Premiere Hotel will deliver world class facilities to make South west a hub for international events — Adewale Raji, GMD Odu’a Investment Company Limited

In this interview with Mathew Ibiyemi, Deputy Editor of Nigerian NewsDirect, the GMD sheds light on the ongoing redevelopment of Premiere Hotel and other projects being embarked on by the conglomerate. He also speaks on the ambitious plan to boost the conglomerate’s revenue by 500%. Excerpts:

As a conglomerate, how have you been able to navigate the current business community in Nigeria?

On the whole, it’s a tough one, and not a question of ‘how have you navigated,’ we are still in the middle of the storm. We are trusting in government for the measures that have been taken, that they are going to continue, and take actions to ameliorate what can cause the side effects.

Frankly, the issues which are being addressed are fundamental; and whether we like it or not, they are things we have to address as a nation. The call to action which has been of concern to the populace at this point in time, relates to the fuel subsidy removal, which people can immediately feel, in terms of the amount they now pay for transportation or for buying fuel. The second one relates to the foreign exchange. We are attempting to solve the problem of availability — that is, it found its level and is now more expensive. It requires a situation where there must be an additional back up action, and those back up actions have to do with being able to revive our productive side of the economy, where our reliance is on importation which requires dollar funding can go down because we are able to provide locally. For example, today as it stands, we can’t boast of 5 per cent of fuel consumed in Nigeria being produced in Nigeria, If we can get to 50 per cent level of production in Nigeria, we will see the impact. Not just because it is now local, will be cheaper. There won’t be logistical hurdles of taking crude out and bringing finished products. That cost will not exist again, that’s number one.

Number 2 is that in the process of producing it, we’d have put people at work. Unlike what happens today, where the employment for the fuel we are consuming is from overseas, which so makes no impact on our economy. When we put people to work and they are producing 50 per cent for us, they will spend their money in the same economy. In the absence of this, it remains tough for businesses and requires resilience. However, I think that’s part of the strength of Ooduwa investment.

Resilience is the ability to be able to withstand fresh pressures and make sure all your risks are continually being mitigated. So we are trying to mitigate the risk under the circumstances, and believe that we must continue to look at our business and see that we operate in sectors that are able to absorb these shocks. Part of the challenge with foreign exchange today is that it has limited ability of marketers to import. But can we take that opportunity to produce internally? what we’re not able to import? That’s the angle we must look at it from as a people.

When we talk about promoting the indigenous industry, how is Odua investment looking to play in this area?

We start with a vision which is to be a world class conglomerate. What this means is that despite being a local and indigenous company, we operate under global standards for assessment. So we identify the sectors we want to play. And when you look at sectors, it’s necessary that you are playing on what we call living sectors. Where is trend going? What is of interest to young people? Take for instance, we must always feed. So if population is growing, and we are feeding and you are in Agriculture, then there must be demand for your product. Therefore, that becomes something of interest to us as a sector.

Pharmaceutical and healthcare is all about the health of people. As long as the population we have is growing and life expectancy is also improving, it also means that you have a business. A growing population has a good trait of about 3% per annum. So one has to make sure it is empowered. If refineries are producing — local and government — then it means Nigerians are working, in so doing strengthening pocket power. However, the case on ground is that fuel is coming from overseas, we are paying workers overseas and that worker is not spending in our own economy.

We are also into the energy sector. We look at Energy within the context of renewable and non-renewable. It will always be a requirement. Also, regarding logistics and e commerce. The previous norm has always been that if you want to buy anything you go to the market. You make up your mind and you have to choose a date. And the reason you’ll be choosing a date is because “okay, I’m at work now, oh I’ll be picking up the children from school later on, I can’t do it during the weekday, I’ll do it on Saturday.” Thankfully, courtesy of technology and e commerce, you can have what you want, once you have access to technology and the money to pay for it. Which can only increase when consumer finance and credit becomes available. The western society has been ever living on credit, whereas we’re still living on cash. What that means is that we can double our consumption, if we introduce sustainable consumer credit. This is not a difficult thing to do once we have established proper identity management. If you default on credit in the western world, you will regret it, because you will even offer cash and people will tell you oh, no we don’t accept it.

Relying on non-cash payments has enormously helped them in improving security, because there’s an identity for every economic activity, which you don’t have whenever you are trading in cash. The person who kidnaps can decide to use the proceeds to service his lifestyle. There is no way anybody is going to trace it. But if he’s in a structured system, then questions are going to be asked. As a country we have elected to be part of the global economy, and the global economy is capitalistic. We have to find a way to also go through them that they will be beneficial to us. So that will be my remarks in terms of the sectors we need to play, including the one for energy as I mentioned earlier on, energy,

In getting involved with energy we also demonstrated interest in Upstream oil and gas. Primarily because we know it can aid the country’s energy security. It can also help — once done well — to access foreign currencies. With foreign currency, as an investment company, we then have opportunity to also invest globally. It becomes a way of also taking care of your shocks — in the Nigerian economy.

Are you also looking to go into the power sector, especially with the Power Devolution Act signed by the previous administration?

Thank you very much. Yes, we are. It requires a proper understanding of the dynamics. We are trusting that the current government will remove a lot of bottlenecks that might be around it. There are 3 components of the power architecture. It is generation, transmission and distribution. Now, the way it is done for the time being, it allows states to get involved but it restricts them to transmit across state boundaries. That is still good because it has given a green light for decentralization of transmission. This is because transmission seems to be the black hole where most of what is generated is lost. It’s a huge issue especially when we’re handling it nationally.

DisCos, in their approach to billing, is very hurtful to people. So if we decentralize, they can be more efficient. Also, the transmission duration, that is, the distance. If transmission is within a shorter distance, the losses will be reduced. It then means that you’re converting more of your power generated into use which translates into more money. These are all of the areas that require thorough understanding.

Today, it is generation that seems to be generating money, transmission and distribution remain a challenge. That conundrum needs to be fixed so that across the line, we can break even and make money such that power availability and making money from power is not going to come from regulating the tariff. It’s going to come from it being available and we now controlling our consumption.

In the future, people are going to switch off everything completely when they are leaving their houses, so there will be 0 consumption when they are not in their house. And when they come back — remember they were away for minimum of 8 hours — it means that they are on switch off for 1/3, so effectively if N3000 was what I’m supposed to pay a day for availability 24/7, it means N3000 has become N2000.

It’s then easy to aggregate what the demand is, because what has been happening before is people were not actually using, they were wasting. And because it was cheap, it was easy to waste. However, under this situation where it will be available and expensive, we are now going to control our consumption. And those are the ways we see it going forward that both consumer and providers of power are going to derive satisfaction in what they’re having. Consumer will have it, a bit expensive but will control the consumption. The producer also will be able to attract correct tariff for whatever he gives out. He’s going to moderate. Like the example I gave earlier, as a producer, if you are generating power and people are in the habit of switching off when they are not in the house what that means is that the demand during the night is probably higher than the demand during the day. It means the volume you are generating during the day and during the night will be different. You then have to shut down some of your generating equipment when the demand is lower. For you also, while you shut them down it means you are now incurring the cost as it should be. Unlike today that once people have installed capacity, they just want to produce all the time. And because you are putting in to a national grid to be distributed, it’s not based on actual demand that is going to translate to money. That is going to change going forward. Power is an area we are looking into to make sure that our involvement should be on the basis that it is actually delivering a solution to our people, and also helping in the area of availability to support industrialization efforts. We need factories next to farms in our suburban areas and rural areas, and by so doing, develop the rural economy. Power being available at those locations is an essential item to attract young people, to be able to live in operations which are in rural settings, but they have access to all the things they get in the urban area.

During your last AGM in Lagos, you reported a decline in profit for the 2022 financial year. What are the lessons you have learnt from that decline and what should shareholders expect in the next financial year?

The fact of the matter is that 2022 was a time where we were doing enormous investment, and a lot of it in the pipeline — where we were actually investing to take positions. We had that going on in sectors like agriculture, energy, and ICT and Digital. We have made some progress in year 2023 and we believe that for some of the sectors we will see the impacts in 2024 and 2025. Let me talk about hospitality, for example. As it stands today, our hospitality business which used to be 3 hotels — Lagos Airport Hotel, Premier Hotel and Lafia Hotel — were on course to shut down at the end of 2022 — both Premier Hotel and Lafia hotel. In the case of Premier hotel, we reached a very good arrangement, a joint venture arrangement, where a partner joined us to redevelop Premier Hotel. If you look at that it means that we are not going to earn revenue during the period, but the difference is that we are closing down to do renovation and redevelopment. Renovation of existing facilities to actually upgrade them to be world class, and adding additional facilities which will be real development, completely new. And with that, with Premier hotel for example, it means that the number of buildings that will be on that site — which we know today is just one building — will change. There will be 2 additional buildings that will come on that site, and those buildings will now expand the facilities that that business is going to offer. For accommodation, we moved from 87 to over 150 rooms. And because we are increasing the rooms we are effectively expanding other facilities especially meetings, exhibitions, convention centres and so on. Also, multi-media conferencing facilities that can take as much as 1,000 and attract National and international events, have restaurants. Which are about 6-7 restaurants in the same location. Also, other forms of leisure like a mini golf course, basically, a destination for relaxation. Imagine being on Mokola Hill and seeing the whole of Ibadan from that location. The two new buildings coming on will even be taller than the existing ones.

What that means is that whatever Abuja, Lagos or Port Harcourt offers today the new Premier Hotel in the future will offer the same. Ibadan being the capital of South West can actually attract events on a regional level comparable to those locations I mentioned earlier. The NBA conference is happening in Abuja today, and lawyers converged, discussing things about their organisation and Nigeria, but they have not come on empty pockets to Abuja. They all went with pocket power, and Abuja will definitely feel their impact. So, that is what we hope that Premier hotel will do for Ibadan when it is time, when it is completed, and Ibadan, the economy of Oyo State, and the overall South West will have the kind of assurance that a world class hospitality facility is available in Ibadan.

Those are the building blocks that we believe will guarantee future revenue, because with that kind of facility, the money you will earn will be comparable to what is obtainable in Abuja. Truth be told, at these world class global standard hotels, because their charges are comparable to world standard it might look expensive to us Nigerians. 80$, 100$. However, people are used to paying that overseas because of the quality comparable worldwide.

So we do believe that those are the ways to lay a foundation to be able to grow our income and profitability in the future. And then going to new territories, reviving what we currently

have to make sure they are more modern and presentable. Then looking at all other new areas that we can enter that will be additional source of income and revenue for us as an organisation.

You are aiming to expand revenue by more than 500% in five years and the deadline is 2025, is this still feasible?

Thank you very much. It’s a tall, very tall order. And if you look at it, the date is near but the truth is this those ambitions were couched in naira, and when they were made in 2020 the exchange rate was less than 400. So it looks as if you’ll just earn the income and you’re still going to be talking about naira, the numbers will add up. However, as a management we have looked at it critically and we have rather placed emphasis on profitability, because at the end of the day it is profitability that allows you do a lot of things. So, the base line for that target of N40billion is that we are expected to be on profitability of 50 per cent. If we’re talking about profitability of 50 per cent, it is a PBT of N6 billion, so what will be fundamental for us is our focus on the profitability. We have no doubt in our mind that the profitability can be achieved because the energy element in it is giving us a significant upside. All we need to do is to accelerate, to get into production as quickly as possible. However, you can’t get into 100% production at once. You have got to get into the initial one — and the reason for that is this: when you are operating a site, you don’t say, okay this site for me to operate it optimally, I probably need to drill 5 wells. And maybe a well is costing you 12 million dollars, so that’s 60 million dollars, but that’s not going to happen.

Therefore, your focus is this: if there’s an existing well there you will want to make sure you can re-enter that well. Maybe for a cost of 6-7 million dollars, that well is producing for you. The volume will be low but you’re already doing production. What that does is that it gives you credibility. Whenever you now want to put 2, 3 , 4 wells, because people already recognise you as someone who is already producing, not someone who has a plan to produce, they will pay attention. They are also going to be doing a cash flow of the production to also rate you. It is possible to accelerate things.

When you start producing also, what you’re bringing out doesn’t become useful unless you are able to get it to the location of export or use. This is because production of oil means that you are producing actually three things; water, gas and crude oil. And these have to be separated. When they are separated, water goes back to the ocean when it is well treated, gas has to go back to where it will be used, and crude oil has to go into where it will be used.

All these will require the logistics of the connections — pipelines — to take them to those places. With your initial execution, you’d have sorted out logistics. For instance, if one is a producer at a location 12km away from an export terminal, one has to put a pipeline from production point to terminal. So you do that once and when you now have 2, 3, 4, 5 wells in the future, they will still be using the first one. Therefore, the initial one is what is fundamental and once you break through on that, it goes a long way. So attention is being given to that particular area because profitability is very cardinal.