8 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.
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.
Ajulo went back to his technical partners for assistance and a consultant was sent to him. The consultant was amazed and sympathetic with what he saw. Together they went to various local banks for funds and was not successful. With another loan from other personal sources, he began the test-run of the factory with about 50 staff. In 2000, NNDC said that the loan has taken time to be repaid and was ready to take over the company.
"I told them that they cannot run the company without me the promoter because it was a new technology. Again I told them that it would be disastrous to take over the company without me because we have not been able to train enough staff to man the place in my absence, but they said no. They sent one inexperienced engineer and an accountant. I left and handed the place over to them after taking inventory of machines and spare parts," Ajulo told THISDAY.
Ironically, the board members did not see the entire scenario the way Ajulo saw it and therefore supported the takeover of the factory by the investment company, NNDC. Unfortunately the staff from the investment company tried for three weeks to run the factory but could not do it. In their incompetence, they turned around to accuse Ajulo of removing something from the computerised factory and subsequently reported same to the Oba of the community. "For six months they were there doing nothing. They later locked the place and left as the factory became bushy and home for rodents and other animals. The 250Kv generator was vandalised and they were looking for N.5 million to refurbish it. Since 2000 nothing is happening at the factory after they sold the goods that we produced," he said.
In 2005, Ajulo said he received a letter from NNDC for him to come back and he gave his conditions including inviting the technical partners to audit the machines and spares as well as means of getting funds to get the place started again. A rough estimate put the amount needed to get the place resuscitated at N5 million. Unfortunately both the investment company and the financiers were not able to raise that fund till date. Presently the factory is in a sorry state as it has been vandalised several times and most of the machines and parts stolen with the store set on fire. For Ajulo, the death of the company is not only a tragedy to the nation's economy, but to him personally as he lost his wife in the process of fighting the battle of his life.
Though established to kick-start the industrialisation of its host community, Wellcrete Building Products Nigeria Limited, situated at Aiyetoro Gbede in Ijumu local government area of Kogi State is a classical example of the nation's failure in its industrialisation drive. When the company was established several years back, it elicited joy among the people of the community and its environs as it raised their hopes of a rapid economic transformation of the community as well as provide an avenue for the engagement of the large number of highly skilled manpower that abound in the town whose natives can be found in all spheres of human endeavour, contributing in no small measure to the socio-economic development of the country.
Today, a visit to the factory complex, situated on a large expanse of land covering over one kilometer with magnificent structures which ordinarily should have made the factory conspicuous to travelers plying the Kabba/Ilorin road would tell the tale of the predicament that has befallen the factory over the years as its presence in the community can not be noticed except for the rusty signpost that was erected at what looks like the entrance of the company.
Presently overgrown by weeds, the building is now a ghost of its former self as there is no life on the site except for few mango trees that dot its landscape as well as series of abandoned equipments and machines. Following its abandonment and subsequent lay off of its staff including security personnel, policemen were drafted to secure the factory as it has become susceptible to vandals who might want to cash in on its inactivity to vandalise machines.
Not long after, the services of the police were withdrawn due to the inability of the management of the company to sustain their services just as it could not engage a guard to look after the multi-million equipment. And as if the problems confronting the factory arose in the interest of vandals, they have continued to strike at the company and each time they strike, they come with trucks and take their time to loot as many equipment as they could invariably carry as there was always nobody to confront or prevent them from carrying out their dastardly act.
As at the time of filing this report, over 50 per cent of the long span roofing sheets used in constructing the main factory has been vandalised while there is no motorable road from the main express road to the factory as the road leading to the factory complex has been overgrown with weeds.
Last April, following a tip off, the officers and men of the Aiyetoro police station, led by the Divisional Police Officer (DPO) closed in on the vandals and engaged them in a shoot out. At the end of the battle, the men of the underworld abandoned a DAF truck they brought to convey their loot.
In a bid to bring the company back on track, THISDAY gathered that the Managing Director of Kogi Investment and Property, Alhaji Yahaya Bello was appointed to head an ad-hoc committee put in place to chart a new course for the company and submit a report on how to revive it. The report is yet to be implemented four years after its submission. When contacted, Bello declined comments but directed THISDAY to the State's Commissioner for Finance for all necessary information on the company.
Also, efforts to speak with the officials of NIDB, now Bank of Industries (BoI) was not successful as the officials competent to speak on the issue were not around at different visits to its corporate headquarters in Lagos. However, when THISDAY sought the explanation of top executives of NNDC at their corporate headquarters in Kaduna, regarding their involvement in the collapse of Wellcrete Building Product Ltd, the reasons proffered was that the location of the company was wrong as well as the refusal by the shareholders to retain the technical partners coupled with petty bickering among the shareholders.
The Executive Director, Business Development and Corporate Planning Directorate, Mr. Frederick Durlong, and Head, Planning and Corporate Development, Alhaji Khalil Hamzat who spoke to THISDAY refuted the allegation that NNDC took over the company knowing clearly that they lacked the technical expertise to run it. Both said that NNDC has never for a day taken over Wellcrete since the day it loaned the 2,427 million Euros to the company, despite its inability to repay.
According to them, NNDC has an avowed commitment to the industrialisation of the north in particular and that of the country in general and that it would never deliberately sabotage, under any guise, a company it had help established, adding that their belief in the feasibility of Wellcrete changing the industrial landscape of the north for good through the generation of jobs for thousand of Nigerians help in influencing the board of NNDC to select Wellcrete together with nine others for the loan.
"Around 1989, NNDC got a financial facility from the European Investment Bank (EIB). It was a loan facility which is made available to financial institutions for onward lending to smaller organisations, companies or businesses aimed at encouraging industrialisation. About 10 companies which included Wellcrete Building Products Nigeria Limited and Niger Detergent that had applied to NNDC for the loan, out of so many other companies were given. But apart from Wellcrete and Niger detergent, all the other companies that took the loan have liquidated it," he said.
Hamzat, then said that personally he feels that the genesis of the problem with Wellcrete was the location, which he said was at variance with the requirement determining where to locate an industry. "One of the factors determining the location of an industry is nearness to market and source of raw material, and with the kind of products which Wellcrete was thinking of producing, the end users and the raw materials are not even close to the place. The end users of the fiber glass asbestos roofing sheet it was to manufacture had its users in areas like Abuja and Lagos, or high brow areas where the high and mighty of the society who would have used the product reside."
When asked whether NNDC did not carry out an appraisal of the company which should include its location before granting the loan, Hamzat explained that the appraisal officer at that time was convinced that the Wellcrete project was a viable one when properly managed.
He said the company installed the plant, test-run it and then "after test-running it, ideally, the technical partners were supposed to have been retained for a while, but immediately the shareholders test-run the machineries and produced once, the technical partners were asked to leave. Personally, I think that either the shareholders were running away from incurring excess cost with the retaining of the foreign technical partners who installed the machines or just their anxiety to start producing and make profit, could be the reason for the shareholders asking them to leave.
"But professionally, technical partners are retained because you can't run a company and the machines. Unfortunately, after producing the first consignment, it did not meet the required standard needed and that was the beginning of the problem for the company before other problems among the shareholders misunderstanding," NNDC insisted.
From 1992 when the loan was given to Wellcrete up to 2000, the company did not produce anything again. This, according to Hamza encouraged NNDC to finally intervene so as to explore ways of getting its loan back. The intervention, he explained was contained in the loan agreement signed by both parties.
He further explained that external receivers would have gone ahead to sell off the company and salvage the NNDC loan. But Hamza said rather than doing that, NNDC sent in its own staff as internal receivers because of its strong desire to always ensure that companies are established rather that dismantled, encouraged and not discouraged. He however said that in 2004, with no progress made toward reviving the company and no serious commitment from the shareholders concerning the company, the two NNDC management staff sent in as receivers were recalled because unnecessary cost was being incurred with their continued stay in Wellcrete with no commensurate progress.
Effort so far taken by NNDC toward reviving the company, according to him include, inviting top industrialists like Dangote and others to come and appraise the company with a view to taking over it. He added that they are even making progress but did not get the cooperation of the shareholders whom he said kept dragging the issue.
However, a member of Kogi State House of Assembly representing Okura Constituency, Hon. Emmanuel Ogbe Omebije has called on the State Government to aggressively take steps to resuscitate and privatise the company and other existing companies that are viable but lying dormant and all others where the State Government has substantial interest.
Similarly, Hon. Dino Melaye, representing Kabba/Bunu/Ijumu Federal Constituency and a native of Aiyetoro Gbede has called on the Federal Government to urgently take over the company and invest substantial funds into it so that it can come back to life. Ajulo however, insisted that any arrangement to bring the company back to life without him would not be proper and fair.
But professionally, technical partners are retained because you can't run a company and the machines. Unfortunately, after producing the first consignment, it did not meet the required standard needed and that was the beginning of the problem for the company
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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 the owners who dont find any worth of their plant may want to contact me.
regards,
Usman