Mr Ugoji Lenin Ugoji Group is the Chief Executive Officer of C & I Leasing Plc. He is also an expert in Commercial and Investment Banking, Leasing and Asset Management.
In this interview with the Nairametrics, he speaks on issues bothering maritime, outsourcing, fleet management business and other challenges in the nation’s economy.
Enjoy the conversation.
Nairametrics: What is your outlook for the Nigerian economy in 2023?
Ugoji Lenin Ugoji: The potential for growth in the non-oil industry is one of the main opportunities for Nigeria in 2023. The government has been putting a lot of effort into diversifying the economy away from oil and gas, and industries like solid minerals, technology, and agriculture have the potential to do so.
The Nigerian economy will nevertheless face a lot of challenges in 2023 with inflation, currency depreciation and a lack of foreign investment being key among them.
The rate of inflation has been steadily increasing, which has reduced purchasing power and made it challenging for the typical Nigerian to afford essential products and services. In recent years, the value of the naira relative to the dollar has decreased significantly. We however expect inflation to taper downwards by Q4.
In summary, there are a variety of possibilities, trends, and difficulties in Nigeria’s macroeconomic prognosis for 2023. While the non-oil sector’s potential for growth and the adoption of economic reforms and policies show promise, there are still significant obstacles that must be overcome if the nation and its citizens are to enjoy greater prosperity in the future.
These obstacles include high inflation, currency devaluation, a lack of foreign investment, inadequate infrastructure, insufficient power supplies, security concerns, political instability, and corruption.
From the standpoint of results of the presidential which held on the 25th of February 2023, we saw an increase in the All Share Index (ASI) immediately President- elect Bola Tinubu was announced (though other factors could also have contributed to that), the market has since then had a marginal drop.
This is due to the rising tension as well as the controversies regarding the election results and general uncertainty. However, going forward market has many opportunities to do better under new leadership.
After the conclusion of the gubernatorial elections and the general stable political climate, I believe that foreign investors will now feel more comfortable investing in our economy. The assumption is that the new leadership will usher in a fresh perspective to tackling insecurity as well as ensure that oil production rises, particularly because the Dangote refinery is in its completion stage.
There are likely to still be some looming challenges such as naira devaluation, corruption, inflation etc, however, the country is expected to experience growth in GDP with some of the challenges being tackled and faced head-on with the new leadership hitting the ground running immediately.
Nairametrics: What is your take on the investment landscape in the country?
Ugoji Lenin Ugoji: The investment landscape in Nigeria has a lot of potentials. As previously stated, the situation of the elections is one of the determinants, provided we have a smooth handover of power, the investment landscape looks very promising, especially for Infrastructure, Mining and Financial Services related sectors.
Real estate prices are expected to improve; the naira is expected to appreciate due to the inflow of FX and the investment environment is expected to be business-friendly over the next few years.
Nairametrics: What are the challenges faced by outsourcing and fleet management businesses in Nigeria?
Ugoji Lenin Ugoji: The peculiar challenges with road transportation are low budgetary provision for road infrastructure has hindered development and affected the quick wear and tear of vehicles; Nigeria has a huge road deficit of about 70%; only 50,000km out of every 200,000km of road networks are paved in the country.
Road deficit results from the multiple and unstructured levies; high level of insecurity; the rising cost of petroleum upon possible deregulation of energy pricing in July 2023; rising FX rates and its higher price consequences on procurement of vehicles and service parts, which heavily affects maintenance cost; and fuel Scarcity and envisaged Deregulation of PMS which is reflected in the pricing of the vehicle leasing and fleet management solution.
Some of the challenges with fleet management are; the struggle to recruit and retain credible drivers; rising costs and fewer new, available vehicles disrupting operations and rising diesel costs and vehicle maintenance costs due to ravaging inflation.
Solutions to these will have to come in multi-folds: Safety and technology, strategic deployment of artificial intelligence, managing supply chain disruption, and strategic collaboration with a related party to upscale and achieve results through economies of scale.
Outsourcing is not so new, but developing at a relatively slow pace in Nigeria. It is a market that is yet to reach its full potential. It does not have a particular date of inception in Nigeria but it has since been faced with a few challenges.
There is presently no strongly implemented legislation guiding the outsourcing industry, despite its budding recognition in the country. The lack of penalties for misconduct has led to high incidences of unprofessional conduct among outsourcing providers especially those who provide low-quality services. More needs to be done for the outsourcing industry to reach its full potential.
Nairametrics: What are the prospects of investment in an emerging economy like Nigeria?
Ugoji Lenin Ugoji: Investment opportunities have expanded greatly in African countries, with over 522 firms now listed on sub-Saharan stock exchanges, up from barely 66 in 2000. Recently, the Russian-based investment bank Renaissance Capital announced the launch of a billion-dollar pan-African investment fund and also created a fully-fledged pan-regional investment banking, Research and Assets Management operation with offices in Lagos and Nairobi.
In the same view, the German government recently signed a bilateral trade agreement with Nigeria in the area of renewable energy where Germany would make available 16.5 million euros (N3.5 billion) in the financing of the projects.
Investors in the emerging equity markets are also developing a taste for Africa, with global emerging market funds deploying nearly 10% of their portfolios on the continent. China and India are in a battle for Supremacy in Nigeria as both countries keep boosting their investments in the country. With a population of over 158 million and substantial revenue from oil exports, Nigeria is India’s largest economic and trading partner in Africa.
Nigeria is also the largest market in Africa for Indian exports. A large number of Indian companies have footprints in Nigeria and have made substantial investments in Nigeria. Prominent among over 100 Indian companies in Nigeria is: Bharti Airtel, a telecommunication company, which officially takes over the management of Zain Nigeria in 2010 following the purchase of the African assets of Zain by Bharti Airtel plans to invest $600m over three years to strengthen operations in the Nigerian market.
Tata Group which comprises over 100 operating companies in seven business sectors: communications and information technology, engineering, materials, services, energy, consumer products and chemicals has invested over $100 million across the continent, including in Ghana, South Africa, Nigeria and Mozambique among others.
India- Nigeria trade reached the milestone of $ 10.2 billion during 2008-2009; it fell to $ 8.7 billion in 2009-10 due to the global recession. Indian export basket to Nigeria was dominated by manufactured items such as machinery and instruments, pharmaceuticals, electronics, transport equipment etc.
However, it is obvious that what the country needs is not aid from advanced countries as it used to be but ample investments and a steady flow of private capital into the country. Meanwhile, it becomes the responsibility and lifetime obligation of the government and policymakers to ensure sustainability and ensure that growing investment interest towards the country is not frustrated with an unfriendly business environment and a high state of insecurity.
Nairametrics: What do you think will be done to expand the growth of Marine transportation in the country?
Ugoji Lenin Ugoji: The Nigerian maritime transportation industry has been designed in accordance with the country’s national economic development plan targeted at ensuring that the sector becomes a strong and viable private going concern with the government as a regulator.
This is because Nigeria accounts for 60% of total sea-borne traffic of volume and values in the West and Central African regions. The Nigerian maritime sector therefore should create a link between maritime transportation and economic development as the source provider of logistics.
The offshore support and other ancillary services are key to the upstream and mid-stream oil and gas sector of the economy.
On the whole, the importance of Maritime transportation to Nigeria’s economy can be measured through its contribution to the country’s Gross Domestic Product (GDP) annually. The impact could be direct, indirect or induced.
The direct impact involves the value added to GDP, industry revenue and profits among others. The indirect impact is caused by purchases occurring through direct demands on goods and services needed in the sector. The induced demand would be demands created in the larger economy through multiplier effects such as increased purchasing power in the hands of citizens employed by the sector.
The Maritime transport industry serves as an input into every other industry in the economy, it will be noted that there is hardly any segment of an economy that can do without the Maritime transportation sector-Maritime transportation accounts for about 95% of the vehicular movement of Nigeria’s international trade.
It is revealed that 70% of industrial activities in Nigeria are sited around the port cities of Lagos, Port Harcourt, Warri and Calabar. However, the Lagos seaport is the most active. To expand the growth of marine transportation in the country, other seaports should be actively developed.
Nairametrics: Do you think marine transportation is attracting expected investment from investors?
Ugoji Lenin Ugoji: I think Marine transportation is not attracting the expected investment from investors because of the preponderance of Marine Operators in Nigeria focusing on the Oil and Gas sector.
The Oil theft challenges in the Oil and Gas sector had, however, impacted negatively on the production capacity of Oil producers thus leading to higher overall costs of production thus resulting in lower-than-expected investment return.
These concerns in the country must be addressed so as to attract more foreign investors and boost activities in the sector
Nairametrics: What Are your expectations from the incoming government?
Ugoji Lenin Ugoji: My major expectations from the incoming government are that key issues like insecurity will be tackled with decisiveness which will give some sort of confidence to attract more foreign investment and strengthen the Naira. I also expect the incoming government to expand the non-oil/ services sector such as agriculture and exportation of services to increase the non-oil foreign exchange revenue to Nigeria.
Nigeria is an Infrastructural deficit nation and more attention is required for good roads, improved electricity as well as provision of a stable and thriving environment for small and medium-scale businesses. Grants and tax rebates are expected to enhance entrepreneurship which can reduce unemployment because more youths can be enabled thus creating jobs.
Lastly, the current cashless policy though forced on Nigerians could have advantages for enhancing payment infrastructure.
Nairametrics: On a year–on–year basis, the headline inflation rate remained on the increase, what are your projections for 2023 and what do you think will be done by the authorities to bring about its reduction?
Ugoji Lenin Ugoji: I believe inflation for 2023 will lower over the year especially, following the cashless policy driven by the CBN because people have been forced to reduce their spending due to the unavailability of cash. The out-of-bank cash which was about 80% has also been recalled back into the banking system.
However, the cashless policy is stifling growth, especially for small businesses and so the inflation rate might drop marginally and then go on to increase when there is the availability of cash hence, there needs to be a better process for monetary policy handling by the CBN.
Nairametrics: Do you think the current CBN monetary policy will have a positive impact on the economy?
Ugoji Lenin Ugoji: In the long run, the CBN monetary policy should have a positive impact on the economy. The MPR is the baseline interest rate in an economy on which other interest rates within that economy are built. The MPR has been increased consistently with over 150 basis points month on month to stand at 17.5% in January 2023. The increase in MPR is to prevent borrowing or reduce the attractiveness of borrowing money.
Increased inflation is not peculiar to Nigeria, the Russian-Ukraine war, as well as the resurgence of COVID-19 in China, have been said to be responsible for the rise in global inflationary trends, however, N9.3 trillion has been invested in various development finance interventions, out of which N3.7 trillion has been repaid. If the cashless policy is managed well and the MPR is monitored over some time, the monetary policy will have a positive impact on the economy.
Nairametrics: How is your company able to consistently remain profitable despite the headwinds?
Ugoji Lenin Ugoji: We have focused on Operational efficiency due to the low growth in the economic environment, trying to pull in and increase foreign clients to earn foreign currency and FX investments and reduce possible costs while actively increasing revenue.