Nigeria Needs More Companies Like LADOL to Achieve Prosperity
they often suffer from monopolies. But as those countries grow, those monopolies become almost unstable because what a monopoly does is to enrich a very small number of people and keep everybody else down. In Nigeria, you also have the fact that we have a private sector that is very resilient and adds a tremendous amount of value. LADOL is proud to be one of the companies in the private sector. In terms of the shifts we have seen happening in the maritime industry, these are really micro-economic shifts. These are shifts that always happen as the country transition into the next stage of development where naturally the private sector will play a bigger role in contributing to the economy and the Gross Domestic Product (GDP). So that is not really a political thing. To me, it has always been clear that it is inevitable that monopolies will fall because everywhere in the world, even in America, they had the Standard Oil monopoly. They had a stronger monopoly than even the ones we have had in Nigeria that fell. Monopolies will always fall. That is a long-term trend as you see around the world as economies develop. In terms of political risks associated with elections, my dream is that of a Nigeria where it doesn’t matter who the president is. We need to get to that point as soon as possible and I think that this administration agrees with us. I think they have put us on a path to a Nigeria where the government will focus on regulation and private sector will focus on business as opposed to the situation we are in now – where 90 per cent of the business is the government. The fall in oil and the economic shock we experienced taught us the lessons that the country will not be able to survive unless the private sector is allowed to thrive. The government has learnt that lesson and if you look at the enabling business environment policies, those policies are actually designed to increase the participation of the private sector. That is what tells me that this government recognizes that we need to move to that place where an election is interesting, but it is not life or death.
Recently you said Nigeria will lead the sustainable global maritime economy. How possible is this given what you said the government has 90 percent of the economy?
The key thing is that for Nigeria’s economy to develop, the private sector must be allowed to develop. What we have seen is that this government is allowing the private sector to grow. That growth I believe will be highly accelerated because Nigeria is such a naturally prosperous country. The fundamentals of our market are strong. We have a huge market that is poorly served by the local businesses and that is why most things are imported. So if you let private sector strive, there are many business opportunities: small, medium and large. If the government stops standing in the way, I believe the private sector will strive. If you look at what is happening in the global maritime industry, particularly in the areas of sustainability, the biggest issue they are struggling with in wealthy countries is how to redesign or retrofit or in some ways modify without it causing them too much money, jobs and existing infrastructure.
We don’t have that problem. We are blessed with an abundance of business opportunities. There is a huge market and we are just developing the infrastructure and facilities and training the human capital now. The reason I think Nigeria will be able to lead not just maritime, even agriculture and technology, is that if we continue to allow the private sector to thrive if we continue the financial and economic reforms that I mentioned earlier so that our local banks and international banks give us long-term loans. We already have smart hard-working people to invest in new technology and solutions that are much better than the ones currently being used in wealthy countries. Naturally, it will take much longer for those wealthy countries to change the way they do business than it will be for us to develop new ways of doing business and excel in many areas which they are currently leading.
How has the down turn in crude oil price that plunged Nigeria into a recession affected LADOL?
Actually, when the oil price fell it had a positive impact on LADOL. Our value proposition is that we provide services at a much lower cost than the cost prevailing in the market. In fact, the minimum cost-saving that companies enjoy by moving to LADOL for their deep offshore support was 50 per cent. For some companies, it can be up to 80 per cent tremendous cost-saving. And this has been known in the market since 2006 –j it’s been clear. Even that whole period of 2006 to 2016, I had thousands upon thousands of meetings and I never had a meeting where anybody disagreed with me that economically it would be attractive to operate out of LADOL. However, when the oil price was over $100 people behaved irrationally. They didn’t save – and by people – I meant particularly international companies. It is also important for people to realize that these excesses that we are talking about were far more egregious in the West than they were in Nigeria. When we see headlines about how much Nigerians are spending and so on, just know that for every dollar that a Nigeria makes, there is a foreigner making $10 on that same deal. So, when the oil price was about $100, a huge amount of our money was spent outside of the country – a huge amount of our money was paid for international organisations to do works. Yes, local content was also able to make some strides but the efficiency of the local content, the quality of the local content also wasn’t pushed as hard because it was a period of huge excesses.
So, when the oil price fell, the reason I said it was actually a good thing – and I agree with the president on this, it was a good thing – was that when the oil price fell people started to behave rationally. And what is the rational thing to do? When you have a deep offshore and offshore shock, the rational thing to do is to get your services as much as possible from local suppliers. Because everywhere in the world where you have real local content – meaning you are working with transparent, hard-working Nigerian companies that are providing quality products – everywhere in the world you have those dynamics it saves company’s money. As soon as the oil price fell the first thing the international companies did was to rationalize their business model and start seeing where they can get more local solutions. One of the places where they could get the biggest cost-savings was from LADOL and it was no coincidence – the level of local content at LADOL and the way we provide the service also include a high level of local content. We don’t just provide our clients with an empty space; we give them a fully integrated solution. Meaning, if you want us to manage your inventory, we will collect it and put it in a warehouse that we have built. We will electronically tag it and when you want to deliver it we will deliver it for you. You can seat in London and watch on your screen the movement of your cargo, which is all electronically tagged. That is very high local content because we are doing everything as opposed to a scenario where someone wants to sow something in Nigeria, you give him an empty land and say come and build and they do everything themselves. Having that fully integrated value proposition maximizes local content, efficiency and it maximizes cost-saving. The other benefit that you see in the fall of oil price is the higher use of local suppliers. That means you start to create prosperity in Nigeria and this is also important to international companies. Everybody, almost every single day, every single hour, is seeing the migrant crisis. We have seen horrible, heartbreaking scenes. We have cried. Some of us have seen our relatives on the television. The solution to that crisis is not different policies in America or Europe. The solution to that crisis is more jobs in Nigeria. The international companies can play their part by patronizing companies that are providing real local content. That will show that Nigeria is an attractive place to do business which will attract more investments and you can create a virtual cycle. The wonderful thing about all this is we don’t have to guess whether or not this will work. It has worked in the United Kingdom, Norway and Brazil. We know that this works. The fall in the oil price and this sort of crisis that it created, created an environment as well as in Nigeria where we can start to create this virtual cycle of development. The last thing I will say on that is part of the reason we have been able to start this cycle of development in Nigeria, and other countries have not is because we already have a local content act in place. We already had a private sector that was there but was struggling and growing. Our population is not just big; our population is hard-working. Our population is intelligent. We have over 100 million mobile phone penetration. So we have a lot of advantages that other countries do not have.
Statistically, what proportion of your operation is local content? LADOL is 100 per cent Nigerian. So, we are 100 per cent local. There is nothing like a foreign investor in LADOL.
Generally, what is the biggest challenge you face as a company?
The biggest challenge we face, as is the case with every Nigerian company, is getting adequate finance. By finance, I mean low-cost, long-term loans. The level of financial scrutiny that Nigerian companies go through is huge. I know what LADOL goes through; I can’t even imagine smaller companies going through it. It is ludicrous. The level of security that people are asked to provide is crazy. I am constantly talking about this now because Nigeria is really on the threshold of becoming great; the country is on the threshold of sustainable industrial revolution. But we need the finance. General Electric and Facebook were not just created. All these companies got long-term, low-cost finance and that was what enabled them to create, invent, and invest. One of the major things holding back the country is the access to the right source of financing.
LA DO L has plans to list on the Nigerian Stock Exchange( N SE) how far have you gone withy our plan? We have always had that as one of our targets, but it is not something we are going to do in the near term. But I will say in the medium to long term it is something we are looking at. We think that the characteristics of the company make it suitable for listing, but we think to do it now will be premature.
What about your plans to get into the power business, when can we expect to see action in that regard?
To be clear we are not a power company, we are just building power for our own needs. That was why I talked about power plant; we are not a power company.
Let us look at your other engagements. Recently, the Global Maritime Forum elected you to a strategic committee. Tell us about the forum and your role there.
The Global Maritime forum is a non-profit organization set up to promote sustainable development and sustainable maritime sector. The forum’s first event is going to be in Hong Kong in October this year. It is really an interesting forum for me to be part of because it brings together international players at different levels of maritime value chain and that is where I can see where Nigeria needs to improve, where Nigeria can fit in, and most important, I can be a voice telling the world that Nigerians are serious players; that the market is untapped but highly prospective and that it is not a market anybody can afford to ignore.
Ataforum, you said Nigeria requires more companies like LA DO Land INTEL S given the size of the country. Can you tell usmoreaboutthis?
What we suffered from in the last 20 years is a monopoly that kept the market small. Obviously, if a company wants to build something like the Egina FPSO, they cannot find sufficient capacity in Nigeria to build that entire vessel. Now let’s compare that situation to Brazil: if go to Brazil now they build an FPSO that produce 150,000 barrels of crude oil every 18 months. They have 30 FPSOs in Brazil working right now and they have 70 per cent or more local content, which is where we need to get to. But obviously, we cannot get there if only one company is doing everything. It is not possible. We need thousands, if not tens of thousands, of companies, contributing. We need millions of people working on different jobs so that we have a thriving environment where a company can now come and say, ‘Okay, I need to deliver a vessel not even for Nigeria. I need to deliver a vessel to Angola. I have 50 different companies I can choose from in Nigeria so I am going to Nigeria.’ Whereas right now, you come to Nigeria and you want to do a project for Nigeria, you put out a tender for the project, you only have two companies that respond and both of those companies are foreign companies. That is the situation we are in now. What they have in Brazil where they are building an FPSO every 18 months, something we struggle to do every five years is not acceptable.
What can the government do to address this?
I think the government has made a good start. We are hoping that in the few years they will do more – take bolder steps. This is a time for bold action; we have to cut down the bureaucracy even stronger. We need to see more accountability in government.
The government has put out these enabling policies but they now need to back that up by saying what the penalty would be if the enabling environment is not enforced. If you as a civil servant or minister fail to do what you are supposed to do what is the consequence? We need to see bolder actions being taken to reinforce the policies the government has already put in place. We need to see more support for the private sector. What we have seen so far is government saying, ‘Okay we are going to streamline the processes and government is effectively going to get out of your way,’ which is wonderful. But going forward, we also need to see the government saying, ‘how can we help you?’ And how they can help us is if you are a small business, ‘I am going to enable you without putting up your house gathering the whole family, the whole village has to mortgage in other for you to raise monies,’ which is completely impractical. The government needs to have a way that small businesses can access finance in a more practical way; and for large businesses, we need to make hundreds of millions of dollars of investment. So how can they help us to get access to that kind of money in a low-cost, long-term way?