The Group Managing Director and Chief Executive Officer, Vitafoam Nigeria Plc, Mr. Taiwo Adeniyi in this interview with Kayode Tokede, speaks on the manufacturing sector performance in 2022, stressing that Nigeria economy stands at risk with the signing into agreement the African Continental Free Trade Area (AfCTA). He also spoke on the foreign exchange market, finance Act, VItafoam’s performance on the Nigerian Exchange Limited (NGX), among others.

As the Group Managing Director of Vitafoam, who also doubles as the President of Nigeria Employers Consultative Association (NECA), what is the outlook for 2022?

We expected growth and the drives of the economy in 2022 as we have been told and all indicators are pointing towards the manufacturing sector as one of them.

The manufacturing sector over the years has been very quiet. But right now, what you find is that people have now settled in on how to price appropriately. As they price appropriately, they now able to produce a cost and better manage their cost. In any case, it is a pre-election year, there will be more money to throw around and we are all going to benefit from it. The manufacturing sector is expected to be one of the drives of the economy this year.

How has the annual Finance Act, especially taxation impacted your business?

When you talked about taxation, our grievance with the government remains that you do not trade the horse that throws the coin. If you keep pressurizing those that currently pay tax to pay more, time will come when push will come to fall and it will be a case of I cannot pay any no more.

Rather than continue to look for venues to muscle the horse that currently trades the coin, look for avenues to widen the tax net and that has been our cry to the government.

It is just unfortunate that in this part of the world, the Key Performance Indicators (KPIs) we have set for operators of the economy speak more to what they will call average performance.

If for instance, I was the finance Minster or the finance minster reports to me, it will be nice to sit down and ask such question like how many people pay tax as of today? In six months’ time, I expect that you could have increased that number by 10 per cent or more in a move to widen the tax net.

Rather than say 100 people currently pay tax and we get N100 from them but our need is N150. So, we increase the amount they currently pay so that government can have more money to spend. To me, it is a lazy way of thinking.

A proactive way of thinking to show that you really know what you’re doing and us to say 100 people pay tax at a moment can I increase that by 100 or 120? So that peradventure, I will be able to meet my target of N150 within that net of 120 people. Don’t forget, year-in-year out, if you do not increase tax net, one of the things that you’re going find happened is that you have muscle those who currently payout of the tax net and that will be more dangerous because getting and saying it is not enough, is better than not getting at all. I think with more engagement with the government, they will do something on the long run.

What should the Central Bank of Nigeria (CBN) and other stakeholders do to resolve the challenges of FX for the manufacturing sector?

Foreign exchange for a time to come will continue to be a challenge in the sense that before now, the demand for FX puts the government at an advantage because our benchmark on sales of crude oil always exceeds government target.

Right now, the story has changed and if the story has changed, what are we doing to bring FX into this environment?

That is the reason why the government needed to diversify the nation’s economy, most especially into the Agriculture sector. We are aware, by the government’s intervention in the agriculture sector, it brings about the biggest rice pyramid that was recently launched in Abuja. It has at least shown that the Central Bank of Nigeria (CBN) is doing something to revamp the agric sector.

Truly, the agric sector is positioned as a sector that will grow significantly this year. If we increase our export window, then we expect more FX will be available because what is going to happen is that you will now have less demand on the little FX that is available and once that happens, it is from a request we have made to the government to distribute the little that is available even they begin to look at it critically, then we might have some respite.

Respite in the sense that we said look rather than just distribute what is available without statistics, whoever is asking for FX, be sure of what they are going to us it for and particularly, be sure that FX that is going to manufacturing is the principle used to procure raw materials or machineries that are not available in this country. Part of it is that CBN now talking about checking the pricing structure of materials. What the CBN has also find out is that they inflate the price of materials ordered into the country. What all of things in place, I think there will be some receipt along the pressure on FX.

What is your assessment of the operating environment of manufacturers in Nigeria with regards to the cost of forex, importation of raw materials, the influx of adulterated products and challenges at the nation’s ports?

For the organized private of Nigeria, we have been reiterating some of these challenges that are more local. Local challenges in the sense that it is coming from the frustrations we face with the regulating authorities on those who collect taxes; they have become overbearing.

We have said to the government until you make Nigeria Customs Service a non-core generating agency; we can’t have any progress along that window. For as long as customs is given a target, they will device every means to get that money out of importers. It goes to many windows and it is a major issue. Not just that alone, virtually all the agencies of government. In the wisdom of those who have operated in the economy before, all these agencies were withdrawn from our ports because among these agencies of government, you’ll find that duties interlocked with one another.

You have the National Agency for Food and Drug Administration and Control (NAFDAC), Standards Organisation of Nigeria (SON) among other agencies at the ports. Before now, there were withdrawn from the ports by a former minister of finance but now, all of them are now back to the ports. These agencies frustrate importation which messes up the whole importation process.

You bring your goods and it takes forever to get it out of the port because it is congested. Eventually, when it comes, it takes four-six weeks to get the goods out of the ports. Where is that done all over the world? There is no expansion around our ports and economy has grown beyond the wisdom of those that constructed the ports.

Vitafoam Nigeria Plc announced a bumper audited financial performance for 2021 in all metrics, a trajectory of profitability despite the inclement operating environment. What are the factors driving the performance?

Over the years, Vitafoam has witnessed trajectory growth from what it used to be and we have been very careful at doing what we know how to do best.

The first thing is that for every growth that you have seen, there have been market-driven. Market-driven in the sense that when you know what your market needs are and you work towards meeting those needs.

Then, you have carefully won the heart of your customers. What used to be in the past was that people sit at the factories and do all kinds of research and developments. They bring up all manners of innovations and push it to the market. At the end, they find out the market does not need them and it then becomes a useless effort.

What has dramatically changed the way we do things at Vitafoam is that we are now listening to our customers and because we listen to them, it makes the whole job easy.

We do not benchmark ourselves with what is available in the market. We benchmark ourselves with global standards and what global standards said is that your product must be fit for a purpose. Every man going to the market has a purpose in his mind.

If he goes there and the product aligns with that purpose, you have won the heart of the customer and I can assure you beyond all we do; research, resilient effort, and cohesiveness of our team working to achieve a common goal.
Beyond that, we listen to customers more than before and do not forget that the current economy we run now doesn’t give room for people to throw money around. Consumers are careful about what they spend their money on which must be fit for purpose for them to decide on how to spend their money. When we talked about fit for a purpose, it means quality and the reason why consumer buys our products all over the marketplace.

Is acquisition still part of your growth strategy and how are your subsidiaries contributing to the group?

I can proudly tell you that virtually all our subsidiaries are now in positive position. Even the one that used to be the carrying baby of the family has now turned positive. So you have from Vitablom, Vitavisco , Vitafoam Sierra Leone Limited · Vitafoam Nigeria and Vono. They are all contributing to the bottom line of the group.

In the past, they used to take out of the purse but now, no matter how small, every of our subsidiaries contribute to the bottom line of the Group. However, it has taken us this long to be able to bring them to a point where they can be contributing. I tell you some of them, in not too distant future, they will be bigger than Vitafoam. In the wisdom of the creation of these subsidiaries at that time, they are now doing very well. Some of them now supply part of materials that we used for production in Vitafoam which was part of the reasons we set up the subsidiaries at that time.

Part of what that has contributed to profit of Vitafoam is the backward integration effort of the company. While others are running to Europe, other places to look for materials; those materials are manufactured by our subsidiaries and supplied to Vitafoam. When we are going to negotiating even the materials for production, you find out we are negotiating these materials from the point of strength. These are part of what we are benefiting from setting up these subsidies and they have been of tremendous help to the operations of Vitafoam.

Given the operating environment, how competitive do you envisage Nigerian companies in African Continental Free Trade Area (AfCTA)?

Nigeria runs a major risk when it comes to AfCTA. The major risk in the sense that we have signed on to the agreement but we do not have a choice at the time we signed it. If we do not sign, others will go ahead and the big brother of Africa will be left behind. In the spirit of the agreement, we signed the agreement. As regards issues around the operating of that agreement, Nigeria is behind and in the number of platforms. Other countries by the help of Western world might begin to commence that implementation of the agreement. But some of these products will be probably shipped to these countries and they will find their way into Nigeria. Of course, they will compete with proudly made Nigeria goods because to be honest, until something is done about our borders, we are at risk, which is unfortunate.

Again, the operating environment in Nigeria cannot be compared to other countries, as the cost of production in Nigeria is much higher because as of today, we still struggle with the key element of production, which is Power. So for as long as that is still the battle, then the agreement we have signed, other countries will come and benefit from it.

PMI closes at 52 index points in December 2021 and at above 50 index points it is positive but below50 index points, it is negative. Do you align with the figure given current economy peculiarity that you have painted?

The performance of PMI remains one of those things we always ask questions. What are the factors driving it? If we go by the pictures that we see, it points to be negative but yet, when our statisticians do the computations, it ends in positive. We then started querying what the driving factors are. One of the major driving factors is the performance of the ICT sector.

The things about ICT sector is purely service and it has a way of driving up those figures but they do not have direct impact on the economy as regards talking about influencing environment conditions. What you find happening is that the sector is driving the PMI is not manufacturing and because it is not manufacturing sector, not too many people are benefiting from it. Once you have it, the environmental picture is that nothing is happening and only God’s know where they are getting their figures. Truly, something is going!. If truly manufacturing sector that has the largest employability is the one driving it, then you will see it in the economy.

In some parts of Nigeria, there is still a perception that rigid foam is the only product of Vitafoam. How will you respond to this?

That is part of what we trying to correct with a lot of our marketing activities recently. It is all about education. When people talked about Vitafoam, what usually comes to their mind is “from cradle to grave”. It was our payoff for so many years. Now, it has gone beyond that and it is a fine act of living. In order words, you get more from just a mattress. We give you comfort, we make your life worth living then just giving a mattress to sleep on. It is the public enlightenment that we are working on for now. We are a household name for all your sleep requirements.

Your living environment can be enriched with Vitafoam products and we are now looking at your vehicles to provide comfort. We did a study and find out in Nigeria there is currently no factory that produces oil filter and we have these numbers of vehicle in Nigeria.

We are known for making life more comfortable for people and we have decided to make an investment in the production of Oil filter. We have set up Vitapart Nigeria Limited to produce Oil filter for our cars. Production has started and people are embracing it. Congratulations on the Company’s proposal of a dividend of N1.50 per Ordinary Share for its 2021 performance as against 70 kobo per share in 2020, how sustainable?

Our dividend payout is sustainable and you must understand that Vitafoam as a company does not do things by speculations. We take circulated risk and if you looked at our performance, you will notice, that it is highly sustainable. For years to come, our stakeholders will be smiling to the bank. On September 16, 2021, teams of Journalists from British Broadcasting Corporation (BBC) Television were at Vitafoam’s Head Office to shoot films and interview some Officials about one of the Company’s products for global education on how sleep positions impact health. Shed more light.

The documentary was part of recognizing and giving credence to what we do at Vitafoam. We did not influence them as they did their research and found out that it is Vitafoam that has what they need. They came around and do the documentary on one of our products. They educate the public that our sleep is important. What you sleep on is as the quality of sleep you get.

Is there a correlation between the company’s performance and its current share price on The Nigerian Exchange Group (NGX)?

If you are investor, where will you put your money? It goes to confirm the confidence investors have in Vitafoam Nigeria. They have seen the trajectory that it has been on the increase. If I have money to invest, I will invest in such company because if you look at our performance over the last five years, there has been consistent growth. We continue to record growth and it has gone beyond marginal increase.

Yes, the shares might not correlate with the performance, but it is a share a lot of investors wanted to buy on the NGX. If you check on the stock on the bourse, there are always activities but not enough to buy because those own those shares see the performance keeps appreciating.