When Nigeria emerges from recession, the way we do business must change forever. This does not just mean an emphasis on diversification; though as the recession has bitten over the last 12 months, the need for diversifying the source of government revenues and our export base has never been more urgent. It means changing the fundamental approach that we – businesses – take to managing the primary fuel of our economic growth: oil.
Whilst there is nothing desirable about the hardships placed on businesses and their loyal employees in times of recession, one cannot deny the cleansing effect of the economic cycle. Recessions force businesses to identify, eliminate and fortify pockets of previously inefficient activity. Fat is cut, waste is curtailed and sweeping efforts to streamline are pushed to front of the queue.
The businesses which will not adapt rarely survive the downturn. But those who do emerge, emerge in a win-win situation. Not only are they more dominant in the market – a position which they then have to defend against newer entrants in the upturn – but through the newly found efficiencies, they are leaner and therefore more profitable.
It is a lesson that I have learned from personal experience across my career, so agility is one of the central principles on which I build my businesses today. And at Aiteo, the oil company I founded in 2008 which is now Nigeria's largest, those foundation principles are bearing fruit. Despite adverse market conditions, with the oil price collapse and militant vandalism, our subsidy Aiteo Eastern Exploration and Production Company has trebled output just 12 months from 23,000 barrels per day (bpd) to 90,000 in one of Nigeria's most strategically important oil blocks, OML 29. And this month we announced a further $4 billion medium term investment aimed at boosting both gas and oil output by, amongst other tactics, bolstering infrastructure asset integrity.
The strategy we employed to get to this position is one that is changing the business landscape in Nigeria, and one that will act as a model across sectors and across the African continent. The macroeconomic environment we were faced with upon the award of OML 29 was intensely challenging, but we knew that the production potential of the asset was multiples higher than the output at the time, if we could put the right processes in place and bring the right local expertise to bear.
We've coined our approach Aiteo Thinking, which means only deploying significant investment capital when it takes a holistic view of the supply chain and promotes efficiency at every stage. It promises yield in times of plenty and stability in times of constraint. The latest investment is in the same vein of business strategy that led to an indigenous Nigerian firm achieving something other international players could not at OML 29. Here we leveraged the diversity and skills of our workforce, providing value down the gas-to-power supply chain. The onshore tranche of our work since 2014 represents the single largest debt financing in the local oil and gas sector by indigenous banks.
The mantra I want to take forward, which I hope will also be a mantra for other African businesses, is this: look to local suppliers first and you will create value locally. Firstly, they introduce regional insight and are more invested in the communities in which Nigerian firms operate. But secondly and more importantly, only by giving local suppliers a chance in the first instance will we reduce the barriers to entry in many seen in many industries and create self-sufficient sectors (of many kinds), capable of creating value at every stage of their respective supply chains.
This approach will also make the full effect felt of ‘overspill' into other sectors – such Aiteo's local debt financing of our onshore work. Larger international firms operating in Nigeria bring international experts – some of the finest in the world – but not only do they lack local insight, they also lack local interest, with no personal investment in raising the standards of complementary suppliers to their own industry.
The recovery currently pursued in Nigeria is as much an opportunity for business, as well as government, to stand up and overcome the challenges pervaded in our country. The should not be more bloated government, but more effective industry. Aiteo's five-year objectives aim to tackle Nigeria's power challenges directly, not only because it is the right thing to do from the perspective of corporate social responsibility, but because it is in all our interests to see Nigeria recover and grow once more.
Benedict Peters the CEO and Vice President of Aiteo Group, an integrated energy group involved in exploration, production, refining and supply.
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