Reputed as the biggest and the best organised trade fair in Nigeria and West Africa, the Lagos International Trade Fair has been on successfully for 26 consecutive years. In an exclusive interview with Muda Yusuf, Director General of the Lagos Chamber of Commerce and Industry (LCCI), organisers of the trade fair, FinIntell gathered that participants at this year’s edition would get more value for trade promotion.
What has been the secret behind the successful organisation of the Lagos Trade Fair for 26 consecutive years, and what should participants expect in this year’s edition?
Basically, the secret is derived from the experience that we have gathered in organising the fair, which is the biggest and best trade fair in this country. We have been in this business for over 26 years, and over time, we have also been able to achieve a lot of goodwill that makes all those who come to the fair believe that there is value in participation. People who come to the fair are business men and women, and the fact that they come in year in, year out is a clear indication that they are getting some values from the fair. In other words, the fact that we are able to deliver value consistently, I think is one of the secrets that have kept the fair going and waxing stronger.
This year we are hoping, as always, that participation will bring a lot of benefits to those who are visiting and those who are exhibiting their products at the fair. The fair is the biggest platform of trade promotion in the country and the West African sub-region. And at a time like this when there are all sorts of challenges in the global economy –a kind of recession is been witnessed in the euro zone; growth is slowing down in Asia; the United States also has its own challenges; growth forecasts in all those regions are generally slowing down drastically, while in some cases, forecasts are even negative – the focus is now on emerging economies, particularly in Africa. And when you talk of African economy, you pick Nigeria and South Africa, the two biggest economies in the continent.
So Africa is now getting a lot of attention. This has made this year’s fair particularly unique and attracting a lot of interest. It is a platform that many investors, particularly foreign investors have being looking up to. And we hope that we meet all the expectations.
The LCCI moved the 2012 Trade Fair from its traditional trade fair complex ground along Badagry expressway with 35,000 square metres to the Tafawa Balewa Square (TBS) with 40,000 square metres of exhibition space (including the adjourning Cricket Pitch). Why the change of location, and with a bigger exhibition space, what are your expectations from the trade fair?
The feedback we are getting, following the change of location, is that we are expecting a greater level of participation at the fair this year because quite a number of our exhibitors are more comfortable participating at the Tafawa Balewa Square.
The initial trade fair ground along Badagry expressway, the Lagos International Trade Fair Complex, has a big challenge of traffic. There is a lot of construction works going on there, so it is a bit of an agony passing through that route. Sometimes we also have security issues. A city like Lagos where you have persistent traffic congestion particularly at night, it brings security challenges. We have even lost quite a number of foreign exhibitors in the past because of that location. With all the perception problems that we have, foreign investors feel that coming to Nigeria and going through such location in Lagos is not secured. We had a lot of problems having to convince participants to come. All these challenges put together prompted the relocation to the TBS. Now that we are in centre Lagos, a more accessible location, people can find more comfortable hotels around to stay in. We are optimistic that it is going to be a lot better this year, even with the large number of participants (approximately one million) expected at the fair.
What arrangement have you made to cater for the estimated one million participants expected this year?
We are partnering with some key agencies of government. We are partnering with LASTMA (the Lagos State Traffic Management Authority) through the State’s Ministry of Transportation. We have held meetings with the Commissioner for Transportation, Mr. Kayode Opeifa. We are also partnering with the Nigeria Police Force, including the anti-terrorist and the anti-bomb squads, to ensure security, and also to aid traffic flow. We are partnering with the Federal Road Safety Corps. We also have some private security agencies that we are engaging. So we have some very solid partners which we are working with to ensure the fair is a success.
We are also doing a lot in terms of publicity. The value of a fair is not so much in the people coming to exhibit; it is in the people that come to visit. So we have some media partners, both in electronic and print media, to mobilise participation. We have also developed a YouTube channel where all the activities at the trade fair will be streamed live online. We will also make sure that the phenomenon of hawking is reduced. The TBS is an enclosed venue, so it will be easier to control the influx of hawkers.
What major contributions would you say the LCCI has made towards the development of the private sector and the growth of the Nigerian economy?
As a Chamber, one of our core mandates is advocacy. And the whole idea of advocacy is to see how we can push for a better business environment. It is one thing to set up a business, and it is another thing to run the business sustainably and profitably. And you can only do that if you have a conducive business environment. Through advocacy, we get a feel of what businesses are facing –both the businesses of our members and non-members, and we intervene from time to time. We address press conferences on policy and economy issues. We hold dialogue sessions with relevant agencies of government. Just last week, we had a forum on the new traffic law.
(Interjects) Was the Chamber consulted before the enactment of the traffic law?
There was no sufficient consultation. The way the State’s Assemble works, they only send invitation to stakeholders to participate in a hearing, say two days before the event. Sometimes we don’t even get the draft bills to analyse. So there was no sufficient consultation. We had to invite the State Governor, Babatunde Fashola, and he honoured our invitation. We made sure that all the major stakeholders were present; the LCCI members, the manufacturing association, the road haulage association, the maritime truck owners’ association, the courier companies that use motorcycles in delivering goods (whose businesses are now affected by the new law) were all present. We had a very robust interaction with the Governor.
Rather than carrying placards and disrupting normal flow of activities in the society, we use advocacy engagement processes and we engage constructively. We put all our thoughts on paper and the Governor promised to examine them, even though the law was a product of the State’s Assembly. However, we know that there is a lot of working relationship between the executives and the legislature. So from time to time we engage authorities at the local, state, and federal levels.
We also engage the Nigeria Customs Service because of the ports in Lagos. We do have issues that arise from cargo clearing, timing, traffic around the ports, problem of corruption, the number of agencies, etc. From time to time we engage all these institutions and critical stakeholders just to make sure that we have an enabling environment for business. Very soon we’ll be holding an engagement process with the Central Bank of Nigeria (CBN) and all the key stakeholders on the cash-lite policy of the apex bank. We have run the policy now for some months, so we want to get a feedback from stakeholders on how it has fared; look at where the gaps are so that the CBN can take some lessons before it begins to replicate the policy in other states.
As the official body through which local opinion on commercial and industrial matters are presented directly to the Government, how cordial has your relationship with the government been in terms of implementing some of your proposals?
The response from government has been positive, but you don’t win all the time because we know what government is. What we have found out is that most of the time, government also don’t have sufficient information on the impact of their policies on the business community. So, rather than talk from afar, we move close to them and let them know what the challenges are. And because communication is key, they listen. Although we may not achieve fully what we wanted, but we have achieved some results over time. Engagement process to improve the environment is a continuous thing that we must do regularly.
Recently, we engaged the lottery agency, the National Lottery Regulatory Commission, for sealing up a number of business premises, accusing those doing trade promotion of carrying out lottery activities. The most recent case we had was with Nestle. They closed up quite a number of their offices nationwide. Nestle reported to us and we took the matter up, and issued a press release on that. The case is still on-going. If it comes to the extreme, we would have to challenge the matter in court because there is a need to separate lottery activities from trade promotion activities.
What other services do the LCCI offer?
Apart from advocacy which we engage in regularly, we contribute to the growth of the economy at the level of business development. We develop capacity for businesses because we discovered that many businesses do have capacity issues, particularly the small and medium enterprises. They have challenges getting the right information for business development. So we provide management training, marketing, financial planning, succession planning, etc at highly discounted fee, both for members and non-members.
We also do a lot of trade promotional activities through the trade fair which is a flagship of our programmes. Occasionally, we also receive trade missions from abroad. Whenever foreign investors come to Nigeria, they appreciate the fact that there are a lot of opportunities here. However, because Nigeria has serious perception problem in terms of credibility and integrity issues with our citizens, most foreign investors don’t know who to talk to. They are always very cautious. In the mean time, they are more comfortable dealing with the LCCI as an institution. Whenever they want to visit, they tell us and we mobilise relevant companies to discuss with them. Through that means, they have more confidence relating with us. Quite a number of our members and foreign investors have benefited from such relationships.
We also organise seminars and symposiums for our members. We have members that cut-across virtually all sectors of the economy, and this necessitates the need for intersectoral relationships. So we provide networking platforms for them because there is a lot of value in networking.
With the benefit of your extensive experience in the private sector, how would you assess the current state of the Nigerian economy, and what improvement do you hope to see in the near term?
The Nigerian economy is not doing too badly, although there are challenges in the system. At the macro level, if we look at the data that we have in terms of the performance of the GDP (Gross Domestic Product), we are not doing too badly. Our GDP growth was between 6.5 to 7.0%, at a time when some economies in the euro zone are recording negative rate. It is also a plus for us that we are still basically an oil economy, because it shows that there is wealth in the system. Whether the wealth is well distributed or not, is a different matter; but there is wealth that can be harnessed in the system.
We also have a large market by virtue of our population, about 160 million people. We have an emerging middle class, even though there are challenges of unemployment in the country. If you look at the structure of spending in the telecoms sector for instance, most of the demands are generated among the youth –the middle class, because that is where the business is. If you look at the entertainment industry, the bulk of the business is also coming from the youth. And if you look at any product that appeals to that segment of the population, the product does well. It is also a plus that we have an enterprising population, compared to other regions of the world.
The banking system, in terms of the sophistication of the industry, has actually moved on, even though there are some challenges in the linkage between the banking system and the real economy. If you compare our banking system with what is available in Europe, you will be amazed that the standards are almost comparable in terms of banking products –the use of cards and mobile phones for payments. In terms of value in service delivery, our banks are not doing badly. And if you look at their spread in the West African region, Nigerian banks have virtually dominated the entire market.
As we have good assets in our economy so we also have challenges in the system which we can call liabilities. We have challenges of unemployment which is growing, and insecurity which is slowing down economic performance. Most of the businesses up in the North have relocated or closed down. Some businesses that are even in the South, but have outlets in the North, are also having problems. Some of them have lost about 30% of their sales because they cannot access the Northern market anymore.
Generally, we have problem with high cost of operation. Nigeria is a high cost economy. If you are in production, you have a lot of problems of competitiveness because you produce at a very high cost. This makes competitiveness very difficult and that is why the manufacturing sector is still in a kind of stagnation. The small and medium enterprises in the manufacturing sector have serious challenges because of the harsh operating environment. The industry is not doing well, except for the top end of the sector –the multinationals that operate in the consumer’s sector.
There is a palpable disconnect between bank lending and the cynicism of businesses in Nigeria. Banks now prefer to buy treasury bills and government bonds than give loans to investors, thereby creating jobs. How would you rate credit facilities to investors in Nigeria?
Funding is also a big issue for operators in the economy. The cost of funding is very high, ranging between 25 to 30%; one of the highest you can find in the world. Unfortunately, the monetary policy stand of the Central Bank is also not helping matter because we are still consistently tightening up monetary policy which is further pushing up interest rate. Collateral requirement is becoming tougher as well. Accessing credit is becoming a very big issue because of the new risk management regime the CBN introduced following the recent banking crisis. Many banks are very cautious of giving credit, and when they eventually give, you get a very tough collateral condition that you can hardly meet.
The role of banks is financial intermediation because that is the way banks can help businesses and the whole economy to grow. In a situation where that is not happening, then the relevance of the banking institution to development becomes very weak; which is one of the critical problems we have now. We currently have a situation where the banking system is failing progressively in its role of financial intermediation; making funds available from the surplus side of the economy to the deficit side. Most of the funds that flow out of the banking system are going to the Federal Government’s bonds, treasury bills, foreign exchange, and few multinational companies. This is not adding much value to the economy.
The Bank of Industry (BOI) that should support some sectors of the economy has actually been performing, but there is financial capacity issue also. The BOI can only go as far as its capitalisation can allow, and you cannot ask the BOI to substitute the role of the entire banking system. There is a limit to what it can do.
Microfinance banks are supposed to support the microenterprises, but they also have a big challenge in getting funds to carry out their roles. If you ask most of the microfinance bank operators, you will discover that they have more demand for credit than deposit because people don’t deposit with them. People only go there to deposit in the hope that they will get credit. Microfinance banks have a big challenge getting the kind of fund they can use to support the microenterprises. That is why the cost of funds even at that level is so high. There should be a microfinance fund which they should be drawing from, but that is not happening. That is why they also source funds from the regular financial market which is very costly.
Stakeholders seem to be excited with the ongoing cashless policy and the privatisation of the Power Holding Company of Nigeria (PHCN). What are the potential benefits derivable by companies from these reforms?
We have seen the cashless policy operational in Lagos with more people using alternative platforms of payment. The volume of transactions that has taken place in those alternative platforms has increased significantly since the policy began. A lot of people now do money transfers instead of writing cheques whenever they want to make payment. Even though there are challenges with e-payment transactions, a lot of people still prefer to use the PoS (Point-of-Sale) terminals, cards, etc for payment. I think the cashless policy is gradual and it is on course. However, I know that there are still a lot of challenges with the effectiveness of the policy. We still have segments of the economy that use a lot of cash. The informal sector for instance is very large and most of them still use cash. Traders in places like Oke Arin, Balogun or Ladipo markets still use a lot of cash. Also, at the retail end, one basic problem people have with the cashless policy is the issue of the PoS, which is relative to the problem of network bandwidth.
On the PHCN, it is true that power has improved lately, but I don’t think it is because of the privatisation process. I think it is more of the better arrangement for gas supply to the thermal stations. We have to be cautious the way we give credit for the current improvement in power supply. For many years now, the PHCN did not pay gas suppliers because of issues around gas pricing. As a result, gas suppliers shut out the PHCN. But under the present administration, in the last couple of months, there was a more concrete arrangement to ensure regular supply of gas, and a better arrangement to ensure that government meets its obligations to those who are supplying gas. Subsequently, that has improved the generation capacity of the thermal power plants. Also, the power supply improved because some of the independent power plants have come on board following the National Integrated Power Project. In addition, the water level, which is now becoming a problem, has also helped to improve the hydro capacity of the dams. Tariff has also gone up, so the PHCN has more money to meet some of its obligations. These are the factors that contributed to the improved power supply, not so much of the reform because the exercise is still ongoing.
...The Lesson To Learn
The lesson I see here is that if the PHCN, as it is now, can be given better working condition –putting the right people in the right places to reduce corruption, the institute can work because the improvement we have seen so far is still being delivered by the old hands.
If you have a state enterprise, and you have a political leadership that is disciplined –which allow the right people in the right places; gives some levels of authority and autonomy to enterprises, then such enterprise would perform. It is not so much the quality of the people, it is the system. No matter how good you are, if you are operating in a system that is not good, there is no way you can perform. If you are a professional and they just bring one nonentity to be your boss, there is no way you can perform.
One thing about this privatisation, the moment the exercise is finished and they sell up the company, all the money realised will go to the federation account; they will share it and that will be the end of the story. But if there is a way they can reinvest the money in the sector, the system would be better off. We hope the labour will resolve their issues and that the privatisation process will be transparent.
Some have argued that the power sector would see growth if privatised, just like the current growth in the telecoms sector. What is your opinion on this?
You cannot compare the telecoms sector with the power sector. The risk profiles are different. First of all, what happened in the telecoms sector was not privatisation. The sector was just liberalised so that investors can bring in equipment and setup. The only element that was privatised was the Nigeria Telecommunication Limited (NITEL), but the process is yet to be completed. We don’t have so much success stories in privatisation.
In telecoms business, you can setup independently because you don’t need to depend on government for virtually anything. The only area telecoms operators would have depended on government was in the area of power; and the power is not constant. That is why they generate their own power for all their cell stations. However, in the power industry, the process is a long chain. You have not delivered value if you have not completed the chain. For you to generate power you need gas; but you don’t have control over gas supply. After generating the power, you have to evacuate it by depending on a transmission mechanism, which is probably owned by another company. After transmission, you have to distribute it. And until the power gets to the man in the house, you have not delivered value. The long chain makes it a riskier process than the telecoms because all these variables have their own inherent risks.
In telecoms, once you setup your cell site, you don’t have to depend on too many variables that are outside your control. But in power, there are so many variables that are not within your control. So this makes it riskier, and that is why it may be more difficult to get the sector funded.
Our population is expected to exceed that of the United States of America by 2050, and become the world’s third most populous country behind India and China by 2100. Should this be cheery news for business or does this press the panic bottom?
Population could be an asset or a liability. If you have quality population, a population which has a very high man capital content, that could be an asset because they can contribute more. That is a population that we have actually invested in through the development of capacity, skills, knowledge, etc. But if we have a population that we did not quite invest in, then it could be a liability; a serious burden on the economy. A similar case is what is happening in some regional parts of the country; and there is nothing that can be worse than dealing with somebody who doesn’t value his or her own life.