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Nigeria: Wellcrete - How Corruption, Policy Changes Ruined Firm


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This Day (Lagos)

8 June 2008
Posted to the web 9 June 2008

Lagos

Wellcrete Building Products Nigeria Limited is a case study of how scores of Nigerian companies are killed by policy changes, corruption and ineptitudeness by government parastatal and ministry officals.

Roland Ogbonnaya writes about a firm with novel product that was made prostrate before it could begin production. Additional reports by Wole Ayodele and Reuben Buhari

Mr. Stephen Kolawole Ajulo, a certified accountant was working with an indigenous firm-Turners Building Products Limited, Kaduna, a company that produces asbestos roofing sheets about 1989 when an idea came to him to established a personal company that will also produce roofing sheets, but now using fibre glass instead of asbestos which research had shown was injurious to human health.

While working with Turners Building Products Limited, he began the contacts and processes of establishing the company. Mr. Ajulo visited the technical partners on how to bring in the new technology to Nigeria, which will make it the first of its kind in Africa. At the time he decided to establish the firm, asbestos sheets have been banned or phased out in Europe and America because of the believe that the sheets were not health-friendly. He finally left the company in 1991 to established Wellcrete Building Products Nigeria Limited at Aiyetoro-Gbede, Ijumu local government area of Kogi State.

As he parleyed with his technical partners for the new technology and machine, he was also negotiating for loans from individuals and local institutions. He convinced businessman Alhaji Aliyu Ibrahim Attah to come on board as chairman of the company as well as the former police officer and AIG, Alhaji Ahmadu Sheidu as member as well as a German, Prof. Adolf Meyer. Other institutional investors include Kinco Limited, Kogi Investment Company Limited Nigeria, Industrial Development Bank (NIDB) and Northern Nigeria Development Company (NNDC), a major financier through a loan NNDC sourced from the European Development Bank in Luxembourg.

According to Ajulo, the loan from NNDC from the European Bank was the genesis of his problem as well as Wellcrete Building Nigeria Limited, which unfortunately rendered the new company moribund till date. The loan from Luxembourg was for companies in developing countries and fortunately NNDC got the loan to give out in Nigeria, but could not find any until almost the expiration of the loan which was when Wellcrete came to be a beneficiary.

"Unknown to me and the company, the loan that we were to enjoy two years grace period had expired. I did not know about it until I got the loan. After six months I got the loan, I was told to begin to repay the loan with interest. That was where the problem started because I cannot start repaying the loan and at the same time building the plant and when I have not started production," distraught Ajulo told THISDAY recently. "NNDC were sending the bills but did not disturb me. However, with so much pressure between 1992 and 1993 I was able to repay N5 million out of $4.8 million despite the fact that this loan was given to me in piece meal," he added.

Ajulo continued the story of his ordeal: "Then I was beginning to have problem as the plant cannot start production and has started to fail. NNDC later gave us what we were asking from them even as that could not cover other ancillary parts of the plant. We had to approach NIDB now Bank of Industries (BoI) to ask for the remaining amount of money that will cover the cost and was finally approved two years later to enable us install the complete plant.

After the money was approved, Ajulo said he ran into yet another problem. He said the funds came at the period when general election in which Alhaji Moshood Abiola won was annulled by the Gen. Ibrahim Babangida government. As a result of this annulment of the election, the European and African Development Banks decided to freeze any loan for Nigeria. This affected Wellcrete as it took another two years for the banks to lift the ban.

At the time the company got the loan approved in 1992, the exchange rate was about N9 to a dollar and "we were ready to pay at that high rate, but eventually that policy was changed by the Federal Government to something higher which was impossible for us to pay. At the time we set up the factory, the Babangida Administration said goods for industrial use should be duty free as a way of encouraging industrialisation. But with delays, not on our part, clearing of our machines at the ports dragged into the government of Gen Sani Abacha and his policy was that there will be no duty free for industrial machineries.

"While others were paying at 45 per cent rate, we sort for five per cent as our goods were already at the port. I went to Chief Anthony Ani, then minister of finance and complained to him. He told me that he cannot because of my company change government policy and therefore gave me a Customs officer from Abuja to inspect the machines, after which the officer wrote a good report in our favour and we were allowed to pay five per cent duty. After this, a lot of things happened along the line," Ajulo said.

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As he was in Abuja negotiating these waivers, his clearing agents called to say that the container bearing the machines was missing. It was later found auctioned for N900,000 against its original cost of N15 million. "The traumatic aspect of it was that out of the N900,000 my goods was auctioned for, only N100,000 was entered in government records," Ajulo further said. He located some part of the machines, which did not make sense to him any more around Tin Can Island, Apapa. He decided to install in the factory what he had which he was able to test-run the factory, start production and begin to repay the loan. Again there was the problem of working capital and the banks were not ready to assist. Ajulo could not get the funds to buy raw material even with the threat from the NNDC over the repayment of the loan and taking over the company.

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Read comments. Write your own.

Author: usmansr

Hi there, Probably I would be the one who would be most interested in this article. I would not say much but I think I am the only person in the world who can make soon good use of this plant. I know about the technology and the wellcrete process as well. All I need is the person or company who owns this plant should contact me. I can make it work or I may buy it as well. depending on the condition. please contact me : usmansr@gmail.com or +92 321 4030011 or by fax +92 42 5852064.

I guess... [Read Full Text]

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