By Ebele Orakpo
Alhaji Usman A. Danmalam is the Managing Director/Chief Executive Officer of Middle East Energy Limited, an oil services and haulage outfit with headquarters in Kaduna, Nigeria.

In a recent chat with Vanguard in Kaduna, Alhaji Danmalam, a man with high business acumen who has gone from provisions, to fertilizer and now oil and gas business, told the story of his rise from an ordinary trader to an oil magnate and why banks are not readily lending to businesses. Excerpts:

According to Alhaji
Danmalam, he went into business about 20 years ago at the famous Singer market in Kano, dealing in soap, sugar, and all manner of provisions from Lever Brothers and PZ Industries. “I would buy and sell in bulk but after some time, I went into fertilizer business.

I did that for some time and then went into the oil and gas business in 1993 when the fertilizer business was going down. I was then at NAFCON in Port Harcourt so I started supplying companies in Port Harcourt like drilling, construction, NBC, and other companies in the area. That was how I started the oil and gas business.

I continued until the Port Harcourt refinery was shut down and I moved down to Lagos where I started buying from private depots. Sometimes I send the consignment to Port Harcourt and sometimes to the north.” Alhaji Danmalam later joined Rahamanniya Global Resources Limited, an oil marketing company from 2001 to 2007 when he decided to start his own company, Middle East Energy Resources Ltd. He noted that although the business is very lucrative, but has been drastically affected by the recent global economic meltdown experienced worldwide.

“Back then, we really enjoyed the business and dealing with the banks, especially during the mergers because you could get facilities to run your business but since the economic meltdown, things have changed. Every business has been affected in one way or the other. Now, to get a bank loan to finance your business is not easy.

My working capital is not enough to supply all my clients so sometimes I do rationing; that is how I have been able to continue in business. Before this time, you could give the bank your garage or a plot of land as collateral and they provide money for you, but now, everything has changed because they no longer accept empty land, you must erect a structure on the land before they can accept it as collateral. It is now very difficult for upcoming entrepreneurs because the banks will not assist them as they do not have collateral.

Even long standing customers cannot easily access bank loans. They will want to see your monthly turnover and they may give you a target of N100 million. It’s no longer only their marketers they give targets, even the customer is not spared. If your turnover is not enough, you must have a house, or a third party’s house if both of you agree and the bank agrees. So, the way things are now, we are just moving by the grace of God,” he noted.

Speaking further, he stated that banks are very scared of the oil and gas industry “because banks lost so much money to the industry. People will borrow money and are unable to pay back due to no fault of theirs.

For instance, the price of diesel is still high, it’s not that people cannot import diesel but the banks cannot open the LPO at this high rate because of what had happened before. At the beginning of the economic meltdown, AGO’s landing cost was N136 but it crashed to N70. So assuming you brought in 1,000 trucks, you would be losing over N1 billion so that is why the price of AGO is high because every bank is afraid to open the LPO.

You can open it today, and before the product arrives, the prices have crashed. For PMS it is a different matter as it is subsidized by government. The landing cost of PMS is over N100 per litre, the government pays the balance to PPPRA. That is why everybody is selling at N65 per litre because government subsidizes it.

From the small buyer to the big buyer, everybody is facing one challenge or the other.  This problem is not peculiar to the oil and gas sector, it affects every sector of the economy and why people are so much into oil and gas is because of the way our economy is.”

Despite the challenges of finance and security, Danmalam said he has decided to continue the business which he started with one truck but today, he can boast of 32 trucks loading products from Lagos, Warri, Port Harcourt and Kaduna. “I never collected bank loan to buy trucks because you cannot make it that way.

Example, if you collect N10 million from the bank, the equity on that money is N2 million, then you do the insurance, at least N1m. The bank charges on this money is 25% so that when you add it all up, you are looking at N14m and this N10m they give you is for one year.  You may decide to be paying a certain amount every month to cover the loan.

That is just for one truck and this truck may likely do three to four trips in a month. Some of my trucks stay up to one month on a trip. If I had collected loan from the bank, how then do I pay back?” he asked.

Continuing he said: “We need to improve on security. Before, our only fear in this business was accidents but today, things have changed. When a driver moves in the night these days, armed robbers may attack him, tie him up and throw him into the bush, carry the truck, sell off the products and abandon the empty truck somewhere on the road.

I think NUPENG should do something about this, like putting a law in place that says once it is 6.00pm, every truck driver must park. Because they may even kill the driver in the process and supposing the owner had taken a loan from the bank to get the truck and product, how does he pay back?”

On the issue of power supply, the boss of the company with 75 people in its employ, noted that no country can progress without electricity, lamenting that so many able-bodied men have become motorcycle (okada) riders as a result of job losses. “If we have constant and adequate electricity supply, I believe those going into okada business will drastically reduce.

In Kaduna State alone, we have 19 textile factories, but only two are functional now. These textile mills can take care of over five million people but today, these people are jobless, and some have become okada riders, brick layers or fire wood sellers. They go to the bush and fell trees to sell as firewood as a means of livelihood even though the government is against deforestation. But if we have 24-hour electricity supply, I believe Nigerians are very creative, very strong people and ready to work.”

Alhaji Danmalam called on the government to subsidise solar energy so that “we in the north especially, with a lot of sunshine, can switch over to solar pending the time the PHCN is put in order and other sources of power work effectively.

It is not a one day job. All the PHCN cables need repairing or replacing, we need more transformers because even if we generate enough electricity, distribution is another problem. In some areas, you see light but it is so low that you cannot use it for anything. It is frustrating hearing the same story everyday. The money they have poured into PHCN was enough for the UAE to transform Dubai.

They used less than $20 billion to get Dubai to the level it is today everybody wants to go to Dubai. Nigeria is the heart of Africa and I tell you, if we have constant electricity supply, and put our infrastructure in order, neighbouring countries will be coming here to look for jobs.

He said he had tried to create jobs for the teeming unemployed youths but lack of electricity supply has been a great set back. “I bought a machine that makes wafers from Turkey and I tried it and could not continue because of lack of electricity. I was spending all my profit on diesel to generate electricity with which to run the machine. I also opened a groundnut oil production outfit, but at the end of the day, I discovered I was also spending a whole lot of money on diesel, I had no choice than to close the businesses,” he stated.