Govt’s patronage of Nigerian coys ’ll boost profit – Okafor, MD, May & Baker
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“When you start manufacturing in Nigeria, you are already 40 per cent disadvantaged”. According to Mr. Nnamdi Okafor, the Managing Director of May & Baker (M&B) Nigeria Plc, apart from contending with bad roads to move your goods and epileptic power supply, which makes his company to shell out an average of N20million every month to power its plants, you still have to wrestle with the global brands that swoop down on Nigeria for contracts. And, not bound by any government policies, these foreign companies are desperate to elbow out whoever stands on their way.
“That is why we are asking the government to give us some level of preference. We cannot develop capacity when we are not protected. The Indians, the Chinese, at some point in their development had to protect their local manufacturers so that they can build capacity”, he said.
In a media parley in Lagos recently, the M&B boss bared his mind on why Nigerian manufacturers want domestic preference jacked up from its current level of 15 per cent; the efforts being made by his company to help contain the spread of Ebola and other sundry issues.
Excerpts:
Global competitiveness
This is a situation I believe that we all should be conversant with because if you start the process of manufacturing, some of those things, the expenses you are incuring, the environment where you manufacture are the factors that will affect your cost structure.
So when you manufacture in Nigeria, you are already 40 per cent disadvantaged because- unlike when somebody is manufacturing in Asia or in Europe where you don’t have to bother about power, you don’t have to bother about water, about road to move your goods and all of that- here you come up with all sorts of cost. Of course, they have economy of scale which has to do with large scale manufacturing, they are the ones that are getting all the major stakeholders from donor agencies. S o they have built up the economy of scale which also break down the cost per unit for their products. Of course, you are also aware that about 80-99 per cent of inputs into pharmaceuticals from overseas are coming into Nigeria. So where you have to manufacture with ingredients or outputs from Europe, and you have to compete with the same company who is giving you their outputs, definitely it is going to be difficult.W hat we are doing, in terms of quality, we are competitive. And that is why we build the PharmaCentre.That is why we want the facility to be the best you can get in any part of the world. So as far as quality is concerned, I think we are there.
The other factor is also part of cost. And that is why we talk about patronage because if you build capacity, you must have market where you are going to sell your products. As we increase the level of our capacity, the cost will start coming down. And then, we are hoping that the good job that is being done by the current administration especially as regards power is sustained, the cost of power will come down, We spend on the average over N20million every month to provide power. We don’t use the public grid to provide power to our plants. So these are the costs that we can do without.
70 years of M&B
Today, May & Baker Nigeria Plc is 70 years as a business in Nigeria. And we are celebrating the past and a new beginning for the company. The company was founded on September 4, 1944 as Nigeria’s first pharmaceutical company and began local manufacture of medicines in 1976. In 2002, the company became 100 per cent owned by Nigerians following the divestment of our foreign partners. The company began an expansion and diversification programme in 2005 which gave rise to the creation of new businesses and subsidiaries. In 2005, Biovaccines, a local vaccine production subsidiary, was set up in partnership with the Federal Government. In 2006, we constructed a multi-billion naira food processing factory, while in 2008, we commenced construction of a World Health Organization Standard Pharmaceutical production facility which was completed and commissioned on June 27, 2011.We saw the need for global best practice and competitiveness. We therefore commenced the process of international certification of our manufacturing plant for Good Manufacturing Practice (GMP) of the World Health Organization(WHO) and the United States Food and Drugs Administration (USFDA). We are in line to obtaining the WHO GMP certification for this facility and pre-qualification for our products and hopefully with these, the gate into global pharmaceutical market will open for us.
Following these huge capital investments on capacity acquisition and expansion, our company has, in the past four years, been undergoing some restructuring and re-positioning to effectively contain the expected short term negative impact of these investments on the business, while waiting to begin to derive expected big returns on the investments. Consequently, the management has begun the process of consolidating all Pharma manufacturing operations by transferring substantial product lines from Ikeja to the new pharmaceutical plant in Ota, the M&B Pharmacentre, which has the capacity to produce 4.5 billion tablets and 37.5 million bottles of 60 ml liquid preparations annually. That way, we hope to derive the advantage of economy of scale and minimize costs.
We are pleased that, in recent years, the Federal Government through the Federal Ministry of Health and the National Agency for Food and Drug Administration and Control (NAFDAC) has made some efforts towards supporting local pharmaceutical manufacturers. However, much more still need to be done in the areas of patronage, protection through restriction of unbridled massive importation of basic essential medicines and promoting private sector capacity building and technology development in critical areas like vaccines production.
Anniversary
We are marking our 70th anniversary for three main reasons:Seventy is a landmark age and deserves to be celebrated. The second reason is that this company has, during these long years, saved the lives of millions of Nigerians through its quality efficacious medicines and the third is that this is the time May & Baker has come full circle – growing from a foreign tutelage and ownership to a wholly indigenous player and is now heading back to global focus. It is a significant new beginning for us.
In commemoration of our 70th anniversary we have decided to give back to society through some projects in key areas of need. We are donating sickbays to public schools across the country. The project kicked off with three pilot schools in Lagos State when we donated sickbays to three public primary schools in the state. The beneficiary schools are Central Primary School, Ikeja, United African Methodist Primary School, Eleja, Oyingbo and St. Agnes Primary School, Sabo, Yaba.
Each sick bay is fully air conditioned and equipped to the standard of a clinic with beds, medical instruments, drugs, recovery motifs and television sets to enable the children feel less of their pains while receiving attention. That way we hope to touch the lives of some less privileged ones. Our intention is to make the charity visitation an annual affair. So in September every year, we plan to mark the birthday of the company by visiting charity homes across the country with gifts that can alleviate their conditions.
Job creation
Well, we have a factory in Ikeja here. We have two factories in Ota; we have locations in Aba, Kano.We also plan to set up some beverage plants in Abuja, where we have acquired some expanse of land, and then Onitsha, to add to job creation in other parts of Nigeria. But the fact is that we want to ensure that we are getting results from the ones (investments) that we have made. So, our first priority is to ensure that the factories we have are working optimally before we start going to other investments. As you are aware, we borrowed money from banks to make those investments and we can’t go to the banks again to borrow money to make other ones. That is why we want to ensure that the investments we have made, we are leveraging very well on them before we go ahead to make further investment.
Ebola
As far as the Ebola disease is concerned, our response as a country would have been much different and better if Nigeria had technology for local production of vaccines. But we are working on products that we hope should be in the market very soon that will help to control the spread of Ebola virus. Of course, as you are aware, we have this joint venture company with the Federal Government of Nigeria for vaccine production. What that company was meant to do was to acquire technology for local capacity production of vaccines to contain diseases like this viral Ebola Viral Disease (EVD). You know, if we have technology, that will go a long way to help produce vaccine to ensure that this dreadful disease does not show up in future again.
As for that joint venture company, Biovaccine, you know, anything that has to do with the government takes its course. So that company started operations and stopped for some reasons. We are trying to resolve some issues which are very contentious. And I just want to say to you that we have gone very far in resolving almost all the issues. And hopefully, very soon, this company will come back to life.
Raising funds
We had planned to be in the market some months ago. But, for some reasons, we tried to put it off because we are also trying to ensure that we get all the major stakeholders and the board to be ready. We have to make sure they are ready to take up their shares otherwise we will not do better. That is what we are looking for. And as you are aware, we have gotten the approval of our shareholders at the last AGM and we are looking up to the board to give the go-ahead. We also have stand-by investors that would be ready to put in money. But, as I said earlier, we want to make sure that our Nigerian major shareholders take up their rights. That is very important to us.
CSR
As far as Corporate Social Responsibility (CSR) is concerned, we have started this project of donating sick bays to schools. As you know, Ebola virus spread very fast, particularly where we have children who can not imbibe the basic rules (to prevent it). We also want to make sure that they have the capacity to handle the sick when they arrive. So we are going to be donating these centres across Nigeria and we also want to ensure that they have drugs and also equipment for checking Ebola. In most of the centres, a mention was made about sustainability, that they have to get light to operate the things that we donate to them. So we accepted to provide generators for them. And we also gave commitment that we are going to continue to refill their (stock and meet their) need for drugs. In fact, we are not alone, for the fact that the local government chairmen (of these areas) gave commitment to provide doctors and nurses to ensure that they sustain what we have started.
As far as the host community is concerned, we started from our base in Ikeja here.The first sick bays we donated was in Ikeja. That is the one that is closest to us. In Ota, we donated transformer and installed that transformer to ensure that the host community has power. Before we got there, there was no light in that environment. We also ensure that we attend the meetings of the community. And we made donations to them to ensure that we sustain whatever plan they have, especially, regarding security of the area.
Domestic preference
One, looking at it from the true sense of local content policy, it is not very applicable to our industry. What we are asking government to do is to give us what we call domestic preference for those of us who are manufacturing locally because we know that we have to get our materials from outside Nigeria. And it is going to be difficult for us to compete with the same people who gave us their outputs. And because we know that we cannot develop capacity if we are not protected because there is no country in the world that just woke up and built capacity. The Indians , the Chinese, at some point in their development., they had to protect their local manufacturers so that they can build capacity. We are asking the Federal Government to give us some level of preference which was approved. And on paper, there is 15 per cent domestic preference when you are bidding for contracts and when you want to compete with pharmaceutical companies from overseas. So that is what we have and we are happy We want that 15 per cent to be increased because we feel it was not sufficient to cover cost at that stage for the fact that, at onset, you are 40 per cent disadvantaged and we found out that you don’t make profit really. Some of the people you are struggling with for these contracts are ready to even sell at discount, but they want to get you out. Yet, like Oliver Twist, we said yes, the 15 per cent is good, but it should be increased because that is not even good enough. And government must ensure that it applies to all the corporate tenders because if the law says that if it is not put it in publication or advert in newspaper, you can not apply , then we are saying it must apply to all the tenders. It is noted that when the foreign companies bring their money ,they are not bound to the policies of government.
Counterfeiters
We are working to repackage our products in better packs. We also collaborate with our customers to ensure that they work with us and give us feedback. What is happening in our brands? Yes, in the last couple of years, we have not got any incidence. We collaborate with regulatory agencies to stamp out the fakers. The last incident we had was that of a company that was trying to copy our designs because they felt that our brands were doing well in the market. So they wanted to ride on the back of the brands to push their products to the market. However, some of the fakers retraced their steps when the regulatory agencies stepped in. But it still remains one that we are talking to now.
Accessing foreign market
As a company, we realize that we shouldn’t do what a 10-year old or 16-year old are doing. That, in the first instance informed the decision to build the Pharmacentre. As of now in our company, we have world class facility that no company has in Nigeria. The whole idea is to develop some high-tech products. We are going to do that through collaboration. We are talking with some foreign companies to see if they have capacity to enable us acquire technology from these companies manufacturing drugs which Nigeria depends on their importation today. Of course, you aware that to develop technology is not an easy thing. We, on our own, are doing our best and I am proud to say that the products that we want certified is our own technology. We didn’t borrow the technology from anybody. And they are doing very well. Of course, there are products that are in very sensitive areas, like the vaccines. We need to get technology on those products. We believe that by the time we develop these products, we should be able to move them outside Nigeria because you cannot move paracetamol or basic generic products from this country. But by the time we are able to have some specialized products that are of global standards, we will be able to access those markets. That is exactly what we want to do going forward.
And as far as the GMP certification is concerned, I think we have advanced very well. The reason we have not announced was that we have to be very careful. The first time the WHO inspectors came, we had not started production. So they couldn’t inspect us. And you have to go through certain inspections before they could pass you. So we have gone through all those inspections and we are just waiting for them. All I want to say is that we are very much advanced and we are hopeful that soon, the results will be announced.
“That is why we are asking the government to give us some level of preference. We cannot develop capacity when we are not protected. The Indians, the Chinese, at some point in their development had to protect their local manufacturers so that they can build capacity”, he said.
In a media parley in Lagos recently, the M&B boss bared his mind on why Nigerian manufacturers want domestic preference jacked up from its current level of 15 per cent; the efforts being made by his company to help contain the spread of Ebola and other sundry issues.
Excerpts:
Global competitiveness
This is a situation I believe that we all should be conversant with because if you start the process of manufacturing, some of those things, the expenses you are incuring, the environment where you manufacture are the factors that will affect your cost structure.
So when you manufacture in Nigeria, you are already 40 per cent disadvantaged because- unlike when somebody is manufacturing in Asia or in Europe where you don’t have to bother about power, you don’t have to bother about water, about road to move your goods and all of that- here you come up with all sorts of cost. Of course, they have economy of scale which has to do with large scale manufacturing, they are the ones that are getting all the major stakeholders from donor agencies. S o they have built up the economy of scale which also break down the cost per unit for their products. Of course, you are also aware that about 80-99 per cent of inputs into pharmaceuticals from overseas are coming into Nigeria. So where you have to manufacture with ingredients or outputs from Europe, and you have to compete with the same company who is giving you their outputs, definitely it is going to be difficult.W hat we are doing, in terms of quality, we are competitive. And that is why we build the PharmaCentre.That is why we want the facility to be the best you can get in any part of the world. So as far as quality is concerned, I think we are there.
The other factor is also part of cost. And that is why we talk about patronage because if you build capacity, you must have market where you are going to sell your products. As we increase the level of our capacity, the cost will start coming down. And then, we are hoping that the good job that is being done by the current administration especially as regards power is sustained, the cost of power will come down, We spend on the average over N20million every month to provide power. We don’t use the public grid to provide power to our plants. So these are the costs that we can do without.
70 years of M&B
Today, May & Baker Nigeria Plc is 70 years as a business in Nigeria. And we are celebrating the past and a new beginning for the company. The company was founded on September 4, 1944 as Nigeria’s first pharmaceutical company and began local manufacture of medicines in 1976. In 2002, the company became 100 per cent owned by Nigerians following the divestment of our foreign partners. The company began an expansion and diversification programme in 2005 which gave rise to the creation of new businesses and subsidiaries. In 2005, Biovaccines, a local vaccine production subsidiary, was set up in partnership with the Federal Government. In 2006, we constructed a multi-billion naira food processing factory, while in 2008, we commenced construction of a World Health Organization Standard Pharmaceutical production facility which was completed and commissioned on June 27, 2011.We saw the need for global best practice and competitiveness. We therefore commenced the process of international certification of our manufacturing plant for Good Manufacturing Practice (GMP) of the World Health Organization(WHO) and the United States Food and Drugs Administration (USFDA). We are in line to obtaining the WHO GMP certification for this facility and pre-qualification for our products and hopefully with these, the gate into global pharmaceutical market will open for us.
Following these huge capital investments on capacity acquisition and expansion, our company has, in the past four years, been undergoing some restructuring and re-positioning to effectively contain the expected short term negative impact of these investments on the business, while waiting to begin to derive expected big returns on the investments. Consequently, the management has begun the process of consolidating all Pharma manufacturing operations by transferring substantial product lines from Ikeja to the new pharmaceutical plant in Ota, the M&B Pharmacentre, which has the capacity to produce 4.5 billion tablets and 37.5 million bottles of 60 ml liquid preparations annually. That way, we hope to derive the advantage of economy of scale and minimize costs.
We are pleased that, in recent years, the Federal Government through the Federal Ministry of Health and the National Agency for Food and Drug Administration and Control (NAFDAC) has made some efforts towards supporting local pharmaceutical manufacturers. However, much more still need to be done in the areas of patronage, protection through restriction of unbridled massive importation of basic essential medicines and promoting private sector capacity building and technology development in critical areas like vaccines production.
Anniversary
We are marking our 70th anniversary for three main reasons:Seventy is a landmark age and deserves to be celebrated. The second reason is that this company has, during these long years, saved the lives of millions of Nigerians through its quality efficacious medicines and the third is that this is the time May & Baker has come full circle – growing from a foreign tutelage and ownership to a wholly indigenous player and is now heading back to global focus. It is a significant new beginning for us.
In commemoration of our 70th anniversary we have decided to give back to society through some projects in key areas of need. We are donating sickbays to public schools across the country. The project kicked off with three pilot schools in Lagos State when we donated sickbays to three public primary schools in the state. The beneficiary schools are Central Primary School, Ikeja, United African Methodist Primary School, Eleja, Oyingbo and St. Agnes Primary School, Sabo, Yaba.
Each sick bay is fully air conditioned and equipped to the standard of a clinic with beds, medical instruments, drugs, recovery motifs and television sets to enable the children feel less of their pains while receiving attention. That way we hope to touch the lives of some less privileged ones. Our intention is to make the charity visitation an annual affair. So in September every year, we plan to mark the birthday of the company by visiting charity homes across the country with gifts that can alleviate their conditions.
Job creation
Well, we have a factory in Ikeja here. We have two factories in Ota; we have locations in Aba, Kano.We also plan to set up some beverage plants in Abuja, where we have acquired some expanse of land, and then Onitsha, to add to job creation in other parts of Nigeria. But the fact is that we want to ensure that we are getting results from the ones (investments) that we have made. So, our first priority is to ensure that the factories we have are working optimally before we start going to other investments. As you are aware, we borrowed money from banks to make those investments and we can’t go to the banks again to borrow money to make other ones. That is why we want to ensure that the investments we have made, we are leveraging very well on them before we go ahead to make further investment.
Ebola
As far as the Ebola disease is concerned, our response as a country would have been much different and better if Nigeria had technology for local production of vaccines. But we are working on products that we hope should be in the market very soon that will help to control the spread of Ebola virus. Of course, as you are aware, we have this joint venture company with the Federal Government of Nigeria for vaccine production. What that company was meant to do was to acquire technology for local capacity production of vaccines to contain diseases like this viral Ebola Viral Disease (EVD). You know, if we have technology, that will go a long way to help produce vaccine to ensure that this dreadful disease does not show up in future again.
As for that joint venture company, Biovaccine, you know, anything that has to do with the government takes its course. So that company started operations and stopped for some reasons. We are trying to resolve some issues which are very contentious. And I just want to say to you that we have gone very far in resolving almost all the issues. And hopefully, very soon, this company will come back to life.
Raising funds
We had planned to be in the market some months ago. But, for some reasons, we tried to put it off because we are also trying to ensure that we get all the major stakeholders and the board to be ready. We have to make sure they are ready to take up their shares otherwise we will not do better. That is what we are looking for. And as you are aware, we have gotten the approval of our shareholders at the last AGM and we are looking up to the board to give the go-ahead. We also have stand-by investors that would be ready to put in money. But, as I said earlier, we want to make sure that our Nigerian major shareholders take up their rights. That is very important to us.
CSR
As far as Corporate Social Responsibility (CSR) is concerned, we have started this project of donating sick bays to schools. As you know, Ebola virus spread very fast, particularly where we have children who can not imbibe the basic rules (to prevent it). We also want to make sure that they have the capacity to handle the sick when they arrive. So we are going to be donating these centres across Nigeria and we also want to ensure that they have drugs and also equipment for checking Ebola. In most of the centres, a mention was made about sustainability, that they have to get light to operate the things that we donate to them. So we accepted to provide generators for them. And we also gave commitment that we are going to continue to refill their (stock and meet their) need for drugs. In fact, we are not alone, for the fact that the local government chairmen (of these areas) gave commitment to provide doctors and nurses to ensure that they sustain what we have started.
As far as the host community is concerned, we started from our base in Ikeja here.The first sick bays we donated was in Ikeja. That is the one that is closest to us. In Ota, we donated transformer and installed that transformer to ensure that the host community has power. Before we got there, there was no light in that environment. We also ensure that we attend the meetings of the community. And we made donations to them to ensure that we sustain whatever plan they have, especially, regarding security of the area.
Domestic preference
One, looking at it from the true sense of local content policy, it is not very applicable to our industry. What we are asking government to do is to give us what we call domestic preference for those of us who are manufacturing locally because we know that we have to get our materials from outside Nigeria. And it is going to be difficult for us to compete with the same people who gave us their outputs. And because we know that we cannot develop capacity if we are not protected because there is no country in the world that just woke up and built capacity. The Indians , the Chinese, at some point in their development., they had to protect their local manufacturers so that they can build capacity. We are asking the Federal Government to give us some level of preference which was approved. And on paper, there is 15 per cent domestic preference when you are bidding for contracts and when you want to compete with pharmaceutical companies from overseas. So that is what we have and we are happy We want that 15 per cent to be increased because we feel it was not sufficient to cover cost at that stage for the fact that, at onset, you are 40 per cent disadvantaged and we found out that you don’t make profit really. Some of the people you are struggling with for these contracts are ready to even sell at discount, but they want to get you out. Yet, like Oliver Twist, we said yes, the 15 per cent is good, but it should be increased because that is not even good enough. And government must ensure that it applies to all the corporate tenders because if the law says that if it is not put it in publication or advert in newspaper, you can not apply , then we are saying it must apply to all the tenders. It is noted that when the foreign companies bring their money ,they are not bound to the policies of government.
Counterfeiters
We are working to repackage our products in better packs. We also collaborate with our customers to ensure that they work with us and give us feedback. What is happening in our brands? Yes, in the last couple of years, we have not got any incidence. We collaborate with regulatory agencies to stamp out the fakers. The last incident we had was that of a company that was trying to copy our designs because they felt that our brands were doing well in the market. So they wanted to ride on the back of the brands to push their products to the market. However, some of the fakers retraced their steps when the regulatory agencies stepped in. But it still remains one that we are talking to now.
Accessing foreign market
As a company, we realize that we shouldn’t do what a 10-year old or 16-year old are doing. That, in the first instance informed the decision to build the Pharmacentre. As of now in our company, we have world class facility that no company has in Nigeria. The whole idea is to develop some high-tech products. We are going to do that through collaboration. We are talking with some foreign companies to see if they have capacity to enable us acquire technology from these companies manufacturing drugs which Nigeria depends on their importation today. Of course, you aware that to develop technology is not an easy thing. We, on our own, are doing our best and I am proud to say that the products that we want certified is our own technology. We didn’t borrow the technology from anybody. And they are doing very well. Of course, there are products that are in very sensitive areas, like the vaccines. We need to get technology on those products. We believe that by the time we develop these products, we should be able to move them outside Nigeria because you cannot move paracetamol or basic generic products from this country. But by the time we are able to have some specialized products that are of global standards, we will be able to access those markets. That is exactly what we want to do going forward.
And as far as the GMP certification is concerned, I think we have advanced very well. The reason we have not announced was that we have to be very careful. The first time the WHO inspectors came, we had not started production. So they couldn’t inspect us. And you have to go through certain inspections before they could pass you. So we have gone through all those inspections and we are just waiting for them. All I want to say is that we are very much advanced and we are hopeful that soon, the results will be announced.
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