OBG talks to Oba Otudeko, Chairman, Honeywell Group

Interview: Oba Otudeko

by attracting investment for adequate refining capacity to produce different types of fuel for local consumption and export. The act has therefore thrown open a number of very significant business opportunities.

What are keys to mitigating imported inflation and exchange rate fluctuations?

OBA OTUDEKO: The keys are making the most of our abundant resources, increasing local manufacturing and looking for local substitutes so we import less. Over 50% of Nigeria’s land is arable, yet we are a net food importer.

Over 5m ha of land is suitable for rice cultivation. If we achieve the type of rice farming yields in Egypt (over 10 tonnes per ha) or Thailand (over 7 tonnes per ha), Nigeria will be a net exporter of rice, but today we are the largest importer of rice in the world.

Consider housing as well. Nigeria’s housing deficit is estimated at 16m homes. We therefore need to work on using relevant local resources (such as clay and wood) to produce building materials to develop affordable housing. When we rely too much on imports, we lose control of the levers of our macroeconomy.

What is the role of Nigerian conglomerates in increasing the non-oil sector contribution to GDP?

OTUDEKO: The agricultural sector is still the largest contributor to Nigeria’s GDP, contributing over 40% in 2011.

Many conglomerates in Nigeria work in the foods and agro-allied sector of the economy, especially in the conversion of raw agricultural materials into finished products. The Honeywell Group is a major player in the foods and agro-allied sector.

We are one of the largest flour millers in the country and, indeed, Africa. We are also one of the biggest pasta, noodles and noodles-based snacks manufacturers in the country. We have just invested over $70m in expanding our foods processing facilities and plan to spend more to grow our foods platform. Ours is an example of a conglomerate increasing contributions of the non-oil sector (in this case, foods) to national GDP.

How can productivity be increased and overhead reduced for fast-moving consumer goods?

OTUDEKO: One important thing is power. Currently, Nigeria produces less than 5% of the power it needs. Industry thus relies on self-generation, which is twice as expensive. Electricity is a significant cost element in manufacturing – it can constitute 40% or more of operating costs in some sectors. Addressing power needs will reduce electricity costs and overheads. It will also reduce management time spent on generating power instead of focusing on growing their core business.

The poor state of the country’s infrastructure network is another factor. Our road and rail infrastructure is inadequate and poorly maintained. We need to develop on our existing road infrastructure so products can be moved more efficiently and at cheaper rates to markets. Accelerated development of the railroads will facilitate commerce and reduce the pressure on road network. We do appreciate the efforts that the government is already making. For instance, Nigerian Railway Corporation has commenced haulage of cassava chips from Kwara State to Lagos ports for export to Asia and other overseas markets.

Finally, there is an acute dearth of skilled local workforce, especially blue-collar workers (such as welders, electricians, machinists, millers, lathe operators and masons) for industry. We need to invest in skill-based, market-ready technical and vocational education so we can produce local manpower for industry.

What are the primary challenges to developing local content among import linked businesses?

OTUDEKO: Today, local content laws primarily apply to the oil and gas sector. This sector is very capital intensive, which may explain why we have so many foreign players there. However, the Nigerian Local Content Development Act aims to propel knowledge transfer through increased Nigerian participation in all oil and gas operations in the country. It also aims to encourage value addition to our natural oil and gas resources