Ugoji: Nigeria Has Strategic Role to Play to Ensure AfCFTA Succeeds

Ugoji Lenin Ugoji is the Group Managing Director/Chief Executive of C&I Leasing Plc. He recently joined C&I Leasing with over 20 years’ experience in Commercial/Investment Banking, Leasing and Asset Management. In this interview, Ugoji speaks about opportunities for C&I Leasing in the African Continental Free Trade Area as well as efforts to restructure the company to sustain its leadership position in the industry. Obinna Chima brings the excerpts:

What is your assessment of the business landscape in Nigeria for the first half of 2022?

Going back a bit, Nigeria has gone through two recessions and coupled with the COVID-19 pandemic, these have impacted the business landscape adversely. What has happened the last six months is actually like a spill-over of several of the things that had happened in the past seven years. For instance, the devaluation of our currency, the hike in inflation, overall increase in cost generally across board, and the slowdown of economies, all these have dovetailed into what we have now seen in the last six months. In February when the Ukrainian-Russian war started, some more upheavals came to the global market, and because we are in a global economy, everything affects everybody. For instance, in our line of business where we deal in motor vehicles which have some foreign components, these things impact the cost of managing assets.

But by and large, Nigeria has been able to manage creditably some aspects of these upheavals. Why do I say so? COVID-19 brought about an unprecedented amount of debts. For instance, because people could not work, governments had to keep the market moving. From what happened in the 2009 financial crisis, governments realised that quantitative easing – which is pumping of money to ensure consumption – is very critical in managing economies. And to that effect, the COVID-19 pandemic caused another round of quantitative easing. That’s why you see across the board, developed and undeveloped, unprecedented amounts of borrowing. The challenge now is that those borrowings are to be repaid, so there is going to be issues with the borrowers; and we have already started seeing that. But if you look at Nigeria’s debt management, even though our debts have grown partly because of COVID-19, it’s still pretty low compared to other countries. For instance, Kenya’s debt-to-GDP is 70 per cent and Nigeria’s is still about 32 per cent. That shows that Nigeria has not done too badly. Yes, we’re feeling the inflationary pressures and all that, but I believe we have been able to manage that slightly. And even the stock market, you see that it trended upwards in the first half of this year; it’s one of the most performing exchanges in the world. It has really been quite a topsy-turvy one, but I think Nigeria has been able to manage its situation properly.

We are gradually moving into another electioneering period. How do you think this will impact the business environment?

It definitely will have some major impact. You can even see what has happened to the naira against the dollar in the last few weeks. It has probably depreciated by over 10 to 15 per cent. And what that shows you is that electioneering still has an impact on some of these indices that affect our daily lives. The way I see the candidates, I think we are going to have a very keenly contested election; that means there’s going to be quite a lot of activity. And for the business community, it may actually be positive because there’s going to be, for instance, a lot of requirements for vehicles, a lot of requirements for advertisement, a lot of requirements for basic services. I think definitely there will be an impact on the volume of business and this will edge up.

You were appointed CEO six months ago; can you speak generally about C&I Leasing business and the structure you met on ground?

C&I Leasing is quite a robust business. I always tell people that I used to be a competitor and so I’ve always analysed the company. Firstly, the company is a market leader. C&I started around 1990, and it has gone through several areas of rebirth at different times in its life and is now a business that spans about three major areas. These are the fleet management for vehicles, the personnel and outsourcing, and of course its biggest unit which is the marine business. C&I is quite a unique business, and that’s why even on the stock exchange, it was difficult for the exchange to pigeonhole the business because C&I also has a finance house licence – so it’s also regulated by the Central Bank. Because it’s probably one of the biggest indigenous players in the marine business, it’s also regulated by NIMASA. It has been able to straddle these industries, providing jobs to about 8,000 people, so, it is the epitome of the spirit of the Nigerian enterprise.

I think C&I should be one of the companies that should be celebrated especially because of its indigenous nature, and not only that, I’m the third CEO of C&I. What that means is that C&I Leasing has also shown great act and depth in succession planning. Emeka Ndu, who founded most of the company handed it over to Andrew, who presided over its affairs for seven years, and who has now retired, having passed the baton of leadership to me. This shows that indigenous businesses can be run properly. Nigeria is a very tough environment, that’s the truth, but like I said, we have been able to show that Nigerians can run a successful business with C&I Leasing. I think, yes, there are challenges because one, the COVID-19 pandemic seriously impacted the business especially in the marine area. As we all know, because of the pandemic for instance, oil production was severely hit; people were producing oil but they couldn’t sell and even the airplanes were not flying, and hotels were not open, and tourism largely suffered. There was so much oil and they were just storing it. It impacted our business because our business directly services the oil industry and for that, we had to assist the industry with some price cuts. We had to take some financial hit to be able to at least keep those businesses afloat as well as ourselves. And I think now as oil prices have gone up, we believe that in the near future, things would start to stabilise in the marine space so that we can go at some higher rate.

But in the meantime, C&I Leasing wants to focus on its key strength, which is its fleet management. We believe there is a massive opportunity in the logistics space such as the big vehicle area and Nigeria is becoming more and more industrialised. Africa has signed the African Continental Free Trade Area (AfCFTA) agreement, all these open up massive opportunities for the movement of goods in-country and intra-Africa. We think that Nigeria as the largest economy has a very strategic role to play in making Africa succeed, and C&I as the largest leasing company and provider of various types of fleets, I believe it is also well positioned to take advantage of that. We do appreciate that we are experiencing excruciating challenges because the Nigerian economy has been a bit sluggish for an extended period of time, but I think we’ve been able to manage that effectively. We’re poised for growth by the end of the year and looking forward to next year, and we are really positioned for some major push.

So, are there plans to restructure the company?

Oh definitely. I always tell people that every business is perpetually restructuring because things change always. Maybe in the 80s for instance, things changed every five or six years, but in the world today, things change every five minutes. I always tell people when they ask me: what’s your five-year plan? I tell them; I don’t know if five-year plans are even in vogue anymore. We are very particular about the issue of rejigging the business. First of all, it’s a people-business, and because it is a service business, we deal a lot with businesses but at the same time, with clients. I’ll give you an example, C&I is primarily a B-2-B business, but it is a B-2-B business that has a retail flavour. We have contracts with some of the big companies in Nigeria, but we drive the individuals, so, every interaction with those individuals tells a story about C&I, and this story gets down to the man on the street. That is something we are very keen on in terms of tweaking the business and we have already started that. For instance, normally we build vessels to supply for certain contracts, but we all know that most of the foreign oil companies are positioned to exit the Nigerian market and in as much as that could be a challenge, but It’s an opportunity for the local players, as the Local Content Law has helped build quite some strong local presence in the area of oil and gas. We believe that as the oil majors exit, the players that are going to come on stream are going to take up those roles and that will still create more opportunities for C&I Leasing. At that point, we’ll be ready to expand in that market as well because we are already focused and in readiness.

Peace Mass Transit acquired about 55 per cent stake in the company, what value did that bring to your business?
Well, it’s two ways. The Local Content Law was created sometime in 2010 to empower indigenous companies. C&I Leasing was one of the first beneficiaries of that. We acquired the services of one of the former foreign companies that was supplying Shell with vessels, we benefited from that. And what that did was that it created a different business line for C&I Leasing, while also adding foreign exchange earnings to our general revenue base. For a country whose currency continuously devalues, C&I now has a business unit or arm that earns in foreign currency. About 50 to 60 per cent of our revenues actually come in forex. By implication, the texture of our earnings tremendously improved by that strategic move. When Actis, which acquired the convertible notes from Aureos and Abraaj wanted to exit Nigeria, they had two choices – they could convert that equity, but once they did, they would own 53 or 54 per cent of the company. Automatically, C&I will no longer be a local company; C&I will no longer be able to benefit from the local content law and C&I will lose some of those contracts.
Strategically, it was important that C&I got a local investor and that’s where Peace Mass comes in. Peace Mass Transit was already a shareholder in C&I Leasing and had seen where the business was going and you know as a business-savvy investor realised that there were some symbioses that could happen with both businesses partnering. You know Peace Mass Transit assemble their buses here in Nigeria, so they already had an advantage in terms of cost, and we have a very strong fleet management business. For us, we looked at it strategically,noting that this may be another fantastic point of meeting because the whole aim is to manage our costs, to be able to give our clients more value. Those two things strategically made the coming on board of Peace Mass Transit a masterstroke for the Nigerian capital market, for C&I Leasing, and I believe for investors in the medium to long-term.

What are your five-year plans for C&I Leasing?

There’s a word that I think I have become totally enamoured with now, and it symbolises what I want to achieve with my time at C&I Leasing and that is collaboration. I think the world is all about collaboration now. The time when one person owned, controlled or did everything by himself is over. I think people are more efficient doing things in their own spaces with collaborative efforts. And if you can combine all those things together, it creates more value for you as a company, it reduces risks, which is very important and because of the volatility in the world, people must focus on risks. It’s proper risks management that ensure businesses survive. You’ll see a lot of people, especially local businesses, yes, they are big, they have contacts, they get the business, but they don’t put in place appropriate structures; they don’t put in place adequate processes; all tthese are risks mitigation to ensure that nothing is dependent on one man, and the more we continue to do that, I think the more the company will continue to endure.

Another one is innovation. You must innovate for you to remain alive; it’s just the fact of life. And I think that’s one thing C&I has traditionally excelled in. Many people don’t know the meaning of C&I. It’s Computer and Industrial. It started as a computer company. And because the computers they bought were changing every five minutes then, the off-take did not come the way they expected. So they had to lease the computers to get back their money. That in itself was the innovation. Then down the line C&I started supplying food to the maritime industry, and when they found another opportunity, they provided a vessel and C&I changed the game.

In the current times, just before COVID-19 pandemic struck, C&I had been looking for ways to cut costs and one of the ways was how to be able to work effectively remotely. Now this was before the COVID and C&I had started playing around with it and working on it and the next thing, COVID happened the following year and C&I was probably one of the ffirst companies to quickly and easily transit to the remote work structure. If you look at the financials, we did pretty well in those periods because we were able to effectively still manage our business which is a physical business though.

I think innovation is something that runs in the DNA of the company and it’s something we want to vigorously pursue. And for that, we’ve gotten even some new hires – we have a new chief commercial and strategy officer; we have a new chief marine officer for the marine business specifically because as much as we don’t want to increase our assets accounts there now, we still want to increase the business. We want to leverage our contacts in the industry to do what they call cross-charters so we can get into vessels that are not ours, we can get the contracts, and we can manage them and get the margins. Those are some of the strategies that we have especially in the short to medium term.

We want to see what is going to happen in the next three years because that will determine some of the plans that we have in terms of the next five years. Nigeria has an infrastructure deficit and we think that we may be able to play a role in that area. That is one of the areas that we want to focus on. We want to help Nigeria improve its infrastructure. For instance, why should Nigeria be buying and running trains? They should just provide the policies that would enable companies to be able to do that.

But have you opened talks with the government on the issue of allowing private companies to handle the train projects?

Well not directly, but we have opened talks with them in terms of certain other areas that have to do with, for instance, vehicles and alternative means of running vehicles. You know we expect fuel price to be deregulated probably next year and what that will mean is that it is going to tremendously increase the operating cost of vehicles. So C&I is already working on certain things in those areas to see how it will help us to manage those costs on behalf of our customers. Those are some of the things that we are looking forward to in the next two, three or five years, and how Nigeria can transit into more efficient use of energy to propel itself. Nigeria has already started in terms of pursuing gas, in which we have comparative advantage and that is a good direction to follow and we have already started looking at that area too.

Since you were appointed, definitely there have been some challenges; can you talk about some of them?
One of the major challenges has been the price of assets. Inflation has tremendously impacted the cost of vehicles, and the cost of assets generally. The price of a vehicle today can be totally different from the price in a month’s time and the challenge for us as a business is that a lot of our clients want contracts. For instance, they want a contract for four years, but if you’re having this type of galloping inflation, to project for four years becomes a challenge. We are looking at other ways to manage that.

We have quite a fleet ourselves – between then and now, we have about 2,000 vehicles – so we are taking a detailed look at the whole lot to see best we can upgrade them because we reckon that may be more cost-efficient for the client until we have some stability in the currency market. It may be a herculean task to continuously do that. Another is the heavy vehicles’ area. If you notice, in the Nigerian market it’s difficult to get reliable heavy-duty movers in terms of goods and services. That is why there are certain companies that are known for that. And you probably cannot easily access their services because they are already plugged to some of the big names. Clearly, there is a demand and supply gap there. We believe there is something there for other players too to close the gap, and we are interested in that market so that’s one of the things that we would be considering in the short-term.

Beyond Nigeria and Ghana, are you looking at expanding to other countries or even outside Africa?

Definitely, I think opportunities are across the African continent, and AfCFTA is the pathway for that. I have a personal view about Africa. Africa is blessed with many natural resources and people talk about adding value, right? But I always tell people that before you can add value, you also have to have the right population that is empowered. So it’s not just about a growing population, the population must have spending power, and that way, you can now create value internally. But if not, I believe Africa is going to have to start from where it must start, which is, take control of its commodities. That is, Africa must be able to appropriately price its commodities; it will now be able to get the kind of margins that it can now invest in the infrastructure because Africa is not going to be competitive in a value-addition space because it lacks infrastructure. How do you compete with China when you don’t have consistent energy supply, you don’t have good roads to move the goods? I think Africa should focus on how to properly take charge of its commodities and price it appropriately and I think value will be added. Moving into the AfCFTA would be very key for a company like ours because if we want to grow, we think we need to look within the continent as well.

Are there government policies you would like to see that would support your business?

One of the policies we think would be very good for our business would be in the area of taxation. We are an asset-heavy business, so there are a multitude of taxes that impact us and C&I is a committed taxpayer. However, we are a margin business and because we need to have contracts, what it means is that we are susceptible to the vagaries of inflation and all manner of price hikes. What that means is that sometimes we may have to take a hit, even on the operational side and then if you add the multitude of taxes that are available in the market, it really impacts our business. It is something that we believe the government should look at to be able to help indigenous businesses like ours to grow. We hope that a very simple, clear tax policy for businesses like ours would be welcomed.

For stakeholders, clients and investors, what should they expect from the company under your leadership?

What I can tell them is that in the short-term, we are going to rebalance the company because certain things have happened, such as COVID-19 that impacted the sector negatively, and now impacting the company. I believe we need to refocus on how the company is structured. We would really want our stakeholders to be patient with us, especially in the short-term. We have looked at the business internally, and we see that there are so many opportunities to tap and there are so many assets that the company has that we can utilise to create revenue. In the medium term, the shareholders are going to be extremely happy about the business. Why I say so is that some of the partnerships we are working on, we think would help to reduce cost and also help in giving us additional businesses to grow. We think that in the not-too-distant future, we should see the impact of some of these on the bottom-line of the company.

In terms of internal growth, the company has evolved. We have quite a number of people that have been here for about 18 years. It is a 31-year-old company, so you can expect that. We did an analysis the other day and found out that we actually have more baby boomers than the other generation. What that tells us is that C&I is evolving enormously and what that means is that as a business we too have to evolve internally, so that we can be able to get the best out of our employees. That was one of the things that prompted us to do a management rejig. Sometimes, you just need to bring in new faces, new ideas, and new opportunities to be able to make the best of it. I believe we are growing in a very positive way and I am pleased about that. You can only exude your positivity or confidence if you are happy internally. So, the important thing for us is how to increase the happiness index within the company.

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