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Manufacturers face too many cost challenges – Odunayo

The immediate past Executive Vice Chairman/CEO,Honeywell Flour Mills Plc, Mr. Folaranmi Babatunde Odunayo, retired on April 1st, 2014. Mr. Odunayo retired after 17 years of meritorious service.  Odunayo, Honeywell’s pioneer CEO is a graduate of the then University of Ife, Ile-Ife (now ObafemiAwolowo University).

He attended King’s College, Lagos and is a Fellow of the Institute of Chartered Accountants of Nigeria. In this interview with Peter Egwuatu, he spoke on challenges facing the manufacturing sector, performance of Honeywell Plc in the industry, agriculture sector and other vital issues. Excerpts:

How has manufacturing sector fared in Nigeria?

Manufacturing definitely is hard. If you look at the Nigeria economic environment, it is obviously not the best way to make quick money but one of the best ways to make steady money and see what value it is adding to the society. Manufactures represent to the country the real sector; Manufacturers are people you can locate and find and the people from the organised private sector rather than being in trade from Belgium to Lagos and bringing all kinds of goods.

It has not been a rosy path because support from manufacturing is not well understood. The principal reason is because of Nigerian’s attitude generally. Those who are in government, civil servants who are expected to provide support comes from the standpoint of doing a lot of favour to the manufacturing sector so the manufacturers have to struggle through many obstacles in order to be heard and today the Manufacturers Association of Nigeria has grown to become an advocacy group that is always advocating good government and improve the lot of the private
sector.

*Odunayo
*Odunayo

What are the challenges facing the manufacturing sector?

We have many challenges which range from inadequate power supply, to lack of road infrastructure, to a tariff system that does not support manufacturing that can in fact in many situations support importation rather than manufacturing.It is a continuous battle to condone advocacy sections in government and try to show the gap between duty paid for finished goods in Nigeria and importing the same items.

Fortunately over the years, we have recorded good structure with government in negotiating appropriate tariffs. Fortunately, also in recent times government has finally seen that it is best to grant tariffs and tariff adjustment to sectors of the economy rather than to individual companies that are able to successfully go to Abuja and get things worked out for themselves.

In the past, you could be in same sector with other manufacturers and some of your counterparts that are in same competition have favourable allowances and tariffs from government. Today the government has realised that finally and we get sectoral reviews of tariffs. I found out that the biggest challenge of cost to manufacturing is far too many.

Small and Medium Scale Enterprise, SMEs  have gone out of business because of lack of adequate supply of power, because the capital required to invest in generating capacity and to maintain a regular production quality is just too high. Infrastructure is a major problem because they are not in best condition. The transport sector also lacks capacity in terms of ability to invest in quality trucks for movement of goods and services.

The transport sector today is supported by private efforts of small and medium scale organisations who struggle to invest in used trailer trucks in order to earn a living for themselves and put them on the road. How much more different it would have been if manufacturers have capacity for mass transit of goods? I will not even speak on mass transit for human beings which is also very essential. In summary what’s being said above is: Inappropriate Tariff, Inadequate Transportation and Inadequate Power supply.

In spite of these challenges, how has Honeywell coped?

Most companies in Nigeria ran out of business because of inappropriate tariffs and also inadequate protection of manufacturing sector. In our kind of industry, we have been fortunate that flour and flour products have reasonable protection and some smuggling too takes place from the Northern part of Nigeria, but we’ve been fortunate they are in limited quantity.

If they were in large quantity, the industry would have been greatly affected. We have survived because of the absence of smuggling of the product in large numbers but it can easily destroy an industry. As a company, our survival has been shaped largely by ability to define our customers, define them in terms of their needs,and also define them interms of  the quality of products they desire.

Having defined the customers, knowing what they like, even their age bracket, and income bracket and knowing exactly what they want, we were able to fashion production and production quality toward these targets and offer precisely what they require.We always stand above competition in our offering to the customers.

Good quality products offerings is one strategy that guarantees you to know your customers and that has kept our volume. It has also helped us to sustain a very strong brand image, brand equity in theminds of consumers. The consumers, they speak about it and help you to sustain a mandate for your production.

How has Honeywell performed in terms of financial indicators?

The company has performed reasonably well. The financial details of our performance is very open in terms of being available at the Nigerian Stock Exchange, NSE but to be more specific, the company is one of the best performing in the industry which sustains production capacity, which sustains high volume and sustains strong consumer perception. So I think we are one of the top performing companies in the relative short time we have been in the business of flour and other associated products.

What is your market share in the industry?

You know Nigeria is a very big country of 160 million people and we can easily boast of a market share that is almost 15 and 20 % of a market for one company out of 20.

How is the employment policy like in Honeywell?

There is a lot of academic education but not a lot of it have been retained. Honeywell does very intense training programmes but our biggest help has been in a strategy to always ensure that it is only good people that are recruited into the organization, regardless of whether somebody is your relation or friend, only good people are recruited.

The management will fail if it does not ensure that it is only good people that are recruited. If you do favour, you also undermine yourself and also undermine the capacity to deliver result because you are going to use people to do it. When we employ, we employ good quality people and we bring them in.

What has been the impact of agriculture in your industry?

First of all, I will speak about agriculture generally. To promote agriculture is a major problem in Nigeria. The Minister of Agriculture has been working very hard to see to the improvement of agriculture and I am very happy with that, not only because agriculture is my first course, in which I graduated many years ago. He has done a great job so far.

I will like to see a great success with one crop, any crop, if we can succeed with cassava and I pray we do so, or we succeed with corn or whatever we pick, we would have been able to establish a model of agriculture in Nigeria succeeding with the crop. Starts from planting seeds, cultural practices, farmer education, credit, then harvesting, storage, transportation and a lot of marketing. Right now,we don’t have a workable system that runs across all these issues in Nigeria.

If we can take it up from any crop, it will become a model for agriculture in Nigeria. I also believe in competitive advantage that a country needs to also concentrate on those areas where you have competitive advantage over others. It is certain we have competitive advantage in cassava, maize, yam, we have many crops that we can handle.

If we can handle groundnut which used to be the soul of Nigeria, lets handle this crop and finally we can substitute these cassava plant with maize, with wheat to some extent. Let’s do some substitution. What am not too clear about is whether Nigeria has a wheat growing environment.

I will be glad if we can take agriculture to a point where we can actually grow variety of crops in Nigeria at economic use and in such volume giving a land tenure system and we can be able to meet the needs of farming. That is something in the future that I will personally be glad to see. In the meantime, what remains for us to do is continue to import wheat and continue to spin some others to an increasing percentage until government is able to offer improved wheat and varieties from certain areas.

Are you in support of the industry to use wheat?

The way a country should run and the way it is fair to the consumer is that you must offer them choices. It is not the business of the government to regulate what somebody wants to eat, if it is too pricy then you will choose something else. We use wheat for bread flour and for the baking of bread,we should continue to use wheat for bread and also continue to import wheat for that purpose and substitute it with cassava until one day when we can also grow locally with the volume that is required.

The problem of the economy in Nigeria is a mono-product economy with oil constituting the main export and the problem is not the wheat, the problem is to grow other sources of foreign exchange earnings. Can we grow cassava as a foreign exchange earnings or can we grow maize and export maize and export cassava chips.

Can we export groundnut, can we export many other products to the point that we can generate high foreign exchange. If we could triple our export earnings, including oil, the problem will not be wheat, in fact, the success is, it will double your revenue, and you offer the  Nigeria consumer whatever he wants, whether he wants some maize products or yam products or wheat or whatever, the consumer must have choices.

I think we are making too much noise about wheat being imported, we should offer substitute foreign exchange earners, we should develop the good spectrum  of agriculture, we should develop manufacturing to the extent that manufacturing in Nigeria can also process raw materials into a finished product, and for export. Right now, all we have is raw materials, there is no manufacturing in Nigeria that is ready to help us convert all this raw materials into anything not even cocoa, so how can we develop our export earnings?

How is Honeywell coping with instability in the North East?

In Nigeria we are more concerned with the instability in the North and that is the reason why  your question is relevant. There are underlining things that are suffering, trade is suffering, commerce is suffering. How are we coping? We are redirecting our efforts in other markets to see whether we can have some edge above competition.

What is not certain in some areas, may be we can increase it in other areas. In the meantime, the bottom line is: for any business to survive you need stability, for any nation to survive in the long run you need stability, if there is no stability in a nation the nation won’t progress.

What is your projection on Honeywell performance in the next five years?

From the foundation we have laid, I expect progress and from the project we are planning even today am sure that we are going to Sagamu, many projects are coming up in food sector. In the next five years I expect that we are going to see a bigger company.

Why are you leaving Honeywell now?

First of all when you have been in a company as the CEO for 17-18years, that’s quite a long time in your working career,  not counting what you have done before but when you are also the CEO of a company for 17-18 years, then you are wondering how long you want to remain the CEO of that company and before it begins to look like the African thing, of the CEO who does not want to go and especially if for 20-22 years people who have been working with you have grown and they are part of the success  of the company because only one man does not build a house.

So, if there are people who have been part of that success today and they have become men of themselves.  I think the best thing to do is to step aside because if you stay longer you find out that mature men of certain strong skills which am very proud of, if you don’t step aside these strong mature men will soon find a way to express themselves outside the company and if you stay a little longer,  you will discover there is no one there anymore because they have all gone to find their own way.

Has there been succession plan before now?

Succession plan is about training, exposure, selection, because people have to be selected. At the right moment, people are ready. Appointment is a final thing that you do, so there was a selection arrangement which made it possible that at the right moment people are selected to certain positions. The incoming Managing Director has been very active, from the beginning.

He came up at a beginning level but after 20 years he has gone to be his own man,so what can I say to a man that is skilled and suitable? I can only wish him the best; he knows exactly how to continue and I know he will keep to the values that we have always cherished.

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