Owolabi: Economics of the Finishing Sector is Squeezed by Few Projects Closures

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Michael Owolabi, an investment banker-turned-interior design entrepreneur, runs IL Bagno, a homegrown firm that specialises in high-end interior finishes. Ahead of IL Bagno’s launch of its new state-of-the-art Abuja outlet, he spoke with Chineme Okafor on how the industry he operates in has been faring during the economic downturn. Excerpts:

It would be nice to know your name and the entity you represent?

My name is Michael Owolabi. I work for IL Bagno as the Chief Excutive Officer (CEO), a job I have had for 12 years now.

What’s IL Bagno’s trading interest?

We primarily do bathrooms but over the last few years, we have diversified into other design solutions like kitchens, lighting and tiles. It is now all about end-to-end interior solutions.

How have you fared so far in this trade?

It has been fulfilling and challenging as well. We know the problems of doing business in Nigeria, you know it is difficult to find good staff, cost of borrowing is high, importation is tough because of delays at the port, road and rail infrastructure is not what it should be and so transporting goods from one end of the country to the other is very difficult.

Moving containers for instance from Lagos to Abuja is very difficult and one is frequently on edge when goods are being moved. You have to pray all the time.

You identified forex as one of your challenges, could you be specific?

We import all the goods we sell and therefore need FX. As anyone knows, access to FX is very difficult today, the rates are very high and it is more difficult to sell, this high dollar rate has led to reduced sales and it is a challenge we are trying to overcome. Import volumes have dropped, sales volumes have also dropped.

Prior to now, what were the operational indices like?

To be honest with you, I can only say to you that they were better and just to give you an instance, we are probably just running about 50 per cent of Year-to-Date (YTD) budget for this year and that is because of the high FX rate and recession.

Everybody points to electricity as their business challenges, is this the same with you?

Sure, as far as business in Nigeria is concerned power and road infrastructure are key issues. In an office like this, we require constant electricity supply in our showrooms and to have a good working environment. When you have to rely on generators and diesel, it is difficult to operate.

I already talked about the challenges with our road infrastructure because we move stocks from place to place. Our ports are in the south and we have to bring goods up north. Every time we put a container on the road, we have to almost pray and fast until they arrive and it should not be like that if we had a functional rail system. We could put them on trains and get them here on time almost without incident. These are the issues that make doing business more challenging in Nigeria.

Does this suggest your losses are almost every time?

Clearly not every time; I am talking about the fact that accidents happen and we have had breakages and lost money. It is not every time but often given the nature of our business. We sell products that are fragile and in the bumps of the journey breakages happen. Fortunately we have not lost entire container shipments as some others have.

How do your insurance firm and indeed the insurance firms in Nigeria measure up to these cases?

The insurance industry in Nigeria like the banking industry is very well developed, our goods are insured really but when a customer pays you for goods, he does not want money back, he wants products. When our goods arrive in Nigeria and get damaged and the insurance person writes us a cheque, we have ended up where we started. Yes, it reduces the pain but don’t forget we started with money but we want goods not money and so the insurance is there but does not solve the problem. We have to start the import cycle again and what is the assurance that they won’t break again and you start all over. The issue really is not the insurance but that we want the goods to arrive where and when they are supposed to arrive.

How are you operating in a recessed economy like Nigeria’s?

We are operating like everybody else, the recession is not peculiar to us. It is certainly more difficult but people understand and appreciate the value we bring. To anyone with a project, we provide high quality products, installed appropriately and this what people pay for but because of the recession, there are fewer projects.

Our challenge is not convincing people to buy, the challenge is that there are fewer projects out there. Also, quite a number of people are buying goods of lower quality as a compromise because of the recession but that is not a big enough challenge to us, the challenge is that half of the projects that should be built have been shut down.

How have you fared with the Customs in a regime that is reportedly averse to corrupt practices?

Frankly, I have never had problems with the Customs in terms of reported overzealousness or corrupt practices, people talk about it but I have not experienced or dealt with such personally.

The challenge we have is delay at the port because of the number of supervising agencies. If a container arrives, why can’t we get it in two to three days and that is my challenge, why does it take about a week or two? In most cases, the minimum is 10 days and you are going from desk to desk dealing with several agencies.

I know government has tried to reduce the number of agencies at the port but I hear it has gone back to what it was, and so those are the challenges in terms of the bureaucracy. If you have your documentations intact, why does it have to take this long?

We usually estimate between 30 to 45 days from when goods leave Europe to when we actually get them in our warehouse and consider that shipping time is only about 20 days, why does it take another 15 days or sometimes more to clear it, those are the questions we have.

The government is trying to shore up its earning by taxing luxury goods, do your products fall into this category?

I don’t know what luxury goods are, what we sell are high quality goods and I therefore don’t see them as a luxury. We sell products that people require to build homes, offices and hotels.

In my mind, when people say luxury goods, I think of jewellery and diamonds and things like that, in our case, we sell things that you need for construction. If you want to build a good hotel today, you have to buy quality bathroom fittings because you cannot build a hotel that is supposed to last for 40 years or more if you don’t buy high quality products, and so that is what we do, we sell high quality products for people who want to build structures that will last.

12 years in the business now, are you able to access the pace of this industry from your perspective?

When we started, what we do now was considered mere trading and therefore not a real profession. If you wanted to buy bathroom products, they will tell you to go to Orile or Coker Markets in Lagos, but we took the business and service to a higher level.

We provided a different customer experience and then convenience and high quality value to clients. Back then, we were almost the only ones doing this, but today, I can point you to more than 10 companies that are in the same business trying to compete with varying degrees of success.

It is interesting for me to see that change and the competition has become interesting. It has helped us to innovate and keep our thinking caps on. A lot of capital has also come into the industry.

Are you able to estimate the capital base of this industry now?

No, that will be a difficult task to do or speculate.

On competition, how have you being able to hold on to your market share?

I won’t let go of my market secrets but if you look around the showroom we have put up in Abuja, you will know that no one has this kind of showroom in Nigeria. We continue to distinguish ourselves as leaders in the industry, when we opened our showroom in Lagos eight years ago, no one had that kind of showroom and people have tried to copy it but in terms of space, I think we still have the largest display capacity in Nigeria.

We continue to stay ahead and we have also diversified. I think we are the only company in Nigeria that offers end-to-end solutions for any project that you do. We can take any projects and finish it.

How expansive is your operation in the country?

We have physical locations in Abuja and Lagos. We have partners in Port Harcourt and we are establishing relationship in Kano.

Why are there no Nigerian-made products in your showrooms?

We have the plans but much more needs to be done. Nigeria is not yet an industrial powerhouse. Industrialisation cannot happen without power, rail network, etc. This will come with time.

You are opening your Abuja showroom soon, what’s different about it?

We are formally commissioning the building on December 15, and our trade partner – Alter Ego, is also opening its outlet here. They offer interior design services and have heeded our call to come into Nigeria to invest, they brought their money to invest and have partnered with us, we are excited that this is happening because for many years we asked our partners to come into the country to invest and Alter Ego is the first to heed to this call.

What is your next big plan going forward?

We are considering backward integration. We are thinking seriously about setting up a factory to produce sanitary wares if we find the right environment and investors. That is what we are looking to do but we will leave the specific details out for now.