Gentleman of Leisure @60: How Femi Otedola Turns Vision to Profit, Opportunities to Goldmine
In his latest Instagram post, billionaire magnate Femi Otedola, chairman of Geregu Power, dubbed himself the ‘Gentleman of Leisure’, sending his greetings to his followers from Venice, Italy, last Sunday. Indeed, Otedola is a prophet of enterprise. Undoubtedly, he is one of the illustrious popes of commerce, robed and mitred in the resonance of their exploits. He is the artist who paints beautifully on canvas with his feats even as he writes wonderful poetry by his exploits
In a matter of days, on November 4, Otedola would hit the mark of 60 years, swelling the number of very lucky sexagenarians with unrelenting energies. That the last six decades of the hugely successful and astute businessman are packed with twists and turns worthy of a potential box office is not in question. Femi Otedola did not only walk the tightrope to the pinnacle of entrepreneurial success; he emerged stronger from situations that tend to confine many to terminal illness, if not to their untimely demise. Of fact, not many businesspeople of Nigerian extraction could lose about $1.5 billion and bounce back in a big way as Femi Otedola did.
HEADSTART HALTED BY CRUDE PLUNGE
His background as the first son of a former governor of Lagos, the late Sir Michael Otedola, notwithstanding, Femi’s entrepreneurial journey did not take off on a platter. His present status had an echo in his childhood when he had his first business at the age of six.
“It was called FEMCO. I’d offer to groom my parents’ guests’ nails. Then, write a receipt and charge them for my service. They paid me too. I always had an interest in business,” he stated.
This certainly set the tone for the young Otedola, whose business mind was further sharpened under the tutelage of his father, who then had a printing press. Femi Otedola ran the marketing side of the family printing press in the late 1980s, which served as a springboard to becoming a name of national, continental and global reckoning.
Otedola’s inroad into the oil business was fortunate and intentional. “Being the son of a governor, Otedola had friends in government who supplied him with diesel. Friends that didn’t do his business any harm down the years. When the political climate changed, the supply stopped. He made enquiries and approached a company for fresh supplies of diesel.
Something triggered in Otedola when he “saw a clanking, broken-down truck deliver supplies to his house three days after placing the order. He decided to open his own, more efficient, diesel supply business,” a Forbes report stated.
“I started buying diesel from a guy who had control of the market for retailing. I soon realised that a lot of companies in the country actually used diesel. I once received an order from a big transport company. The banks were closed, and I could only offer a cheque,” he added. “I was my supplier’s biggest customer, but he refused to take a cheque from me. I immediately realised I needed to source alternative methods of getting my diesel.”
Otedola’s crazy ambition pushed him to approach the new management of the depot and offered to buy it for $20 million ($16 million more than its actual worth of $4 million at the time).
“I contacted Zenith Bank, sold my pitch on the venture and how we would finance it. I had a meeting that barely lasted 10 minutes with Jim Ovia; he believed in me, and it was a done deal. This was in 2003,” Otedola said.
It took Otedola a relatively short period to take overwhelming control of the diesel supply infrastructure, with his Zenon Petroleum and Gas Limited holding 91 per cent of the market. The success spiralled in his setting up F.O. Transport and Seaforce Shipping – a transport and shipping company in line with the logistics attached to diesel supply, thereby completing the take-over of the entire chain. This was followed by his foray into property and buying into a string of other large companies. He was able to achieve these monumental successes within the span of seven years. By the time he was 42, he had only the oil industry’s biggest giants, like Total and Mobil, as competitors. With his ingenuity, he was dictating the pace, setting the diesel price and supplying his competitors. Otedola’s business ingenuity took Zenon from an unknown quantity to being the largest diesel importer in Nigeria - a good underdog story.
“While my competitors were sleeping, I was busy strategising. I was liberal too. My strategy was: high volumes, little margins. I was very excited at this point,” the mogul noted. “However, I knew that at some point, the government would fix the power issue, and I needed to move a step forward.”
Stoutly solvent, Zenon then bought a 28.7 per cent stake in African Petroleum (AP), which was increased to 55 per cent (at the cost of $400 million at the time). Everything was fine until the worst happened - the crude oil prices plunged from $146 to $36. It was a
period that brought Otedola’s intransigence and faith to the fore.
Narrating his ordeal, Otedola said he almost committed suicide.
“We took a very big hit, and I lost about $1.5 billion, plus interest, in the process. When the oil prices were dropping, I saw it all coming. I could see myself losing big money. I had diesel worth $400 million on the high seas,” he further explained. “It didn’t look good. I’m a capitalist, though. It was great while the money was rolling in. Now that I lost so much, it was also time to face the tune. It was a very low time for me, and I explored different options, including suicide, but ultimately, I knew I had to solve this problem. My debts had to be paid.”
Wasn’t it interesting that the banks that ran after customers to get money from Otedola for their accounts in the past sent tough-looking men to his house to retrieve his debts in the mornings?
“The only people I’d credit at this point were my wife for her great support, Jim Ovia of Zenith Bank and Segun Agbaje of Guaranty Trust Bank who understood the situation and offered a restructure of the loans for ease of payment. I was, however, determined to pay it all up and move on. The banks sold the debt to Asset Management Corporation of Nigeria. It was a total of N200 billion ($1.2 billion at the time),” he remarked.
What turned out to untie Otedola from the quandary of that era was his decision not to muddle things up by separating his personal fortune from his business. While Zenon became insolvent, he stayed afloat. Asset Management Corporation of Nigeria (AMCON) waded in and bought the debt for $867 million. They valued the Zenon assets, his property company and other existing assets, to which he added some cash, and there was a court settlement. He had also started selling his bank shares, before the big plunge. It dragged on for four years.
“The most important lesson I learned is that no one is invincible. No matter how high up there you are today, you can lose it all tomorrow if you’re not on top of your game. I also learned that being a good entrepreneur does not necessarily make you a good business manager. I learned to keep my hands off managing and leave it in the hands of experts,” Otedola revealed.
Femi Otedola has distinguished himself from his contemporaries. His chutzpah to take a plunge when and where others develop cold feet stands him tall above his peers. His virtues and ideals have seen him elevated and celebrated by many. The Epe-born magnate has held several board memberships, including President of the Nigerian Chamber of Shipping and as past chairman of Transcorp Hilton Hotel, Abuja. He was appointed member of the governing council of the Nigerian Investment Promotion Council in January 2004, and in December of the same year, he was appointed a Member of the Committee saddled with the task of fostering a business relationship between the Nigerian and South African private sectors.
He was a member of the National Economic Management Team from September 2011 to May 2015 and the Honorary International Investors Council under the leadership of Baroness Lydna Chalker. Otedola was further recognised for his immense contributions to the growth of the Nigerian economy with the conferment of the prestigious National Honour of Commander of the Order of the Niger (CON) in May 2010
STUNNING COMEBACK – THE REBOUND ERA
Typically, comeback stories focus on either the people who achieve great things and then have a major setback that almost destroys everything they’ve worked for or those who start from nothing, experience major setbacks, and still find a way to impact the world. Either way, Otedola’s is one of the greatest comebacks in Nigeria’s business milieu. He has gone ahead to pick his lessons and emerged better for it. Otedola has since adopted a different business approach which he described as “very risk averse and content.”
His attention shifted to African Petroleum, having sold off his Zenon assets. Now made of sterner stuff, he engineered an overhaul in 2011 that saw him sack all staff at African Petroleum (with a mouth-watering severance package) and rebrand African Petroleum to Forte Oil.
Forte’s rise was frenetic, just like Otedola’s recovery and return to global prominence.
“I also made a decision not to run the business as I had failed at running it well. I then brought in a crop of fresh young talented guys to take over. I wanted fresh, brilliant minds and ideas,” he stated. “I wanted to build an institution based on the best corporate governance practices; a whole new direction.”
Forte’s rise was frenetic, like Otedola’s recovery and return to global prominence. Forte Oil owned more than 500 retail outlets across Nigeria. Its growth was unprecedented. By half year 2014, its revenue grew by 33 per cent to $511.18 million against $385.03 million in 2013. The company’s power generation arm from Amperion Power contributed significantly to revenue. A major plant overhaul commenced in 2015 and was completed in 2016, increasing the combined capacity to 435MW. In 2013, Amperion Power Distribution Company Limited, Forte Oil’s power subsidiary, paid $132 million to acquire the 414-megawatt Geregu power plant under a government-led privatisation scheme meant to confront decades of chronic power outages in Nigeria. Otedola joined the board of Geregu Power Plc as chairman of the board of directors in November 2013. In December 2017, Forte Oil invested close to $100 million to increase the plant’s generation capacity from 414-megawatt to 434-megawatt of electricity.
Seeing Forte to an unassailable height as a business entity in Nigeria and beyond, the energy tycoon decided to take up a new challenge and concluded the sale of his 75 per cent stake in Forte Oil to Prudent Energy. In a message he posted on his Instagram page, Otedola announced that the sale of Forte had been completed and he was now prepared to focus on Nigeria’s power sector.
“A few years ago, my team and I embarked on an arduous task of transforming a moribund petroleum marketing business, African Petroleum Plc (formerly British Petroleum), into Forte Oil Plc; a leading integrated solutions provider with solid footprints in downstream petroleum marketing, Upstream Services and Power Generation and one in which we built intrinsic value to the benefits of our shareholders,” he explained.
He added, “In line with my principle of business focus, we have divested from our marketing and upstream businesses and shall from now on focus and consolidate on the gains of our power generation business, Geregu Power Plc. We wish our successors the very best and urge them to build on our legacies which have been established since 1964.”
Otedola’s Midas Touch would also rub off on Geregu Power Plc. Originally constructed by the federal government and commissioned into service in February 2007 to generate electric power and supply to the national grid managed by the Transmission Company of Nigeria, the plant is owned and operated by Amperion Power Distribution Company Limited, holding an 80 per stake and 20 per cent retained by federal government jointly held by Bureau of Public Enterprise and ministry of finance.
The power plant consists of three simple cycle natural gas fired SIEMENS V94.2 STG5-2000E gas turbine generator units with a 435MW Installed Capacity. The turbine units are GT11, GT12, and GT13 and each is designed to produce 145 MW at 15.75KV, stepped up to 330kV via a 173.6MVA power transformer and now generates on average 10 per cent of Nigeria’s power.
As recently as days back, he made history with Geregu power Plc when it was admitted into the main board of the Nigerian Exchange Limited (NGX) by listing by introduction with the admittance of 2.5 billion ordinary shares of 50k each at N100 per share on the exchange. By doing so, Geregu became the first generating company to be listed on the NGX main board, a listing segment for wellestablished companies with demonstrable records of accomplishments.
The listing of Geregu’s shares also added N250 billion to the market capitalisation of NGX, further boosting liquidity in the Nigerian capital market and providing opportunities for wealth creation. Geregu Power’s stock gained 10 per cent (N10) m on its first trading day on the NGX to close at N110 per share from N100 per share it was listed by introduction. The gain pushed its market capitalisation to N275 billion from the N250 billion it was listed. The leading power generation company traded 8.5 million shares at N935 million in one day as its listing further boosted liquidity in the Nigerian capital.
To mark the significance of the listing, a closing gong ceremony was planned for the last week of October 2022.
Speaking on the listing, the Executive Chairman of the GPP’s board of directors, Femi Otedola, stated that “the listing of the company was the actualisation of a vision to bring world-class standards in governance, sustainability, and business processes to the company and the Nigerian electricity sector.”