In this interview with the National Institute of Credit Administration (NICA) chartered the Chairman/CEO, Andromeda ISL, Chief Ugochukwu Okeke, FICA, speaks on the need to promote right credit culture and develop effective credit framework among other issues
What drives your passion for entrepreneurship?
We’re an engineering company. We have our hands in other aspects of the economy. What drives us is our passion to add value, create employment and support the government in whatever way we can to actualize their policies in the business sector. For example, we are vendors to Abuja Electricity Distribution Company and Ibadan Disco, as well as other government agencies. We have also ventured in Oil and Gas, where we are striving in our own way to improve on what we have met on ground. So basically, what drives our passion is entrepreneurship to add value, create jobs, employment and work with the government in different ways to improve the economy.
Did you use credit to start your business and what were the terms?
Yes, we used credit to start up our business, we used a lot of personal credit (from relatives) who believed in our vision, and as we progressed, we also got some credit from the unofficial circles, not the banks, because their interest rate was too high. Banks were also there but their interest rates were too high. Initially, some were charging 5% then increased to 10%, then 15%, 20% etc. Some will give us and add little money as interest rather than charge a percentage, so initially it was easier to deal with but when we started growing, it became too difficult, as the demands before credit was issued became tough.
Were you happy with those terms?
I would say we were not happy, but had to manage because that was the best we could get.
Are you still using credit to expand your business?
Yes, we still use credit to expand our business, we are still looking to leverage on more credit facilities. We have assets that we leverage to secure credit, we are also trying to utilize our cash flow to manage our transactions and business commitments, so we can limit our exposure to lots of credits due to the exorbitant interest rates. If we go to the bank they charge up to 25-30% or more. If we go to the unofficial credit firms they charge per month, and because of the business culture we have in Nigeria, you cannot be certain when you get in payments accruable to your business, especially for those in our contracting line of business. When you do jobs and they don’t pay you on time, these people charge you credit and you end up scared and incur losses, so it has been a mixture of good and bad for us but we thank God that we are still upfront
Are you envisioning a credit-based economy for Nigeria?
For me, I envision that because even if you look at it now, we are using more of our cards. A lot of transactions are going on online. If we look at the analytics of our online transactions, it has grown rapidly which shows we can apply credit with time, and that means we need a good framework because we Africans especially Nigerians don’t understand what credit means. They will borrow money and spend it anyhow, not on their business but on other selfish needs and this increases the high rate of default. But I believe that with time, Nigeria will be able to use credit well and know the importance of it.
What I still envision is that it will make things easier but we must have a good framework, our credit professionals should be brought into play to ensure that it is not abused. People borrow money and put it to wrong use, so default level is high. However, credit makes it easy to do business because you borrow based on what you earn, so the economy has to be boosted so that people who take credit have a source of paying back the credit. This is the major issue with credit, if you don’t have the source of paying back, the credit you get goes into bad debt and nobody wants to be in bad debt. I believe we must go back to our institute, our bankers and all our professionals in the credit business, to work together to have a very robust framework, developed to promote a credit-built economy.
Can you walk us through your perception of how Nigerians generally behave in both business and consumer credit transactions?
It is similar to what I have said earlier. Nigerians borrow and don’t pay back, a lot of businessmen who don’t know about credit, borrow for consumption. And you can’t borrow money for consumption, you borrow money for building a business to improve on your cash flow so your business can earn more and so your revenue will increase, many businessmen don’t understand it and so it affects our payback time. And so, our people need to be taught what credit means, it functions and how to leverage on it gradually and then improve on it. This way, they make it something that they can depend on. Our perception on credit is very negative, even those who are enlightened borrow money
What is the state of credit business in the industry you belong to right now?
We’re an engineering firm, and we also do a lot of trading, very recently we’ve also ventured into Oil and Gas. For me in all these sectors, the credit business is still quite poorly aligned and interest rates are very high, the challenge of cheaper credit facilities has to be worked on. With the structuring of single digit financing access, credit would become easier and effective. And for the industries, the payback period should be reflective. I still believe that the credit situation in the company that I belong to is not very effective. Both those issuing the credit and those collecting the credit are yet to understand the varieties of what credit is meant for. It is always misapplied and when it is applied you find out that those that are meant to payback wouldn’t pay back on time. For example, if I’m doing an engineering procurement in company A and I borrow money at 10% per month in the official sector and you delayed my payment for the month, I have lost my profit if my profit is 25% or 20%. I have lost my profit which on the 10% interest and if it goes beyond 1 week or 2 weeks, I have lost 25%. You also have other accruable charges of like 1-2%, which puts you in a very difficult position in terms of paying salaries and maintaining your normal business structure. The state of credit interest in the industry is still very dire from my experience, and like I emphasized earlier we need to upgrade our credit system to align with a single digit interest rate, and also ensure that the system is properly structured that when money goes round, the upcoming will use the same time frame of 30 days, 60 days, 90 days. When you borrow money and go outside your time then you know you have lost.
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