NIGERIAN ENTREPRENEURS AND ABUSE OF INDIGENISATION POLICY 

         SOLA ONI argues the need to rejig the board of some major companies to save them from collapse

Prior to the promulgation of the Nigerian Enterprises Promotion Decree ( now Act) in February 1972, the Nigerian market was operating like a silo. But the deliberate government policy,

popularly called indigenization aimed at increasing participation of Nigerians (indigenes) in the management and ownership of businesses. While a few Nigerian entrepreneurs took advantage of this policy and make success of it, some abused the opportunities and grounded the companies. For instance,

prior to the debut of  indigenization,

companies like Nigerian -German Chemical, formerly Hoechst, a pharmaceutical company,  Unic Insurance and Niger Insurance were amongst the high fliers.  But today, the companies have become caricature of their past. It is as if Nigerians cannot manage business.

The latest in the series of companies that Nigerians bought from white men and progressively mismanaged to the point of grounding, is a one-time famous paints manufacturing company – IPWA PLC, former International Paints West Africa.

Storm is brewing on the Board of IPWA PLC.  It is a trial of corporate governance. Many of the shareholders can no longer endure what has become an opaque mode of corporate governance by the majority shareholders, the famous Daniyan Group with above 30 percent stake. 

When the frontline manufacturer of marine and Oil and Gas paints was listed on The former Nigerian Stock Exchange (now NGX) in 1992, the expectation was high that it will enhance its drive to contribute more to the Nigerian Gross Domestic Product (GDP) through increased employment and output and generate value to shareholders. 

However, due to lack of innovation,  the company has been groaning under the yoke  of bleeding Profit and Loss Accounts and fragile balance sheet. By 2016, IPWA could no longer comply with the Post Listing Requirements of NGX, the minimum of which was regular disclosure of information and payment of statutory fees. For almost one decade, IPWA never held an Annual General Meeting (AGM). Consequently, NGX delisted the embattled company as an investor-protection intervention . 

Let nobody blame the current hostile operating environment in Nigeria on  the woes of IPWA.  Market watchers noted that the  company had lost focus when  the majority shareholder shut the door on the other directors who would have provided fresh ideas on the way forward long time ago. It is frightening that IPWA parades directors  of a median age of 70 on its board and they relish in deploying the same strategy for over ten years, expecting new results.

Key stakeholders are expressing  concerns in measured tones that landed properties of IPWA are either on sale or lease agreement. This may explain why the company is operating below installed capacity utilization and  rendering many staff redundant. Concerned shareholders have the right to demand for Annual General Meeting. The apex capital market regulator in Nigerian, the Securities and Exchange Commission (SEC) intervention caused IPWA’s board to convey the Meeting with SEC’s representative in attendance to  produce report of the meeting for necessary action. 

Although IPWA is highly geared, there are options to reposition the company. Given the company’s loss of focus at the moment, 

 floating rights issue may be a costly gamble. Shareholders are already disillusioned and they need a clear evidence of new direction before they can part with their money.  Huge amount of money is required to  revamp the company’s machinery perhaps in phases. IPWA’s admission into NASD PLC after its delistment at NGX presents  an opportunity to recalibrate its operations. 

The company is in dire need of  Angel Investors , Private Equity and solid Turn Around Managers for capital injection. These group of institutional investors invest efforts with more zest and innovation. A huge working capital will enable the moribund company to acquire  licenses to participate in the Oil and Gas Sector. It had demonstrated competence in these areas in the past and can still do the same. As the last  option to step up a new beginning, the  company can approach government development agencies such as the Bank of Industry (BoI) for special loan at subsidized interest.

But the  board has to be rejigged to pave the way for fresh ideas. Every investor will demand for proven evidence of sound corporate governance and rebranding for new market share and enhanced profitability. IPWA should not be allowed to die an avoidable death. 

A paradigm shift in this unpleasant situation in many companies in Nigeria is for the regulators to show more  interest in their affairs. This will justify the general believe that investor- protection is at the core of market regulation. The time for regulatory intervention is now .

Oni, an Integrated Communications Strategist, Chartered Stockbroker,  Commodities Broker and Capital Market Registrar, is CEO, Sofunix Investment and Communications