The Central Bank of Nigeria, CBN, policy restricting access to foreign exchange, FOREX, by importers of 41 items is positively impacting operations of local substitute products producers. But, Executive Chairman, Baton Nigeria, a wood-based products processing firm, Rotimi Sekoni, said the presence of imported varieties of the 41 items in the market is making them expensive. He canvasses outright ban of the affected items if the country is to build a sustainable local industrial economy.
PT: How did you come about this great product?
ROTIMI: We set out with the idea to ultimately get to a point where Nigeria could stop importation of wood, paper and pulp products by employing locally available raw material, “wood”, to produce a basket of high quality and cost-effective products for import substitution and with the potential to export. Most of the products we produce or intend to produce are products that Nigeria currently spends over $1 billion importing every year.
For that to happen, we will need to own and invest in woods plantations across Nigeria, particularly from the South-west where the climate is very conducive for the growth of such trees in industrial scale.
PT: In 2015, the Central Bank of Nigeria, CBN came up with the policy restricting access to foreign exchange by importers of 41 items, including tooth picks, paper and packaging materials. Were you inspired by that policy to go into the production of Baton tooth picks?
ROTIMI: Ironically, the Central Bank of Nigeria, CBN, policy restricting access to FOREX to importers of 41 items, including toothpicks, happened while we were still putting together the pieces of the business together. It was happenstance. But, we are certainly grateful to the CBN, because the policy became very helpful, to check the competition from outside, particularly China.
The down side is that the policy has made importation of tooth picks a little more expensive. This has not been helpful, from our sales perspective as a young company as ours. Our product is about 25 per cent cheaper than the Chinese’, our main competition, although our quality is top of the range.
The CBN policy has highlighted the need for local companies like ours to exist. It is a necessary first step. But, it requires us and policymakers to do much more to make the spirit of the FOREX policy more effective and sustainable in the long run.
People are still buying their dollars in the black market and importing the 41 products. Remember, there was a time when the ban was lifted on the importation of vehicle tyres. As a result, Dunlop left the country. We need to avoid such mistakes if we really want to build a sustainable industrial base.
To make the policy more effective, the CBN needs to go a step further, by outright banning the importation of tooth picks and the other 40 items on the list once and for all. In Nigeria, I know when a ban is placed on items, they still find their way into the market, making the cost to be expensive.
If the CBN policy is sustained, I believe we will be able to expand and grow. The policy has to be consistent across the country and legislative cycles across administrations to build a real sustainable industrial base in the country.
PT: What’s your installed capacity? How do you plan to grow that capacity?
ROTIMI: We can produce about 60 million sticks per month. By the end of next year, we will be able to produce 4 billion sticks per annum.
PT: What about the cost and where the products could be found?
ROTIMI: The small dispensers costs less than N100, while a pack of 250 sticks costs less than N200 and the mega size of 700 sticks costs around N300.
In addition to open markets, our products can be in found 140 supermarkets in Lagos and Abuja including Spar, Shoprite, Sahad, Dunes, Grand Square supermarkets to name a few. We plan to print the price on the packets to allow retailers follow the established manufacturer’s suggested retail price, MSRP.
PT: At the moment, where does your raw material come from?
ROTIMI: Our primary raw materials come from the South-west states. Our factory is in Ogun State.
PT: What are your plans to establish your own sources of raw materials?
ROTIMI: Yes, in some countries you can rely on third parties as primary components of your supply chain because those third parties are industries on their own. In Nigeria, it’s a treacherous exercise to do so.
So, we want to cut off the middleman in every aspect of our operations, to get better and cheaper products. So, we naturally seek complete independence in our supply chain. To achieve independence, we need to invest significant capital in the cultivation of our raw materials. The benefits of which are higher quality and consistency in our raw material supply chain.
This will give us the opportunity to replicate what our primary competition has done. The Chinese have dedicated almost an entire province to this industry and they are very good at what they do. For one to be competitive in an industry that is globally dominated by one province in one country, we must pay attention to what we are doing, in terms of cost structure, supply chain, etc.
PT: Do you plan to open plantations in other parts of the country?
ROTIMI: Going beyond South-west without establishing a defensible foothold in our immediate base will be premature. We are currently at various stages in several conversations with various states where we can establish our own plantations. Those plantations will depend on size and will provide opportunities for us to employ between 400 and 1,000 people seasonally, in addition to what we will create on the operations and processing side. When operating full-scale, we are looking at about 450-500 high paying, full time jobs on the average.
PT: What’s your staff strength?
ROTIMI: Our company size is 43 employees per shift, excluding others involved in the company’s operational value chain.
PT: Any immediate plan to expand beyond your immediate operations area to other parts of the country?
ROTIMI: No, we think about expansion methodically and are very cautious about the idea of expansion for a number of reasons. First and foremost, quick expansions have the tendency to degrade a company’s culture.
Second, it is important that we have enough recruited and embedded talent to manage and operate new facilities – talent acquisition takes time anywhere in the world. Even more so in Nigeria. We will need harness capacity to convert paper into packaging, or polypropylene into dispensers for us. These things must not be located too far away our operational base, because it could be so expensive. Third, the supply chain must catch up with our ambition – we need other components of our supply chain to develop in other states for us to expand.
PT: Some people say doing business in Nigeria is tough. What do you say to this?
ROTIMI: I have worked and transacted in other parts of the world. The situation here is not materially different from what is happening in other places generally. It is the same level of complexity, same manner of stress. The only difference is that Nigeria has its own idiosyncrasies, in terms of infrastructure shortcomings and policy confusion at times, which needs to be solved in order to build a sustainable industrial base.
In our facility, we can use NEPA (PHCN) – public power supply at night and the generator in the day. It is not the ideal, but it is not killing us.
PT: How is the business being financed?
ROTIMI: We are completely privately financed. We don’t have bank loans. It is too early in our gestation cycle to seek traditional loans from Nigerian banks at the bargain basement price of 27 per cent. May be in future we may consider. For now, no, thanks.
PT: What is the environmental impact of your operations?
ROTIMI: The impact of our operations on the environment is very little. Our company is very sensitive to the environment. We take our environmental impact very seriously.
First, our primary raw material is renewable. After it’s harvested, the wood begins to regenerate, thereby absorbing the carbon dioxide produced by others. Second, our plantation strategy naturally and by design creates additional carbon dioxide absorption through the gestation cycle.
Third, we use our by-products and others to produce wood-derived products, such as charcoal, MDF, plywood, etc. to reduce the demand on illegally and to some extent legal logging exercises to produce such products.
We have found more economic value in the charcoal for the good of both the company and the environment. This is opposed to the charcoal produced from illegal wood logging, or cutting down trees and burning them into charcoal and sold in the market. We have already taken the charcoal production about 70 per cent way back, and selling for a cost-effective price. Our charcoal is far cheaper. That way, we are deriving economic value, while at the same time protecting the environment.