‘FX scarcity has cut our bread production from 1.5m to 400,000 loaves monthly’

Joseph Babatunde Oke is the chairman of A.G. Leventis Group. In this interview with ODINAKA ANUDU, he says the group has suffered from acute shortage of foreign exchange, stressing that unless the manufacturing sector is given the desired attention in Nigeria, it may not be easy to industrialise the country and create the desperately needed jobs.   

Your financials show you had increases in sales but not in profits in 2015. What are your expectations in the 2016 financial year?   It’s unfortunate that the economy has not been properly managed. Now, the year will depend on the performance of the economy. At the moment we struggle to get foreign exchange to even order raw materials for our production. For example, we run a bakery and sell one of the best bread meals in the market today. At a time we were doing over 1.5 million loaves every month, but we discovered that the flour millers were increasing their prices on a day-to-day basis. However, we could not afford to increase the prices every day, because if you take bread out of the tables of a lot of people, they will suffer.  Bread is easy to buy, whereas if you go and buy yam, you still need to cook it. Currently, we are doing about 400,000 loaves.  So the difficulty at the moment is foreign exchange, which is not there. Up to this moment, we have broken even. But I need to have some magic wand to be able to tell what the government will do tomorrow. Are you aware of the CBN’s directive that manufacturers should be allocated 60 percent of the available FX? They have not told you the value of dollars they will make available to banks. So if you give them only $1 million every month, and you say ‘allocate 60 percent’, that is only $600,000, which is not even enough for one manufacturer. I can tell you that throughout August, what they gave us was about two percent of our need. So it’s neither here nor there.  That’s why you find that some manufacturers are leaving Nigeria. What you will also discover is that some are trading with the dollars. So this is the problem.  But all hope is not lost.  We know the government and the CBN are working every day to see some improvement.   To what extent have you raised the prices of your products in reaction to FX challenges?   We cannot, especially if you are producing food items, because the ordinary man buys a loaf of bread at N250. In the current situation, the family loaf should be selling for N400.  But if you do that, how many people can afford it?  So you have to think about the consumer as well as you think about profitability.  What we are doing is to cut our profitability in order to produce and sell to our customers at affordable prices. What is your capacity utilisation at the moment? We are into three industries. If you take the bakery, we are about 60 percent. This is because once upon a time we were doing family loaves of 1.5 million loaves every month. Today we are doing something like 400,000, because the ability or capacity of the consumer to continue to buy is not there.   We are in recession. How do we get out of this slump? I think the government in a way is taking the right direction with emphasis on agriculture, which we should have done 25 years ago. When I was growing up, there was oil palm in the Old Bendel State, and they produced oil palm which we were able to export and earn dollars. But those companies are all dead.  There was the other one in Delta that was producing rubber, which has died too.  There were companies in the north that were producing cotton. But they have all died. Government needs to outline its economic policy based on the short term to meet today’s problem. It also needs to come up with medium- and long-terms policies. I have heard some ministers say they are working on things and Nigerians should wait. You cannot tell Nigerians to wait and then starve.  You must have a short-term measure and then you can have a medium term. Let there be policies that will make us earn dollars or at least be self-sufficient in textiles and other industries.   ODINAKA ANUDU