Fola Tinubu, Managing Director/CEO, Primero Transport Services Limited, speaks with Osa Victor, news editor, BusnessDay Newspaper, and Desmond Okon in Lekki, Lagos. In this exclusive interview, Fola talks about his desire to reduce commuters waiting time across Lagos transport ecosystem.
Gridlock has become a very big problem to the Ikorodu corridor. What are you doing in the short-term to overcome the problem, and in the long run, what do you intend to do?
In the long run, once they fix all roads under repairs it will make things a lot easier. In the short run, because they are fixing so many roads simultaneously, it is causing a nightmare for us. They are fixing the road from Mile 12 to Ojota, they are fixing Oshodi to Oworoshoki, they are fixing the Third Mainland Bridge, they are fixing Eko Bridge from Alaka to National Theatre, they are also fixing Costain Bridge, and part of Ikorodu Road is been scraped and re-tarred right now.
Unfortunately, there is nothing we can do; we just have to find a way around it. In the long run, it will be good for business because once they fix all these roads; hopefully, the vehicular movement will be much better. But for now, it is a big nightmare.
Since your daily projection has not been met, how do you augment, especially in the area of training and paying salaries?
It has been a nightmare for us. Like every business, this year has been a very difficult one. If you remember, in March, they asked us to carry 20 passengers in a bus that carries 70 passengers. For those three weeks, our income dropped by over 60 percent. We then shut down for six weeks without any income at all. Since we came back in May, we have been carrying only 42 passengers per bus, which means we are using less than 60 percent capacity. This has a negative effect on our revenue. Our suppliers are suffering because we have not been able to pay them as at when due.
We are working with them and they are working with us. I have to thank our vendors at this point because, without them, we would not even be where we are right now. With regards to staff salary, we have been managing to pay the staff and there has not been any major issue. It is very challenging. There is hardly any business that has not been affected by this COVID-19, and I do not care what industry you are in, everybody has been affected. It is what it is; we just have to find a way to keep afloat until business comes back to normal.
How are you managing your bankers?
Our bankers are Sterling Bank.
Honestly, they have gone way beyond the call of duty. They have helped us a lot. Remember, we went to the bond market last year and we were able to raise N16.5 billion, but we are in the process of refinancing it. We are working with our bankers to refinance and get a single-digit loan through the CBN. God willing, we should be able to resolve that on or before the end of this month, and we will pay off the bond and get a single-digit interest rate of a five to six-year term loan, which will reduce our interest expenses and the pressure on our cash flow tremendously.
What is your general overview of Lagos’ transport system since this problem (gridlock) has been there over 40 years?
There will always be traffic in Lagos because Lagos is a very small landmass and the people coming to Lagos increases daily. What Lagos needs is a massive investment in public transport so that we can encourage people to leave their cars at home and use public transport. We have to find a way to make the rail system work, we have to find a way to make sure the waterways work; we have to find a way to make sure the bus services work. But, even if we do, we need to ensure that we charge commercial rates. Because if you do not charge commercial rates and the government does not subsidise, it is a recipe for disaster.
When we were younger, there was LMTS, and then there was LSTCC, they all went under because they were not charging commercial rates and the government was not subsidising. That is part of the problems of Primero also. You cannot eat your cake and have it.
We must have an honest discussion. Let the commuters sit, the government sit and let the operators sit and let us all decide what we need to do. If you do not charge commercial rates and the government does not subsidise it, the system will not survive. Do not get me wrong, I am not advocating for a subsidy, all I am saying is something has to be done. There is no free lunch anywhere; it has to be paid for. The question is who pays for it? That is a political decision, but it is a decision that we all must take if we want public transport to work.
People go all over the world and say ‘oh Fola, it is done this way or that way. I look at them and say we know what we need to do, but it cost money. You do not pass a social responsibility of a state to a private company. That is the same problem they have in the oil industry and the electricity industry. You cap the price to make people happy, that is a political decision but then you expect the private companies to augment it; it is a recipe for disaster.
If Primero is a publicly owned company, I can keep on piling losses because at the end of the day, the taxpayers are there to back me up and they can write off the debt at any time, they can raise taxes and pay off the debt. But a private company cannot continue to pile up losses. Governor Babajide Sanwo-olu is the first governor to actually sit with us to find out what our problems are and how to find a solution.
After we showed him our books, he approved an increase in fares for us in May this year. If we do not tell ourselves the truth in this country the country will not progress. People talk about dividends of democracy, but you cannot talk to a private company about dividends of democracy. I keep telling people, this may sound cold, but it is the truth. A bank MD’S number one job is not to look after the populace, an insurance company MD’S first job is not to look after the populace, Primero MD first responsibility is not to look after the populace. That does not mean we should not care about the people and the society we are in. But our number one job is to look after the company that we are entrusted with. We need to ensure the company survives, so that four years, five years, 10 years, 15 years from now, the company is still around.
If, while doing that, we can also do something for society, all well and good. But the president’s job, the vice president’s job, the senators’ job, the House of Representatives members’ job, the governor’s job, the house of assembly members; job, and the local government chairmen’s job is to look after the populace because they voted them.
That does not take out the social responsibility of companies because at the end of the day, we will live in this society and we have to make sure the society develops. But the MD of a company’s job is not to look after the populace. If you look after the populace and you let your company go bankrupt, everybody is going to blame you because it means you have failed in your job. It is cold, but that is the reality.
I am not advocating for a subsidy, all I am saying is the system must be put on a solid financial footing and it must be sustainable so that many years from now, the system is around. I’ll give you an example: in May this year, our buses were off the road for about a week or so because of fuel issues. The Danfos increased their prices almost three times, and people paid N1,500 from Ikorodu to Lagos Island, and that is what will happen if (God forbid) anything bad happens to Primero.
I am very happy with what the Lagos State government is doing, but Lagos State government does not have the financial resources to do it by themselves, they need private companies to invest. It is a very capital-intensive business, and if private companies are going to invest, they have to make some modicum of profit, or at worst, break even.
Some time ago, you said your goal was to reduce commuters waiting time and the gridlock is a major issue. How do you intend to marry these two?
Before the Covid-19, I think we were running about 240 to 250 buses, but when we realised that we were going to be shut down for Covid-19, we camped over 200 mechanics in our yard to fix buses. So, we have ave been able to increase our bus rollout, we are now rolling out between 300 and 310 busses daily. I can tell you that out of the new buses that Lagos State is about to give us on revenue sharing basis, 50 of those buses are going to be put on Ikorodu axis and the number of buses on that axis will go up to about 350-360 daily. That will reduce the waiting time. It is a good problem for me to have because what that tells me is that more people want to use our services. The solution to reduce waiting time is for the government to fix the roads, which they are presently doing so that the buses can flow better and we put more buses on the road, and that is exactly what we are going to do.
Itemise the strategies you want to put in place to achieve a world-class service, and looking at engaging female drivers?
I can assure you that we have female drivers right now. We have had female drivers for over three years and we are actively recruiting female drivers because they are patient and not as rough as men when they are driving. We men have this machismo’s attitude when we are driving. But women are calmer. And, when you introduce women into the midst of men, the men tend to behave better and more civilised than when it is just only them. We are encouraging more female drivers and we are going out of our way to look for more female drivers.
But, our strategy to provide a world-class service is not just the women drivers; it goes back to my earlier argument on finance. We know what we need to do, we know how to do it, but it cost money and that is why I have been advocating that the system must at least break even. We break even either by letting us charge a full commercial fare, or the government says because of the social nature of the business, we don’t want to charge more than XYZ but we’ll do XYZ to subsidise. Unfortunately, Lagos State’s government is not in a position to do much right now because the state revenue has been dwindling due to Covid-19. Even if the government wants to help out, they cannot do much because the government presently have so much that they are dealing with due to Covid-19. They have schools to provide for, they have roads to fix, they have hospitals to provide for, and other issues to deal with and their statutory revenue is going down because the price of crude oil has plummeted. Even their IGR is going down because a lot of companies profit has declined dramatically due to Covid-19.
How has Lagos State government helped Primero?
The most important thing that the Lagos State government has done is to provide infrastructure, which cost a lot of money. The infrastructure they provided has made it easier for Primero to operate. We are about to start Abule Egba to Oshodi route with two other operators. The state has spent a lot of money to put the infrastructure in place for that axis. Without the infrastructure, we will not be able to do what we are doing. Like I keep saying, we are very bullish about Lagos, we want to invest, and we want to bring in more buses. So, as long as Lagos continues to develop the infrastructure, we will continue to invest.
When the economy improves and things go back to normal will Primero review back to the normal fare?
You have put the cart before the horse, and I will tell you why. Even now, with this increase, we are still the cheapest on that route and our cost structure is a lot higher than everybody else on that route – the rest of them do not insure their vehicles, but we insure not only our vehicles but also everybody that rides on our buses; they don’t have to clean their vehicles every day. LAMATA sends back our buses to be cleaned if they are dirty; they don’t provide training for their employees, we do. They don’t provide health insurance for their employees, we do. They don’t pay payroll taxes, we do.
Our cost structure is a lot higher. Even though it is a lot higher than others, we are still the cheapest on that corridor. If our cost structure is higher and we are still the cheapest and you are asking me that if things go back to normal… it does not make sense. That is why I said we should have an honest discussion, let the commuters sit, let the politicians sit, and let the operators sit, you can now argue that you do not want the operators to make more than 5 percent or 10 percent profit or whatever profit margin we all feel is reasonable. But the system must break even and give the operators some sort of profit if you want people to invest.
We went to the bond market to raise N16.5 billion last year, and we are thinking of going back again to raise more money. If we are going to do that, the capital market will only give us money if they are sure we can pay it back. The capital market does not joke. They want to be sure that whatever they invest in makes business sense. That is why I have been screaming and yelling since the past four years that the system must be profitable.
N16.5 billion to most industries is a lot of money. In our industry, it is peanuts because of the upfront investment involved. I will give you an example – say a bus costs about $100,000 (roughly). This means each bus will cost you roughly N45 million to N47 million. So, if you are buying 100, that is almost N5 billion and you still have to pay a duty of 35 percent on it, you still have to ship it to Nigeria, you still have setting-up expenses in Nigeria. Before you know it, just bringing only 100 buses, you are talking of over N10 billion. Lagos State, according to World Bank statistics, needs about 7,000 buses on the road daily, going up and down the metropolis.
Right now, with our 434 buses, with Lagos State government 820 news buses, the total number of buses on the road daily in Lagos is less than 2,000 buses. The need gap is huge and that is why if you go to any bus shelter anywhere in Lagos, you will see people queuing waiting for buses. If you want the private sector to come in and invest, you are talking about hundreds of billions of naira. For this kind of money to come into this sector, then you must show clearly how they are going to make profits on their investment.
We can now argue that we don’t want the profit margin in this industry to be more than 5 percent or 10 percent, or whatever profit margin we feel is reasonable. But if you are asking me as a private investor to put 5 billion, 10 billion, 20 billion, 30 billion on the table, you have to show me that I will get some modicum of profit on my investment. Unfortunately, neither the Lagos State government nor the Federal Government has the resources to do all of the required investments by themselves. There is no way we will not have to involve the private sector, and if you want the private sector’s involvement, then the system must be profitable.
What Primero is doing is for the future of public transport in Lagos and Nigeria, because if anything negative happens to Primero (God forbid) no investor is going to go near public transport for 20 to 25 years, we would remain a Danfo/okada economy. We need to be honest with each other and have an honest discussion around this. If we can get the required investment to come into this sector, the number of jobs that will be created is mind-boggling. Primero has about 1,500 people working on the project on one corridor only. The Abule-egba to Oshodi route will create a minimum of 1,000 jobs. The amount of jobs that can be created by this sector is humongous. And all these unemployed youths going up and down in Lagos looking for jobs can be catered for.
The money for investment is there. The pension funds and the banks are sitting on trillions of naira. But they will only invest if they know that it is a viable business and that is exactly what Primero is trying to show everybody that this sector is viable, and other investors should come into the sector.
I told you earlier that a World Bank study showed that we need 7,000 buses going up and down in Lagos. I know for a fact that LAMATA’S plan is to have 14 BRT corridors all over Lagos State. The first one is the Lagos to Ikorodu that we are on now, the second one is the one that the governor opened recently which is the Abule-egba to Oshodi route. There are still 12 more corridors to be built. The number of people from LASU, Iyana-oba is massive. The number of people in Alimosho is massive. The number of people in Lekki is massive. Anywhere in Lagos, there are people that need to be moved from point A to point B. But what has been lacking in the past is we have not been investing on the scale required.
Primero is actually the first company that will bring in 434 buses at one time. But there are other investors with the same capacity or capability that can do that also. One company cannot serve the whole of Lagos. The logistics and investment are mindboggling. So, we need other investors to come into the sector.
You said imported bus now costs $100,000. Have you considered sourcing your buses locally?
We are working on it and it is on advanced stage right now. We have partners we are working with; we want to start assembling the buses in Nigeria. We are working to set up an assembly plant with some of our partners and investors because we believe that the assembly plant should be in Lagos or very close to Lagos. Most of the buses initially will be used in Lagos, and we believe we can sell it all over the West Coast of Africa. We would like to be close to Lagos as much as possible, but we are working on that and I can assure you our next set of buses will be assembled in Nigeria.
What timeline are we looking at?
Actually, if you asked me this before Covid-19, I would have said by the last quarter of this year. But it may be before the first quarter or second quarter of next year because right now nobody can even travel even if you want to go and sign contracts with others, you can’t do anything. I believe God they will open the airspace sometime next month, or October, and business will start picking up again. So, we are looking at probably the first quarter of next year. Worst case scenario, the second quarter of next year if the pandemic permits.
In the next few years, what do you hope to see in your sector, in Primero and Lagos’ transport system?
Our goal in Primero is that we would like to have 2,000 buses picking up 1 million people daily all over Lagos. But even with 2,000 buses, it is not 50 percent of what Lagos State needs. My hope is that there would be at least two or three other operators that have the financial capacity to do maybe, 1,000 or more buses. That way you will have about three companies each one with about 1,000 to 2,000 buses. This will go a long way in addressing the needs of Lagos and we can all benefit from the economics of scale. This is what I am praying to God for, but our goal in Primero is that we would like to have 2,000 buses running all over Lagos and picking up 1 million people daily. That way, we will affect every Lagosian’s life positively.
We may not pick you up, but we will pick your cook, your gardener, your steward, your cleaner, your gateman, your secretary, even your colleagues. So, there is hardly any aspect of Lagos life that we will not touch and
Are you talking to other investors to come into this space?
That is not my job. To be more serious, the Lagos State government is actually talking to about two or three other companies. In fact, on that Abule-egba to Oshodi route, there is going to be three companies running that corridor, and we are one of them. I believe each of these companies has made a commitment to Lagos State government to bring more buses because the government is giving them some of the new buses to operate on a revenue-sharing basis. Exactly what they worked out with state I don’t know because I don’t work for Lagos State government. But even we had to make a commitment to the state government that we are bringing more buses on top of the 434 we presently have.
We are already going towards that route anyway. With what Lagos government is doing right now, I know there are about two or three other companies they want to work with to develop the space.
What is your message to Lagosians, especially your commuters?
My message to all Lagosians, especially our commuters, is to understand that what we are trying to do in the long run is in their best interest. They may not like that the price has gone up, but we are doing everything to make sure that the system is sustainable and we are doing everything possible to ensure that we provide a world-class service for them.
World-class service costs money, and we plan to continue to invest to ensure that Lagosians enjoy our services. We want Lagosians to work with us and know that the government is there to make sure they are not gouged, that they are not taking advantage of, and we don’t have any intention or plans to take advantage or gouge our commuters. We are a responsible organisation and we plan to be here for a very long time, and if you are going to do that, then you have to do it in a sustainable fashion. But everything we are doing right now is to ensure the survivability of the system and to ensure that in the long run Lagosians get the service that they deserve.