lull in the economy, especially in the capital market?
It is likely to be a temporary lull. I believe the Nigerian economy is quite resilient and will overcome the challenge of low crude oil prices. For the capital market, asset prices fluctuate and if there is a temporary dip, it is an opportunity for savvy investors to get good stocks at relatively cheap prices. The advice would be to target assets with good underlying fundamentals and buy at the right prices.
You are the immediate past Chairman of Ashaka Cement Plc. How is the company coping with the manufacturing of cement?
Ashaka Cement is a company that has been manufacturing cement for more than three decades and it has established a reputation for quality products and excellent manufacturing practices. It is backed by the resources of Lafarge, one of the biggest names in cement manufacturing globally. Ashaka Cement is doing very well, we did the Ground breaking ceremony towards the end of last year and now working on the capacity expansion of the company. I am happy to inform you that I left a healthier and more focussed and profitable Company to the new Board.
How competitive is the company?
Ashaka Cement is a niche player with the North East region as its central focus and it is quite competitive in its region. It has been able to retain its market share over the years and when the current expansion project which was initiated by the board under my chairmanship is completed it will be able to increase that market share. Ashaka Cement is competitive in terms of quality and price.
What is your advice for the existing and potential shareholders in your company?
I would prefer that such advice come from the current leadership of the company as I have retired from the board. As a fellow shareholder however, I would say the company remains a good investment because of its record of regular dividends and a potential increase in revenue and profitability through it on-going expansion projects and the linkage with Lafarge Africa.
Is Ashakacem considering diversification of its products?
Yes. Before I left the board we had concluded plans to launch Supaset which is a premium product. Even before the Standard Organisation of Nigeria (SON) directive, the company was also preparing to have a broader range of products geared towards various segment of the market.
Which aspect of the government policy would you like to be reviewed in favour of cement production?
The first one should be tax policy to favour local manufacturers. Given the critical role of cement manufacturers in addressing the nation’s infrastructure deficit, I would like to see a more favourable tax regime for them. A change in the transport policy to ensure that railway links get to manufacturing hubs such as Ashaka would also be helpful in bringing down costs and price. There is also a comprehensive National Industrialisation policy that I have been privileged to work on and whose implementation I believe would help revive our industries.
What are the challenges facing manufacturing sector in Nigeria and the way forward?
The major problem remains the poor power supply. It is not easy for manufacturers to cope with self- generation of power and still produce goods that are competitive. That is partly why dumping of products from countries with better manufacturing environment persists. I think the myriad taxes and regulations that manufacturers face from the various levels of government can become distracting and reduce productivity
You are on the board of some other companies. Could you explain briefly your role in these companies?
I am the currently the Chairman of Axa Mansard Pensions Limited and Waila Microfinance Bank. I am on the board of the Central Securities Clearing System plc, FBN Mortgages Limited, Jaiz Bank plc and Gombe Microfinance Bank Limited. I also am a member of the Council of the Nigeria Stock Exchange representing my company, Finmal Finance Services Limited. These are a few of the companies and institutions whose boards I am privileged to sit on. As chairman, I have contributed my own quota to move these companies forward and enhance shareholders value.
As a practising stockbroker for many years, how are you coping as the CEO of a major stockbroking company?
I am doing my best, with the help of Almighty Allah. It has been much more difficult to generate business in recent years because of the apathy that set in after the downturn that our capital market suffered in 2009.Local investors especially have been reluctant to invest in stocks and shares and that is the main focus of our firm. In the face of declining income, you have ever rising operating costs. You could say what has kept me in this profession is my passion for it. I have always felt fulfilled when I advise my clients on investments and they end up making good returns on it. The bond that develops when you serve your clients well is one that I treasure despite the challenges of our capital market. I also have a core of committed and dedicated staff that has been with Finmal for more than a decade and they help to ensure that the company runs smoothly.
What efforts are you making to strengthen your company’s competitive edge?
We are investing in technology and people and broadening our product offering. You may be aware that the Nigeria Stock Exchange has mandated all stock broking firms to ensure they maintain some minimum operating standards. These standards specify certain levels of corporate governance, staffing and technology for market operators. I am happy to say that Finmal is striving to not just meet those standards, but to surpass them so that we satisfy our existing clientele and win over new ones. We are intensifying training for our staff and planning to leverage more on technology to ease our clients’ service experience. Finmal Finance Services also has a broader range of functions than most other market operators. We are an issuing house in addition to being broker/dealers and we also offer financial advisory and portfolio management services. Our clients are thus availed of a diverse range of services at the spot.
Any thing that you want the investing public to know?
I would want the investing public to recognize the importance of a diversified portfolio and so look beyond the traditional deposit accounts and real estate. Financial instruments such as bonds, and shares offer rates and returns that are usually higher than fixed deposit accounts and they are far more liquid than real estate. The capital market is highly regulated so the risk of fraudulent transactions is minimal. Potential investors should however always seek the counsel and advice of professionals so that they invest at the right time and the right prices. If an investor does this, the likelihood of loss is minimal. I am not too happy that our capital market has for some time been dominated by foreign portfolio investors. Local investors must recognize the value in our capital market and also enjoy the benefits it offers.