INVESTING FOR THE FUTURE: BIPC IN FOCUS

By Alex Adum & Prince Toryem

Inspired by the need to increase the earning power of the state; create more employment, enhance development, and lay a solid foundation for a self-sustaining economy; the first civilian Governor of Benue State, late Apollos Aper Aku conceived and incorporated Benue Investment Company Limited (now Benue Investment and Property Company Limited (BIPC) in October 1979, about three weeks after he assumed office. It is instructive, to note that the incorporation of the Company was one of the very first acts of the new government. This was to underscore Aku’s vocation as a businessman prior to his election into office as Governor. His vision was to run the new administration in Benue State on the enterprise model of administration, which emphasises resource generation before expenditure and the pursuit of a favourable balance sheet at the end of every budget circle. It is to his eternal credit, that pursuant to this vision, he established over 20 enterprises in the State cutting across various sectors with the BIPC as the investment holding company in the hope that these investments would kick-start the modernisation of the Benue economy, which was largely agrarian at the time he was elected into office in 1979.

As an investment holding company out of the pack, BIPC was designed to seat at the top in what was intended to be like a pyramid structure. The company was mandated to spur the growth of the state economy by deploying capital in viable commercial and strategic business ventures that would catalyse the development of state. Strengthen revenue generation and improve the quality of life of citizens. The company commenced operations by managing the investments of the State Government, especially, investments in equities, properties and other real assets shared to Benue State at various times of states creation in which the state was affected. The company continued to invest in the acquisition of more equities; fixed income instruments and earned more return on investments which enabled it to diversify into other viable businesses such as petroleum marketing, hotel management, agribusiness, and real estate development; among others. 

Over the years, however, the company witnessed poor business count in the equities market and several managerial challenges which impacted negatively on the original vision and mandate of the company. The drive for industrialization and economic advancement by the Governor Samuel Ortom led administration and its desire to secure the future of the people of Benue has seen to the current reengineering efforts at the BIPC and the renewed drive to overcome these challenges and reverse the downward trend through management reforms and significant reinvestment in the equities market, portfolio rebalancing and conversion of wasting assets into opportunities using OPM (Other People’s Money) model.

This and more is the focus of this Chapter, which discusses the retooling and growth strategy of the BIPC under the Governor Samuel Ortom led administration. To set the context, the chapter begins with a short overview of the historical background, the role and corporate structure of the company and considers the challenges. The final section discusses the strategic investments and diversification efforts aimed at securing the future of the company to generate positive returns for the people of Benue State.

Historical Background, Role and Corporate Structure

BIPC was incorporated as a Limited Liability Company on 18th October, 1979 and commenced operations in March, 1980. The company is wholly owned by Benue State Government. At inception, the company had a share capital of N5 Million. This was increased to N20 Million in 1992 and further to N50 Million in 2002. Of the N50 Million, the State government holds equity in the company’s share capital to the tune of N30 Million, leaving N20 Million for future allocation. Currently, the company has an asset base with a market value of over N17 Billion.

Late Mr. A. O. Ako was appointed the Coordinator and first Chief Executive Officer of the company from 3rd March 1980 – 30th December 1981. He was succeeded by Mr. R. Westerbeek, a Briton who was specifically headhunted for the job of CEO from 1st January 1982 – 28th February 1983. Mr. K. Lussier another Briton took over from him on 1st March 1983 – 11th June 1985. Mr. A. Ako returned to the saddle on 12th June 1985 – 18th September 1990. Mr. J. D. A. Feese was appointed on 19th August, 1990 – 20th August, 1992. He was succeeded by Mr. C. C. M.  Ajekwe on 21st August, 1992 – 28th February, 1994. He was succeeded by Mr. J. Yaji on 1st March, 1994 – 29th December, 1999. Late Mr. I. Ortese took over from 30th December, 1999 – 1st April, 2002. On the 2nd April, 2002 Mr. J. E. Odu took over from Ortese and left on the 21st August, 2003. Mr. J. T. Tine was appointed on the 22nd August, 2003 – 5th June, 2008. He was succeeded by Mr. P. T. Agu on 5th June 2008 – 22nd March, 2012. Mrs. B. A. Sheidu was appointed in acting capacity from 22nd March, 2012 – 1st July, 2012 and her appointment was confirmed on 2nd July, 2012 – 9th March, 2016. Mr. J. Mulya was appointed on 9th March, 2016 – 28th May, 2018. He was succeeded by Mr, A, Adem on 30th May, 2018 – 20th August, 2019.  He was succeeded by Dr, A. T. Adum on 30th August, 2019 to date. In all the Company its over 43 years of existence has had sixteen Managing Directors/Chief Executive Officers.

Mandate of BIPC

With a vision “to be the leading investment company in North Central Nigeria by the year 2030”, the company has defined its mission requiring it “to drive economic development by promoting, managing and investing in real sector and service projects that maximize stakeholders’ value”.

The Company’s investment mandate is an elaboration of its vision through investment decisions that are focused on capitalization in stocks and projects that have developmental impact, which are primed to provide tangible social and economic benefits to the state. This mandate includes to:

• mobilize funds for the investment and development programs of the state;

• act as a catalyst for the speedy economic development of the state;

• engage in portfolio investment and capital market activities;

• invest in real estate and infrastructural development;

• provide Tourism and Hospitality Services;

• provide business advisory and management consultancy services to the government and interested entrepreneurs in the state.

I addition, the company also has responsibilities to woo investors, prepare loans for small and medium scale entrepreneurs and investment promotion. To fully pursue its mandate, create specialisation and competitiveness, the company incorporated subsidiary companies as strategic business units to live up to its billing as an Investment Holding Company. 

Corporate Governance Structure

Until 2012, the company was run by a Ministerial Board made up of the Commissioner of Finance as Chairman, while the Commissioners of Works, Commerce and Justice and the Managing Director/Chief Executive served as members. This composition has since changed to a hybrid arrangement, where members of the public are nominated into the Board. The current structure is made up of the Board, Board Committees, and the Managing Director/Chief Executive, who heads the management team comprising one (1) General Manager, three (3) Assistant General Managers, Heads of Finance and Accounts, Administration and Human Resource Management, and Internal Audit and Control. There are six (6) main departments/units in the company, namely:

a. Business Development and Strategy

b. Investment & Risk Assets Management

c. Finance and Accounts

d. Real Estate and Infrastructure

e. Corporate and Secretarial Services, and

f. Internal Audit & Control

The period 1980 – 2000

The company commenced operations at the time business conditions and indeed the Nigerian economy was in crisis. The oil crises of 1973-74 and 1979 slowed down business growth not only in Nigeria but globally. In such a depressed economy, the first managers of the company which were head hunted from other companies had the difficult task of navigating through the crises by promoting local development and investing in sectors that will enhance economic growth and set the stage for the future of the company in the state and Nigeria at large. The focus in the first two decades of the company’s operations was to grow its equity portfolio inherited since the creation of the state. The company continued with investment in companies like Julius Berger which earned it a seat on the Board of Berger. The company also has major investment in such other companies as Benue Cement Company Limited now Dangote Cement (where prior to the Federal government privatisation exercise it held over 27% and maintained two board seats), Nigerian Electricity Supply Corporation (NESCO), Jos and a host of others. After years of sustained and meticulously planned business operations, the company grew its stock portfolio to over N40 billion.

In 1995, the defunct Benue Housing Agency was scraped, and its housing portfolio transferred to BIC through the enabling Edict No. 10 of 1995. The name of the company was then changed to Benue Investment and Property Company Limited (BIPC). The Memorandum and Articles of Association of the Company were also amended to reflect the changes and additional objectives of the company, which was investment in real service sector of the economy. With the additional portfolio, the chosen strategies were that of expansion. The expansion drive became that of developing and managing properties to address the housing deficit in the state.

While some companies collapsed due to failure to adjust to the economic crises of the 80s, 90s and the Nigerian stock market bubble of the late 2000s, BIPC continued with strategic business investments that have resulted in the great business success stories of the company. These successes nonetheless, the company witnessed some peculiar challenges, which are highlighted in the next section. 

Challenges of BIPC, 2000 – 2018

The efforts to grow the company continued within this period however, with a new set of managers. Their chosen strategies were that of expansion and diversification; which led to the construction of new BIPC Estates in Nyiman and North Bank, reactivation of previously existing subsidiary companies and incorporation/establishment of new businesses such as the BIPC Oil and Gas Limited, BIC Securities Limited, Benue Properties Limited, Bentel Networks Limited, the BIPC Microfinance Bank Limited. 

While all these businesses have been pursued with considerable level of success gained within the period; several challenges stood in the way of the company. These include persistent management inadequacies, assets stripping, political interference in the affairs of the company and lack of clear understanding of the company’s mandate. These gradually tempered the level of successes gained in the first two decades of operations. This was because the state government used the company to pursue social and development objectives beyond pure profitability. For instance, the Estates that were constructed with borrowed funds from the Federal Mortgage Bank of Nigeria (FMBN) were allocated to cronies and politically connected individuals. These off-takers have largely remained recalcitrant in the repayment of the about three hundred houses delivered from the (FMBN) Estate Development Loan (EDL). The slow and poor mortgage repayment profile has burgeoned the EDL outstanding balances to over 780 million from a total facility of 280 million. The current management of BIPC has had to commit over 150 million in the EDL repayments to FMBN, while negotiating with the bank for a waiver of accrued interests. Needless to say these are funds, which could have been channelled into new investment opportunities to increase the profitability of the company. Moreover, the slow loan repayment has made it practically impossible for the company to access further concessionary funds from the apex mortgage finance bank to deliver affordable housing for the benefit of low income earners from the State. A reason most of the new real estate development projects of the company are designed for the middle class and upper class.      

In addition, managers were also poorly recruited by placing premium on factors that never produced the best hire for the job; and upon being hired, most of the managers lacked the necessary skill set to operate successfully in a politically exposed business environment, such that they couldn’t properly navigate the business content of the job and the politics of the job to produce optimum results. In most cases, investment and management decisions were not taken or pursued with the enterprise objective in mind but the political objective. One of such decision was the ill justified expansion in the workforce of the company to accommodate political pressures for employment, which increased the company staff strength from 65 as at 2016 to over 200 as at 2019. The undue expansion in the personnel carriage capacity of the company depressed its resources and aggravated asset stripping to fund operations.  Secondly, political gradations and the predominance of a civil service culture and style of operations denied the system the best corporate governance structures and high powered incentives to pursue efficiency and profitability like the pioneer managers of the company.

As a result of the above, the company witnessed a lot of challenges within the period because some of the actions taken were not based on well thought out or based on any strong business cases. The divestment in 2014, 2016 and 2018 adversely affected the company’s portfolio in quoted securities. The portfolio investments which were more than N25 billion declined drastically to about N10 billion with the divestment in 2014. Between 2016 and 1st quarter of 2019 the portfolio assets slipped to about N3.6 billion. Relatedly, the property portfolio of the company also depleted with the transfer of the Company’s properties to the Nigerian Navy, the Nigerian Security and Civil Defence Corp, the Federal High Court amongst others without compensation to enable the company to recreate new assets. Recently, the company was directed to also surrender one of its prime real estate asset, the former headquarters of the defunct Lobi bank, which the company had acquired from the Nigerian Deposit Insurance Corporation. The assessed open market value of the property is put at N 750 million.  

With the operational liabilities of the company on the increase it took a downturn inevitably. It had to grapple with huge wage bills and other concerns including tax liabilities to Federal Inland Revenue  Service and Benue State Board Internal Revenue Service and loan repayments to the Federal Mortgage Bank of Nigeria. These challenges and liabilities running into several hundreds of millions exposed the company to further vulnerabilities between 2000 and 2019.

To realign the Company with the vison of the founding fathers, the Governor Ortom led administration had to restructure the enterprise resulting in several changes in the Board and Management. These interventions by the Governor reversed the downward trend and repositioned the company on the path of profitability to be able to contribute to the growth of the state economy. 

The Forward-Looking Investments

Governor Samuel Ortom in pursuit of the collective vision for the state subjected the company to several surgical restructuring aimed at addressing challenges and liabilities to secure its investments for the future of the people of Benue especially in 2019. After sessions of situational analysis on the state of the Company, the immediate action was to stop the bleeding, then retool and reposition the company.

The focus was again to address the challenges of the uncertainty created by the outbreak of the Corona Virus pandemic which eclipsed business and other activities around the world. A plan to tackle the challenges and make strategic investments for future sustainability of the company became imperative. First, the staff strength had to be rightsized to reduce the humongous wage bill and associated costs. Second, the practice of stripping the company’s portfolio assets was halted. Third, the loan liability and tax liabilities were restructured; and reinvestments in new equities embarked upon, while wasting assets were farmed out for new investments using OPM and new real estate projects initiated. These measures and the strategic investments made to ensure the viability and future sustainability of the company and the achievements recorded thus far are discussed in detail below. 

Discontinuity of Asset Stripping

As noted above, the Company’s equity portfolio which was more than N25 billion prior to the divestment in 2014, 2016 and 2019 respectively was radically reduced to about N3.6 billion this affected the dividend returns on the portfolio because the Company’s annual dividend also dropped to about N300 Million. The decline in dividends adversely affected the operations of the company because they could barely fund the operations of the Company let alone allow for reinvestment. The immediate action was to halt the stripping of the Company’s portfolio which had been the practice for more than a decade.

Tackling unsustainable tax liability 

The tax liabilities of the company were put at over N600 million as at 2019, a situation that created a possible sink hole that was likely to collapse the Company completely. There was therefore an explicit need to address this challenge to free the company’s resources for investment. Through constructive engagement with the Federal Inland Revenue Service-FIRS, the tax liability of over N600 million was substantially reduced and regularly paid. Thus for the first time in the last 10 years, the company was issued with Tax Clearance Certificates for year 2020 and 2021.

Re-payment of Estate Development Loan

The EDL obtained from the FMBN for the construction of BIPC Ever-Green Estates in Nyiman and North Bank placed a heavy burden on the company as funds that would have been used for investment were channelled to the repayment of the loan.   In looking to invest for the future, the loan was renegotiated, and a repayment plan agreed on with FMBN, and proactive steps taken to clear the loan and free the company of the obligation. This has resulted in the repayment of 80% of the loan. 

Policy Review

Given the scale and multiple challenges facing the company including lack of good corporate governance culture, the company had to carry out a review of its policies particularly on investment. The new investment policy is to reinvest at least 30% of the company’s dividends in new equities and stocks. The internal control measures of the company have also been strengthened for effective and prudent management of the company’s resources. These policies promise to place the Company on the path of sustainability and more resilience to future shocks.

Strategic Investments for the Future

Despite the Company’s challenges and the negative impact of the pandemic, it has made concerted efforts in investing for the future. Some of the investments are hereby highlighted.

Portfolio Investment 

The Company has deepened its presence in the capital market by acquiring additional 5,890,851 units of shares in Zenith Bank Plc. This was done as part of the strategies to grow the Company’s portfolio and dividend income. To achieve the strategic goal of maximizing risk, ensuring that the portfolio remains proportionately balanced, enhancing the growth and dividend income on the portfolio, the Board of Directors of the company and the Benue State Executive Council approved the rebalancing and restructuring of the portfolio. The Board and EXCO also approved the divestment of the 80 million units of Julius Berger Plc shares in favour of Zenith Bank which has good history of high dividend returns. The decision to divest the holdings in Julius Berger was based on the dwindling fortunes of the construction giant as evidenced by the declining dividend income from BIPC’s over 80 million units of the shares and the strategic plan of achieving portfolio growth and high dividend income.

Considering the divestment in Berger and the purchase of Zenith Bank shares, BIPC now has a total of 87,359,686 units of Zenith Bank Plc. The rebalancing/restructuring of the portfolio and the effective management of the portfolio has impacted the company positively as the company received a total dividend amounting to N506,337,000.00 for the year ended 2021 up from N290,226,649.44, representing an increase of 74.46% for the same period in 2020. The company’s portfolio which was down to N3.6 billion has also grown to an all high value of about N6.6 billion. The target is to achieve a portfolio growth of N10 billion and a dividend return of over N1 billion at the end of year 2025.

Investment in Real Estates

The Company has also made some strategic investments in the real estate with a view to enhancing its streams of income, while addressing the housing deficit in the state as well as attracting mutually beneficial partnerships. Notable of these investments are:

i. BIPC-Cosgrove Smart Homes, Mabushi, Abuja

The company signed a Joint Venture Agreement with Cosgrove Investment Limited, one of the leading construction and property development companies in Nigeria for the construction of BIPC-Cosgrove Smart Homes, in Mabushi, Abuja. The project which comprised 7, 5 and 4 bedroom duplexes with BQ is worth over N6 billion and the company is expected to make a net profit income of over N1. 5billion.

ii. Nyorgyungu Housing Estate 

In pursuit of its housing mandate, the company has embarked on the construction 30 units of 3-bedroom flats at Nyorgyungu layout located along George Akume Road, Makurdi. The project which is worth over N500 million is at 80% completion level and it is expected to yield a return of almost N100 million. The Estate when completed will boast of facilities such as creche, shopping mall, security post, paved road network and drains, streetlights, intercom, sports arena among several others. It is important to point out that the last time the company embarked on construction of a housing project was in 2004.

iii. Retooling of Weak Assets

In line with the vision of investing for the future, the company had to retool some of its investments to earn maximum returns. For instance, the company leased the Benue Plaza, Abuja and Lagos to Taj Bank plc and Preskens Hotels and Resort Limited respectively. These organizations have remodelled these plazas to contemporary designs and the company is receiving reasonable returns on them.

iv. Reopening of sales at the BIPC Oil & Gas Ltd

The operations of oil and gas station which was a stand-alone business unit which had been hampered due to a weak financial base, non-utilization of its bulk purchase license and poor haulage system has been revitalized and the station is operating maximally with steady returns to the company.

v. Intervention in the agricultural sector

Bearing in mind the removal of subsidy and the difficulties encountered by farmers in getting fertilizers, the company also embarked on the retailing of fertilizer to farmers to facilitate their access to the product. Though fertilizers are sold to Benue farmers at the price of N5,500 against the N7000 and N8000 in open markets, the company still make marginal profit.

vi. The Kaduna Guest House/BIPC Guest House North Bank 

In order to enhance the operations of the Guest Houses which had remained in a deplorable state for years, the company undertook the remodelling of the Kaduna from the revenue generated from its operations. So far, a total sum of N19,964,250.00 has been expended on the renovation and furnishing of Seventeen (17) rooms with modern facilities. The Management of the company also redeveloped the poolside section of Makurdi Guest House by converting it into business and leisure arena. An exclusive executive lounge has also been incorporated into set up to provide a place for relaxation for high net worth individuals. The pastry section was also reactivated with yummy pastry products that are commanding a high demand in the market. Management plans to commence a comprehensive renovation of guest rooms at the Makurdi Guest House using the Kaduna model upon availability of funds.

vii. Retail of Cement

The Company also embarked on the purchase and retailing of cement. It has so far earned a 10.31% return on investment. 

Investment Promotion

The company in an attempt to promote and attract new investments in the state has initiated discussions with BUA Group and Flour Mills of Nigeria PLC to explore the investment in new cement plants in Mbatiav and Igumale. The company has also intensified its partnership with the Nigeria Investment Promotion Commission (NIPC), Bank of Industry, Bank of Agriculture, NEXIM Bank, Infrastructure Bank, and Development Bank. These engagements are to leverage the capacities of these entities in investment financing and exploitation of business opportunities that abound in Benue state. For instance, investment by either BUA or Dangote or both in cement plants in Igumale or Mbatiav holds the potential to boosts employment, revenue generation for the state government, wealth creation for citizens and to re-invigorate the entire state economy.

Staff Welfare

The management of the company recognises that a well-motivated workforce is key to achieving its vision and mission. To this end, the current management of the company places great premium on staff welfare. Staff salaries are promptly paid as at when due. All allowances and staff benefits that were in arrears have all been cleared and management is in the process of implementing new welfare packages approved by the board as enshrined in the new staff conditions of service recently approved by the board. Training and retraining of the board, management and staff has continued to receive priority attention from the management to ensure the company workforce is continuously kept abreast with modern trends in business and investment. 

Conclusion

The Net Assets Value of the company grew by 99% from N9.5 billion in year 2020 to N18.1billion in the year 2021. This result was achieved due to prudent management of resources and the revaluation of the existing assets to obtain the actual values. The long-term goal is to increase a store of generational wealth for the shareholders, the people of Benue state. There is no doubt that the most glorious period of BIPC is 2015-2022 which saw the strategic restructuring of the Company that positioned it on the path of sustainable profitability. It is this condition that has given vent to its capacity to meet its vision. In this way, its mission has enlivened the collective vision of Governor Samuel Ortom through investments that hope to secure the future of the people of Benue state. 

Alex and Toryem wrote from Makurdi