*Insists Lagos govt has no stake in the business, wants FG to reduce interest rates to single digit
By Ishola Balogun
Against the backdrop of ill-feelings among commuters occasioned by the increase in fares for the use of BRT services in Lagos state, the Managing Director/Chief Executive Officer, Primero Transport Services Limited, Fola Tinubu has said the company was not making a profit now but poised to sustainability and delivering qualitative service. In this interview with Saturday Vanguard, he spoke on enhanced services such as wifi system, back up SIM on buses, as well as efforts towards reducing the waiting time of commuters to 10-15 minutes. He also called on the Federal Governments to assist in sourcing foreign exchange and to reduce interest rate to a single digit. Excerpts:
How has it been in the last five years in the transport sector?
It has been very challenging for Primero. In the last five years, the company has not been profitable. The cost of operation has been on a steady rise and our revenue has been static. The banks are charging us commercial rates. When we started, the cost of diesel was about N130 per liter and it went up to about N260 per liter, though it has come down slightly now.
Again, when we started, the exchange rate was about N169 to a dollar, it is now N450. Unfortunately, we don’t manufacture any of the parts in this country; all the spare parts are imported. You can imagine the additional cost of tires, and other parts we bear. It has been very challenging.
Maybe the investors need to put in more money to tackle these challenges?
The investors put in billions of naira when we started and it is tough going back to them to bring in more money when they have not taken a kobo out in terms of dividends or profit in four years. They are very reluctant in parting with money again. This is purely understandable If I invested billions of naira and I have not got one kobo and you are asking me to bring more, of course, I will be very reluctant to do that.
But we believe as management that what we are doing in the last few weeks will put the company in a better financial footing. You cannot survive by paying over 23% interest on loans. The government can also help to source foreign exchange in order to buy parts for the buses.
In May last year, we closed our bonds and put some money aside to buy some parts in July. We spent over N400million worth of spare parts. It came in December and it will soon finish. We are about to buy exactly the same spare parts now. Without adding anything, the same quantity of spare parts is now going for over N600million because naira has gone from N360 to N450.
I have no choice, we have to buy it. If we refuse to buy them, the buses will not operate. So, the government can really help us in sourcing foreign exchange. Yes, we agree that there is a social element to our service, but we have to continue to be in business and also make profit to render social responsibility services.
This is the second time you will increase your fares since you started and commuters are complaining. How did we get to this point?
During the five-week lockdown, our revenue dropped to zero. When we resumed work, the government said we should carry only 20 passengers, which meant that we were using three buses where we were supposed to use one on a normal day. Yet, our cost of operations remained the same. We still use the same amount of diesel and pay the same number of staff, the wear and tear of the buses were exactly the same. This affected us tremendously.
We know it is not only Primero, it is a worldwide phenomenon. It affected everybody in different ways. Now, we have been making sure we keep all our employees and provide the same service. That was why we went to the government and we showed them that for the company to survive we need an increase in fare. Thank God they agreed with us and also approved that we can carry 42 passengers.
This is even against the 70 passengers per bus we used to carry before, so, our revenue dropped to about 40%. I have been saying the same thing for the past four years now, and nobody seems to be listening to me. Primero is not profitable right now. The fares we are charging are too low and unfortunately for us the cost of operations keeps soaring. Primero is not a monopoly in the transport sector, there are other alternatives.
We have Red buses, White buses, Danfo, and there is ferry especially the Ikorodu-Island axis. Check out what other operators charge. None of them is cheaper than Primero even with the increase we have just done now, not to talk of where we were before. Right now with the increase, we are still charging below all other alternatives. Yet our cost of operation is a lot higher than anyone of them. Most of them, if not all of them don’t pay taxes, they don’t provide insurance for their passengers and workers, they don’t disinfect their buses everyday like we do, they don’t provide sanitizers like we do every day.
obody provides the kind of service we provide, except may be the new ferries that the Lagos state just bought recently. Yet, even with this increase we charge less than any one of them. People sometimes want to rationalise it and say, “Oh you have a dedicated lane, it makes you go faster” but I tell them the dedicated lanes are only 60% of the lanes, you still have to come back to the main road which is the remaining 40%, so the traffic affects us too. Even the dedicated lane is encroached on by other road users and causing a traffic snarl for our buses. Everybody wants to move faster in Lagos but it needs to be paid for. It is a political decision that pays for it.
My job is to ensure the survival of the company, Primero. If we are not making a profit, at least we should balance our books and not record losses. You can have a philosophical decision on who pays for what, but there is no free lunch even in Freetown. We travel all over the world, and we see services being provided here and there, but they are not provided by magicians, they are paid for. People pay for them either from their pocket, or via taxes, or government subsidy. Even subsidy comes when people are able to pay taxes from which the government has money to subsidise. It is only in Nigeria that we always want everything for free.
What is therefore the true cost of carrying passengers from Ikorodu to Lagos Island for instance?
You will know the true cost by what the Danfo buses charge because they are not regulated at all. They go with the law of demand and supply. They charge between N1000 and N1500 from Ikorodu-to Lagos Island. But our own, with the statistics available to us, it is going to be about N700.
So, should Lagosians who patronise your services be bracing up for further increase?
I don’t know. The biggest challenge which I hope everybody should be wary about is the position of the naira at the foreign exchange market. You know we don’t manufacture anything in this country.
Everything we use in those buses is imported and naira affects it negatively. If I know what naira will be in a year’s time, I will be a billionaire. So, the value of the naira drives everything. Unfortunately, that is the reality. There are two things Lagosians need to know, one is that the last increase was three years ago and we got another increase three years after.
Lagosians have been enjoying relatively low charges. Even with this increase, our charges are still the cheapest on that axis.
What is the position of Lagos State government in the business because a lot of people believe the state government also invested in the business?
Lagos state government does not have a single share in Primero. They do not have a single kobo invested in Primero. I have said it at every forum; the company is 100 percent privately owned. I believe God that next year when we get our finances together, we will go public and everybody will know that we are public quoted company. But if Lagos state wants to buy shares when we go public, I will be very happy.
However, there are lots of policy formulation which the government, not just the Lagos state government but also the federal government, can do to cushion these challenges. What happens in Lagos affects all Nigerians. The government can look into areas of helping us to get cheaper loans. The Lagos state government is currently doing that for us, but the federal government can do more in order to reduce it to a single digit.
I understand it is somewhat difficult right now because of the slide in oil price world over and the IGR going down because of the Covid-19 pandemic. I also know they are trying to slash their budget, but there are lots of areas they can come in to help. Right now, Lagos State is trying to assist in one area I don’t want to disclose now. So, I believe the government can come to our rescue in one way or the other.
So, you mean the business is not attractive to investors?
A bus cost about $125,000, if you bring in 100 buses, you are talking about $12.5million and if you put that in naira, it is about N5.6billion. That does not include customs, clearing and other money needed to start off the business.
So, you may need nothing less than N20billion to start the business. How many people will want to invest that kind of money, charge what we are charging and for four years will still be grappling with how to make profit? How many will consider that when you can put the money in the bank and get about 7% returns on your money, and go to sleep, people will not abuse you that you are a crook, calling you names that in five years they can do better than you.
So, if we want the private sector to come in, it has to be profitable. We can decide to say we don’t want more than 10% profit or anything but it has to be profitable.
How many buses do you have on the road daily?
We have about 300 and 320 buses on the road right now. We can really put more out if we need to.
But the waiting time at the bus station is still not encouraging, many commuters who want value for their money will be discouraged if they have to wait much longer.
The waiting time has reduced now, but why it is still so is that we are the cheapest. People still have to wait because it is economically better. In any case, you can do a survey; the waiting time has crashed significantly now. My goal is that I don’t want any passenger to spend more than 10 to 15 minutes before they go.
The card system you introduced was good, but its availability is still an issue to contend with.
Yes, I agree with you to some extent, it was because the vendor that was supposed to produce the cards disappointed blaming it on high cost of production.
But all that have been fixed. What we also did during the shutdown was to camp about 200 of our maintenance people in the Bus-yard to work on our buses and the wifi to make sure everything works well. We have also put a backup sim on the buses.
Anywhere you are in the bus, if the wifi does not work, then the sim picks up. The system works about 99% right now. We have also worked with Sterling bank and they are pushing about 500,000 cards out. So cards are available now.
Your final word to the people
My advice to them is to understand that we are trying to ensure the survival of the BRT system. I understand the economic situation of the country right now and I fully understand what people are going through. But it is better to take this short term pain and ensure the system is always available than to bury our heads like ostrich and pretend as if everything is rosy and the whole thing collapses, then we start paying a lot more in the long run.
They should rather work with us to make their lives better so that they will know we have their interest at heart, and we are not trying to punish them by reaping huge profits.