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NIGERIA
A new business climate |
 Business - Economy - Lean and clean - Core issues - Home truth -
Oil business - Private sector - Banking 
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INTERVIEW WITH
MR ABBA GANA,
MANAGING DIRECTOR OF AFRICAN PETROLEUM
May 27 th 1999 |
1) Mr. Abba Gana, every nigerian knows about African Petroleum still could you give us a brief historical background of your company?
Mr. Abba Gana: Well, African Petroleum is a petroleum marketing company that started off in the 1950s as British Petroleum. It gradually got nigerianized and AP is now 100 per cent nigeria owned and one of the largest petroleum products distributing companies in the country at the moment. It runs service stations, supplies the aviation and marine sectors , lubricants etc..
2) Are you specialised in certain products?
Mr. Abba Gana: we are in most of the downstream marketing areas such as service stations, we have about 330 stations in nigeria, we operate in some of the airports, most of the seaports and we are also a major distributor of industrial chemicals. So we have a very diversified range of services.
3) You were saying that AP is fully nigerianized?
Mr. Abba Gana: Yes, fully.
4) As far as the structure is concerned, 40% of the company belongs to NNPC and the remaining 60% belongs to nigeria public?
Mr. Abba Gana: Yes, that is correct.
5) Are there any plans to reduce this Government interest?
Mr. Abba Gana: Yes, as a matter of fact, that 40% is going to be sold back to the nigerian public in the next two weeks. As a matter of fact, the agencies that will take care of this have already been appointed.
6) Do you know when exactly this will happen.
Mr. Abba Gana: It should be any time now, the law has been passed.
7) Could you give us some figures on your company. In
1998 you had a total turnover of 130 million dollars and there was a slight drop as against the figures in 1997. Why was this?
Mr. Abba Gana: This was probably due to the poor performance of the refineries and this affected our sales. We did not have enough products to sell and this affected our turnover. But now that they have been restreamed, we should notice a marked increase this year.
8) As far as your stock market operations are concerned, could you provide us with some operational performances? I see there is a sharp drop in the price of AP stock. Are you foreseeing any positive change?
Mr. Abba Gana: Of course. Prior to December 21 1998, the price of nigerian petroleum products were highly regulated. And the margins were also very tight, about 4 % in the distribution side. The price was about 10 cents per litre at the station. But since 21 December 1998 the industry has been partially deregulated and prices have been allowed to close to import parity, to near economic levels. Consequently, we have increased from about 2 or 3 per cent to about 21 per cent. We should be able to have improved performances in both our turnover and in our profit levels. This will of course be translated into an improvement of our stocks.
9) According to result, starting 1999 investors were clearly not ready to trade away their stocks.
Mr. Abba Gana: They do not know what we know. They do not now that this year is going to be a better year for AP. We have been constantly informing them but they still want to wait and see. They want to wait for our audited accounts, they want to see what kind of dividends we will declare and so on.
10) I would like to discuss two main things with you today; one is the structure of your company. Firstly, are you planning to bring in a major international investor into the structure of the company?
Mr. Abba Gana : Really, it is NNPC which decides to sell its shares. It is up to NNPC to decide whether or not they will be selling shares to the nigerian public, to a core investor or to a technical partner. But what most people think is that we have done very well on our own so their is no real need to do so.
11) But as the MD of this company, you must have a say
Mr. Abba Gana: Yes, and I believe that it is always good to be part of global group with the new globalisation of the world. There is a definite advantage there.
12) This will improve your chances of harnessing technologies, etc..
Mr. Abba Gana: But you see, I do not have to be part of a global group to benefit from the technology outside nigeria, I could always buy or acquire it . It is really in terms of marketing of the company, that I see the most advantage.
13) The second issue I would like to talk about deregulation in nigeria. Could you tell us more about it?
Mr. Abba Gana: The petroleum downstream sector has been the singularly most regulated part of the nigerian economy. The economy has been gradually deregulated over the years but the petroleum sector has been strictly regulated. We have to deal with one single supplier, i.e. NNPC. Consequently product prices and margins are fixed, by this I mean that I am told the prices at which I will buy and the prices at which I must sell, etc.. The system is extremely regimented. Especially when such arbitrarily fixed prices do not reflect real economic world standards. Investment becomes difficult and this has hampered the industry from supplying required products and to adjust to the realities of nigeria. In a word, we need to deregulate. Prices must be allowed to go up and down to meet the realities of demand and supply. This is what we have been advocating. Deregulation also implies that where domestic supply becomes inadequate, the industry will have a pricing system that will permit them to import from wherever they can find the products and bring them back to sell in nigeria at prices that would not constitute a loss at the end of the day . We are not interested in making super profit but to make decent returns in order to invest and grow.
14) How is the public responding to this issue? And how will the new government respond?
Mr. Abba Gana: It has always been difficult talking about petroleum matters, and especially about pricing. Everyone feels that it should be given away free of charge . Because it is a nigerian asset, it should be free. A lot of people do not understand the difficulties involved in exploration, processing and so on. We just need to keep on asking for these changes. The industry is a capital intensive business and we need to fight to continue to get the most out of our crude oil in order to maintain the infrastructures and to invest in new ones. There is not enough information for the people so as to enable them to understand what the petroleum sector really is.
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15) People do not understand why a country so rich in oil can have so many problems.
Mr. Abba Gana: It was the pricing which was simply wrong. nigerians did not want to understand why they should pay more for the petrol in the cars. At that time the Government was rich and they could support the low prices. Now it can no longer sustain it since the price of crude oil crashed and with the increase in demand , there has been a squeeze on the Government. Now imagine a third of the nigerian equity crude being given away at next to nothing, instead of the government earning a proper economic price for it, which is about 16 - 18 dollars a barrel converted at the current exchange rate. This is what we require from the Government, that they get full value for its crude in order to enable to invest in other areas such as health, education, infrastructure. The industry should also be allowed to earn enough to enable us to have a proper return on our investments and stay in business.
16) You mentioned nigerian refineries. The Kaduna refinery has been restreamed…
Mr Abba Gana: Yes
17) The Port Harcourt refinery is under re-habilitation.
Mr. Abba Gana: Port Harcourt has two units. An old
60,000 barrels a day Unit built by Shell BP in the 60s. That unit has been repaired and is now working. The new Port Harcourt refinery, 150,000 barrels a day, is the one that is now being serviced. The Kaduna refinery is back on stream and Warri is on stream as well.
18) Obviously, the Government understands the importance of having these refineries in good condition. How will this affect your business?
Mr. Abba Gana: Oh very well, As long as the refineries work, I do not need to import any longer. Why should I go out to import at a high price when I can get it down the road, from the refineries, at a good price. It is less hassle and I do not need to open Letters of Credit.
19) So how do you see the future of nigeria?
Mr. Abba Gana: The oil industry or the country as a whole?
20) Let’s start with the oil industry.
Mr. Abba Gana: Well, I think it is very good, a lot of positive decisions have been taken such as partial deregulation, higher pricing, higher margins. It is very positive. NNPC and the Government will now earn more money and so they can put more money back into the industry, into repairing the refineries and making them more efficient. I do not know much about the up-stream but I do know that the current MOU
(Memorandum of Understanding) has been reviewed , and the Government is also trying to pay all cash calls now.
21) This cash call problem resulted in stalled exploration.
Mr. Abba Gana: Yes, but I think it’s going back on stream now. They have signed a new PMC which will give confidence to the new companies that are now taking blocks in deep waters. I think it is all positive. It is all growth.
22) More globally, will you be in Abuja for the handing over?
Mr. Abba Gana: Well, not all over us are going to get to Abuja simply because we are private sector. The people who will be there will be mostly public sector, the in-coming executives, foreign diplomats, the media. We will not be there.
23) Are you looking forward to having a new president?
Mr. Abba Gana: To the Handover, Oh yes, it is always a good thing - Democracy. I had the opportunity to cast my vote and democracy is positive and it will improve the image of the country.
24) The last question is a bit more personal. You are a key player in the nigerian Economic Summit Group.
Mr. Abba Gana: Yes
25) Would you say that this is your personal contribution to a better nigeria?
Mr. Abba Gana: What aspect of it?
26) Being a member of the Group?
Mr. Abba Gana: yes, I was in all the 5 Economic Summits and I am a member of the Vision 2010 and also a member of the Governing Council of the nigerian Economic Summit Group that actually worked towards and planned all this. Ah, I would say yes, because when we started the group, we found out that the Public sector never listened to the private sector. We were looked upon as enemies. "Oh do not listen to the business men, they are all greedy, they want to make money, they are all crooked". Government officials were always "anti-private sector". But the public sector can no longer be the engine of growth in the country. It can not employ all nigerians, the Private sector has to be allowed to take its position as the engine of growth. Before, you either worked for the government or you were a trader. Now, the organised private sector is picking up, there are a lot of organised manufacturing entities, trading organisations, banks and so on. With that growth in the private sector. It must be given the enabling environment to continue to grow to employ nigerians. Now, for the private sector to do its best, the public sector has got to take the private sector as a friend. Now, that was what the nigerian Economic Summit Group was able to do, to bring us together, to sit together in committees to discuss issues. We also harped on Democracy at all the Summits. I think, we have done our best. Some of us are now seeing the results.
27) As a very last question, what would be your last word to our 4.5 million readers?
Mr. Abba Gana: That nigeria is going to be really the place to be in Africa. 120 million people, we have a well educated middle class, strong work force, low wages, a Government that recognises its mistakes and is set to correct them. Most of the negative tales about nigeria where largely untrue and I hope people will begin to take nigeria seriously in terms of coming in to do business. I advise that they get on board before the train leaves the station.
28) Thank you Mr. Abba Gana
Mr. Abba Gana: Thank you. |
© World INvestment NEws, 1999.
This is the electronic edition of the special country report on nigeria published in FORBES Magazine,
October 18 th issue.
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