Despite the recession, the Managing Director of Phillips Morris, Nigeria, Mr. CoskunDicle, has seen the opportunities in the country and is urging foreign investors to come to Nigeria and invest. He spoke with select journalists. Jonathan Eze presents the excerpts:
Why is a global brand like yours venture into the Nigerian market at the time you did?
Africa is at the forefront of investment focus for many international companies across a wide range of industries. Within Africa, Nigeriaâ€™s human and natural resources, combined with the fact that there has been political stability and democratic governance since 1999, make the country an attractive investment destination. From our industry perspective, despite our global market leadership position as Philip Morris International, we were not present in Nigeria and one of our global competitors was enjoying what we can call a monopoly situation in Nigeria. We commenced business in Nigeria in 2015, after obtaining all necessary statutory and regulatory approvals.
Our objective has always been to provide our international brands of the highest quality, as alternative choices to the legal aged smokers who have made the choice to continue to smoke. Beyond Nigeriaâ€™s position as Africaâ€™s largest economy, Nigeria is also home to a consumer population that is both sophisticated and discerning. Nigerians recognise and appreciate quality while placing significant importance on the value-for-money proposition. This type of environment is one where Philip Morris Limited and its products can add value and thrive. In fact, we estimate that our employment footprint will reach approximately 2,000 Nigerian talents, through direct and indirect employment.
Furthermore, through our global efforts on tobacco harm reduction and reduced risk product development, which we hope to make available in all of the markets where we operate, we are committed to meet the marketâ€™s demands for the best quality, innovative products, now and for many years to come.
Why did PML start local manufacturing in Nigeria at this time?
Since our entry into the market, we have been very clear about our commitment to Nigeria and about the contributions we can make to the local economy. It has always been our strategy to manufacture our brands locally. Having found the right partner in International Tobacco Company Limited (ITC), we are proud that this is happening in less than two years of our presence in Nigeria; this will no doubt contribute to the local economy and establish a long lasting presence for our company. There is also the advantage of significant job creation, which PMI globally is passionate about as attested to by the many top employer awards received across the countries and regions where we operate. We are already providing direct and indirect employment to thousands of Nigerians, through our distributors, agencies and the support we are giving to the trade.
Presently, one of the major attractions of the Nigerian economy to global investors, to my mind, is the stability that has been bestowed on it by the sustenance of democratic governance. International businesses and investors want to flow with stable policies. For a country that endured long spell of military intervention in governance from independence in 1960 with civil rule lasting barely six years from that date to find itself under unbroken civil leadership since 1999 is remarkable. Civil rule promises stability and so long as that is guaranteed, global investors would be attracted. And so long as leading investors from across the world are attracted to any economy, it will continue to witness growth.
For us this time is the best time for any investor to invest in Nigeria economy. I believe that Nigeria economy is growing. It will not grow over night but gradually. Despite all the concerns about the state of our economy, I would say that our country offers tremendous opportunities for investors. We have the largest population in the African continent (estimated 170 million). We have the largest black population in the world; ours is the second largest economy in Africa (with a GDP of over $300 billion). We have one of the highest growth rates in the world currently (6.7 per cent). We account for over 50 per cent of the GDP of the West African sub region. We account for over 50 per cent of the population of the west sub region, we are blessed with abundant natural resources (minerals and arable land) and our democratic structures are becoming firmly .entrenched.
What is missing is the capacity to harness these opportunities for our common good. I am confident that this will happen before long.
How do you hope to compete, being relatively new here?
Quite simply by providing better products at a better value than those that are currently available to Nigerian consumers. This consumer quality-and-value proposition, along with our commitment to maintaining the industryâ€™s highest standards, is in our DNA and is what has helped PMI to become the worldâ€™s largest international tobacco company. These are values on which we never compromise and which will allow us not only to compete in this market, but to thrive in it.
Additionally, with our global efforts on tobacco harm reduction, including the development and commercialisation of products with the potential to reduce individual risk and population harm in comparison to smoking cigarettes, and which we hope to make available in all of the markets we operate, we believe we can change the face of the industry.
Recount your experience in Nigeria. What challenges come with the operating environment?
It has definitely been worthwhile. Looking back to the time I started as managing director in Nigeria, precisely in February 2016, I can say we have had a fast learning curve discovering the uniqueness of doing business here. Our experience shows that doing business in Nigeria at this time might not be as difficult as it is being portrayed outside the country, particularly in the media, which has created an erroneous perception of the Nigerian business terrain as a difficult operating environment. With the governmentâ€™s intervention in addressing the power supply challenges, infrastructure deficiency as well as the recent economic reforms focused on the ease of doing business in Nigeria, the business environment can only get better.
From PMâ€™s perspective, the operational and economic outlook is extremely positive and we are here to stay. We recognise that both the opportunities and challenges in Nigeria are great, not least of all the highly competitive nature of our industry. However, we have invested considerable time and resources to better understand the market and how to work in it. As a result, we are confident that with fair competition and a level playing field, we will be able to operate with integrity in Nigeria and provide meaningful contribution to the community while delivering long-term sustainable growth.
The cost of doing business in Nigeria is said to be higher than those in most countries; how is that affecting your cost and pricing template?
It is costly doing business in Nigeria, and this was discussed at various meetings. There are two big things, energy and the logistics needed to support moving goods across the country and different markets. Being an export organisation, we have to compete against other factories in these markets that do not have the same challenges. However, to manage our costs, we localise a lot of our operations , growing, packaging, manufacturing, among others. A number of our competitors who are transactional have challenges with the inflation and foreign exchange pressure. But due to our deep roots, we only see these challenges as opportunities.
What is your stand on Nigeriaâ€™s Tobacco Control Bill?
We were fully aware that the National Control Bill was being discussed at the National Assembly as we sought our registration. We strongly believe that proper regulation of tobacco products is essential to ensure that adult smokers are aware of the harmful effects of smoking, that tobacco products are not made available to minors, and that legitimate companies can compete on a level-playing field with clear rules.
How do you think the issue of illicit tobacco trade can be handle?
Available statistics from different sources estimate the size of the illicit tobacco trade to be between 10 and 12 per cent of the global cigarette market. This is alarming not just because of the income it denies various governments and the world economy but growing concerns that such income is further employed to support other illegalities.
Contraband cigarettes deprive governments of billions in tax revenue yearly, while consumers lose because they often end up buying fake products of poor quality that are not subject to any regulatory scrutiny or quality control procedures by manufacturers.
Around the world, PMI undertakes a broad series of measures to fight illegal cigarettes, to ensure our brands are protected and consumers get the genuine product they expect. We support strict regulations and enforcement measures to prevent all forms of illicit trade in tobacco products, including tracking, tracing, labelling, record-keeping requirements, and where appropriate, implementation of strict licensing systems. We are also working with a number of governments around the world on specific agreements and memoranda of understanding to address the illegal trade in cigarettes.
We are planning to meet with all relevant authorities in Nigeria, in particular with Nigeria Customs Service, to present our tools and know-how to foster cooperation in addressing illicit trade together.
Can you shed light on your investment plan for Nigeria and how have you affected the economy positively?
The plan is to steadily grow our investment in Nigeria. Since 2015, when we started our operations by taking advantage of the ECOWAS Trade Liberalisation Scheme (ETLS), which enables free movement of goods within West Africa, we have gone from 100 per cent importation of brands from our manufacturing plant in Senegal, to taking the bold step of starting to locally manufacture our brands in Nigeria with our strategic partner, International Tobacco Company Limited (ITC). This goes to show the confidence we have in the Nigerian market and our focus on local manufacturing and other investments will certainly continue. PMINTL Nigeria intends to have significant positive, long-term impact on the Nigerian market.
First, we expect that the work that we are doing in tobacco harm reduction will transform the tobacco industry.
Next, we have already created approximately 500 direct and indirect employment opportunities in the country and are still creating new ones with the hope to grow our footprint by as much as four times in the near future. To aid in this, and in pursuit of our long term investment plans in Nigeria, full-scale local manufacturing of our brands will begin before the end of the year through strategic partnerships.
Additionally, we have started exploring the possibility to produce in Nigeria, with key partners and local farmers, tobacco and/or other agricultural crops for the local and international markets. We would work with local business partners to share our know-how and help to ensure good agricultural practices to obtain good quality crops, high yields and good income for farmers, while minimizing environmental impact and fostering sustainability.
PMINTL Nigeria, through our investment plans and commitment to Nigeria, will be a significant tax payer â€“ contributing to the government revenue, providing foreign direct investment into Nigeria, creating sizeable direct and indirect employment opportunities to Nigerian talents with ongoing focus on education and development. Overall, we are committed to contributing to the local communities, while operating with integrity, and look forward to becoming a major player in the Nigerian economy to establish a long-lasting presence.
How can you compare Nigeria with other market where PMI also does business?
Every market has its peculiarities. For PMI, countries that have signed up to and are guided by the WHO Framework Convention on Tobacco Control (WHO FCTC) resolutions have some unanimity in the treatment of the tobacco industry and this helps to maintain a unified approach in addressing the challenges facing the tobacco industry, such as illicit trade, youth smoking, etc.
Since the enactment of the National Tobacco Control Act, 2015, which has led to the setting up of the National Tobacco Control Committee with a view to ensuring compliance with the law by all stakeholders, there have been a lot of activities within the industry and all players are aware that it is no longer business as usual. We welcome these developments in the hope that they will help the tobacco industry operate within the provisions of the law to the benefit of all stakeholders.
How does PML manage to impact the operating environment?
Our industry is highly regulated. Philip Morris Limited (PML) maintains a global policy of compliance with rules in each market where it operates. So, our best way of impacting our environment is through quality processes and ensuring full compliance to all laws and regulations. For instance, we are very much interested in partnering with different Government Agencies on jointly fighting illicit trade of cigarettes, to ensure that every pack sold in Nigeria contributes to the tax revenues of the federal government.
In what areas would you want to see changes?
Regarding the operating environment, it will be nice to see more of an improvement in power supply and quality of infrastructure. On industry specific changes, I would like to see more efforts towards the fight on illicit trade and counterfeit products as this will invariably increase revenue generation for the government. I am also keenly looking forward to the continued implementation of the Act and other subsidiary legislations with a view to ensuring compliance by all stakeholders.
Can you shed more light on PMI operations, how it was started?
We are the worldâ€™s leading international tobacco company, with six of the world’s top 15 international brands and products sold in more than 180 markets. In addition to the manufacture and sale of cigarettes and other tobacco products, we are engaged in the development and commercialisation of reduced-risk products (â€œRRPsâ€).
Initially, the company is incorporated as PMINTL Nigeria Limited. In December 2014, we applied for and received all regulatory approvals required to commence business in 2015 and started by importing some of our brands into Nigeria under the ECOWAS Trade Liberalisation Scheme (ETLS) from its factory in Senegal. As PML Nigeria, we are already providing direct and indirect employment to thousands of Nigerians, through our distributors and agencies. Through our investment plans and commitment to Nigeria, the company is a significant tax payer, contributing to the government tax revenue, providing foreign direct investment into Nigeria, creating sizeable direct and indirect employment opportunities to Nigerian talents with ongoing focus on education and development, while upholding the highest standards as a socially responsible company. We look forward to continued contributions to the Nigerian economy and establishing a long lasting presence.
PML and ITC are into partner on local manufacturing. Can you shed light on this?
To start with, Philip Morris Limited (PML) is the national affiliate of Philip Morris International (PMI) in Nigeria . Recently, we entered into a strategic partnership with International Tobacco Company Limited (ITC) to manufacture one of PMIâ€™s leading brands in Nigeria.
Under this agreement, PML will be investing in technology and capacity building at ITC’s factory, creating additional employment opportunities and contributing to the local as well as national economy of Nigeria.
We strongly believe that investing in local manufacturing is the right thing for the future as it contributes to the Nigerian Governmentâ€™s efforts to strengthen the economy and reduce the dependency on oil. It will also benefit all parties. Our consumers will have their preferred brand readily available at the highest quality standards, our partners will enjoy improved capacity utilisation of their facilities, and the local community will benefit from the micro-economy boost and new employment opportunities.
We are here to provide a choice to those consumers who choose to continue to smoke, and we are here to make a positive contribution to the Nigerian economy for the long term.â€ He went on to highlight the giant stride that PML has made in less than two years of operations in Nigeria, attributing it to PMIâ€™s global strategy to deliver long-term sustainable growth and the passion of local employees.
The start of local manufacturing is just the beginning of various planned investments in the Nigerian economy by PML. PML and ITC are eager to become an integral part of Nigeriaâ€™s drive to strengthen the economy through creation of jobs, more foreign direct investment, and tax payments, while upholding the highest standards as socially responsible companies.
What is the future of Philip Morris in Nigeria
We are optimistic about the prospect of our business in Nigeria and against this background, we are currently focused on building our business organisation, hiring local talents and strengthening our infrastructure and ties with our counterparts in the tobacco value chain. But I can assure you we are here to invest and we are here to stay.
We have planned to invest heavily into Nigeria economy which I know would provide a lot of job opportunities for the youths of the country. The Nigerian youths deserved the best, and that is why we are in Nigeria. When you look at the economy, there are a lot of challenges but we not looking those challenges at moment now, we are looking at the future. The future is bright for any investor like us in Nigeria.
What is your personal experience living and working in Nigeria?
I absolutely love Nigeria and Nigerians, the passion and energy is unmatched and contagious. I have enjoyed every bit of my time here and made many good friends because everybody is so warm and welcoming. I have also developed new taste buds and I relish all the local dishes especially pepper soup and suya.