‘Public transportation as a social service requires subsidy’
Fola Tinubu is the Managing Director/Chief Executive Officer, Primero Transport Services Limited. In this interview with BENJAMIN ALADE, he spoke on the need to address chaotic transport system in Nigeria, especially Lagos, as this would make the nation become a world class economy.
With your background in mortgage, what attracted you to the transport industry and BRT in particular?
Actually we never went to look for transport business. When I came back from the United States, I was working for a company called Maryland Wreckage. The job was into reclamation, but we were approached by Lagos State through Lagos Metropolitan Area Transport Authority (LAMATA). They asked us to see if we would be interested in investing in transportation. We ran the numbers, and we liked what we saw. We were able to get some investors to put money into the business, and we approached some banks, Sterling Bank stepped to the plate and the rest is history.
How would you describe the transportation system in Nigeria and Lagos specifically, compared with your experiences in England, United States of America and Scotland?
It’s been like night and day. I don’t care how savvy you are; you are never prepared for transportation in Nigeria, because there are so many factors that are out of your control, and you are dealing with so many people that you never had little interaction with before. It could be very challenging and exciting, and it is a thankless business. It doesn’t matter what you do, the commuters are calling, complaining; the bank is calling, complaining; the political people are calling, complaining; the employees, drivers, everybody! But it has been fun and very interesting for the last three years now.
From the chaotic commuter situation in Lagos, there seems not to be enough mode of transportation to move passengers from one point to another, what can be done to ameliorate the situation?
Having been in the industry for the last three years, there are some political decisions that need to be made by the Lagos State Government, and one of them is the issue of subsidy for public transportation. Lagos is probably the only major city in the world that I know that is trying to run a public transport system that is not providing any subsidy for the operators. All over the world, it is actually a social function, and you cannot transfer a social function to a private company. On the one hand, you are trying to make sure the company does not charge the full normal price, and you are not providing subsidy. It is either you let the market work itself, or you provide subsidy.
Right now, Lagos State Government is trying to have it both ways, and we are in the middle of it. Anywhere in the world, public transport is subsidised by the government. So it is a political decision that Lagos would have to make. What they want to do, going forward, because although I had known the governor with the bus reform system even though I haven’t seen the full stuff, but I’m thinking along this line working something out. But to really get a handle of the public transportation in Lagos, you need it. Lagos State has up to 22 million people moving up and down, you cannot all rely on cars; they need to finish the light rail that they started, and also encourage more buses. According to the analysis done by the Government, Lagos actually needs about 7,000 buses running up and down on daily basis, including our own 434, excluding the one Lagos State is bringing now, which I don’t know how many. There are less than 1,000 buses in Lagos, including what they are bringing now.
Lagos State said they are bringing about 800 buses to complement the bus reform. With this opportunity, how is your company going to key into this? Have you been contacted?
I have to be careful here now; no, we have not been contacted by Lagos State, they are doing their own thing now. But I believe what Lagos is trying to do is to have three major operators of buses in the state, and we would be one of them. But exactly how they want us to be part of it, we have not been told yet, so we are waiting to hear from them. We, on our own, have submitted a proposal to run the BRT from Abule Egba to Oshodi, and bring our own buses, which we are still waiting for approval on. We are engaging them, we are talking to them.
You mentioned that you have 434 buses, which are just like a little drop in the ocean. What plans are in place to increase your fleet?
Part of it is the Abule Egba that I spoke about; if Lagos State approves it, I think we would bring in about 350 buses for that axis, and as Lagos State approves new areas for us, we would bring new buses in. But we are dependent on Lagos State approving the routes for us before bringing the buses, because there is no point in purchasing buses until you have an approval to run the route.
Primero Transport is under concession with the Lagos State Government. How would you describe the experience so far, considering all the negative reports about government not keeping to its own part of the agreement in other similar contracts?
I won’t say government is not keeping to its promises, I won’t say that because there are some parts they have not kept, and there are some parts we have not kept also; so it’s a two-way traffic. It’s easier for me to seat and get sanctimonious and say it’s Lagos State, there is a large part we have not kept too, and there is a part of it they have not kept too as well. My experience is that LAMATA has been working with us; they have been actually bending backwards to make this scheme work, and LAMATA represents Lagos State. To be honest with you, they have really gone beyond the call of duty sometimes, with what they have been doing to help us.
Why are you not patronising the local assemblers and manufacturers? Are there any plans to backward integrate such that some of these buses can have local content?
When we started we looked at the local assembly; we visited them, and we didn’t like what we saw, that’s why we went outside the country. But we have signed an MoU with Yutong, to start assembling buses in Nigeria, and we hope before the end of the year we would start assembling buses in Nigeria, especially because of the duty on those buses; we have to pay about 33 per cent or something like that, which is very high. We think it’s cheaper for us to assembly them in Nigeria, Yutong actually is the biggest bus manufacturer in the world, and this is the first time they would actually put their own money in investing in an assembly plant outside China. What they have been doing before is that you pay your money, and they assemble for you, and you run it. But we told them that they must be part of it; they looked at it, and they liked what they saw, and they are actually investing in Nigeria. It’s because they like the economic environment, and what they see about Nigeria, so we would start assembling the buses in Nigeria.
So, how many units of vehicles do you intend to produce on yearly basis or quarterly to meet the needs of the Lagos populace?
It’s a long term business, it’s not a short term business, and the way we envisage it is that initially, we are going to start with our primary needs, and we start to broaden up to other people. We are looking to sell all over West Africa, and not just Nigeria, eventually we plan to start selling within the West African market. Also, we have a big plan for that I won’t tell you a particular figure right now, but for the plan to break even you have to do a number of XYZ number of buses anyway. We have done that analysis, and we know what that breakeven point is and I don’t think that is a problem for us.
There is no venture nor business that doesn’t come with corresponding risks, especially in terms of funding and an enabling environment, can you tell us your own experience since inception?
The biggest problem we faced since we started is the currency risk, because when we started this, naira was at N168-169 to $1 a few years ago, and we all knew what happened; it went to about N520 before it came down to N360 something that it is right now. That is the biggest problem my company faced, because our debt almost doubled just because of the currency devaluation. Our loan was in dollars, and we were collecting our money in naira; and it really affected us, not only us but almost everybody that does business. Unfortunately for us in Nigeria, we don’t manufacture anything in this country; almost everything is brought in, we just consume so when naira lost drive like that it affected us. Not only did our debt double, but everything that we used to maintain the buses went up in price. I will give you couple of examples, tyres – we were buying tyres for about N65,000 to N75,000 per tyre, and all of a sudden we buying them at about N130,000 to N140,000 per tyre, so almost everything we use on the buses doubled. When we were running our figures, we used N275 naira to $1, and we thought we were being aggressive, and nobody envisaged naira would go all the way to N520 or at the level it is right now, and that affected us negatively, and not just us, almost every business was affected negatively.
Judging from your books and revenue generation, and a target of N1billion/year, the transportation system sure appears very profitable. But why are investors not flocking to this very lucrative sector to make life easier for commuters?
It is because the amount of upfront investment is a lot of money, and it is not so profitable. Before you even see a kobo return on your investment, you would have to outlay almost about millions of dollars; I am not talking about one, two, or four, I’m talking about like $40 -50 million or more. Not only that, the amount of money you need to start this business is a lot of money, and that is the biggest reason why people are not investing in it.
In what ways can the government at the centre and the state improve the lot of operators in the transport sector?
If we are going to be a world class economy, we have to sort out our public transport business especially in Lagos, because whether we like it or not whatever happens in Lagos affects a lot in Nigeria. In fact, Lagos is the only mega city in the world without a public train system, and its just now getting into organised bus system, which is where we are right now. The government must really come into, that’s why I said it’s more about political decisions. What we need to do is, if you get your mass transit right, you decongest the roads; it makes it easier for people to move back and forth. It even spurs economic activities, and it would lead to economic growth in the long run, but there must be that political will to make that decision, that this is what we must do. It is also good for the environment because the less vehicles on the road the better the environmental effect. So it’s a win-win situation if we can get it right, but it takes political will; and it’s a political decision that has to be made and okayed if we must go from here to there.
Every user of facility wants the best, at any point in time where customers don’t feel satisfied with your services, is there a channel where they can report or lay their grievances.
Of course, on all our buses at the back there are two toll-free numbers there that you can call, and there is somebody there that would pick up the phone, I think from about 7am to about 10pm, seven days a week. All your complaints can be laid and people send us emails, so we are very customer service oriented. Even I go out on the road most times, and people come to me and complain, and I give my cards out to many commuters. I tell them to send me complaints because they see more and tell me more than what my employees would like me to know, and that’s why I constantly run checks. Most of the commuters would tell you their experience; there’s hardly a day I don’t stop at one bus stop or another to experience what is going on, the feeling, and what they are doing and to talk to them; it gives a ready avenue that they can lay their grievances.
Going forward what are your future plans for the company and the transport sector at large?
My goal and my dream are to make Primero the number one public transport system in Nigeria. I pray that we end up with over 2,000 buses running all over Lagos, and picking up over a million people daily, those are my goals. And I believe it’s possible, and our services are not where I want them to be, because right now, people still wait, as far as I’m concerned, too long to board our buses. So my goal is to reduce the queue and leg of time they wait for buses; I don’t believe anybody should wait more than 10 to 15 minutes to board a bus, and that’s what I’m working to and I would not rest until I get it right.
In terms of technology, any plans to digitalise transportation?
Where we’re going is for everybody to use smart cards, and with cards you can load it, and put whatever you want in there. You can plan it like say one week, it’s already on, we are working on with Lagos and the State is also working on it. There is an app that you can put on your phone called, Lagos BRT, and with that app, within 24 hours before you actually use a bus it can say I want to go from Fadeyi to Ketu, and it would tell you when the bus would get there. It’s not 100 per cent, but we are working on it, and that is where we are going with technology, so that you can plan your journey 24 hours before, and you know when you have to get to your bus stop. Lagos traffic permitting, if you say the bus would be there at 10 am, at that time it should be there.
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