CBN, Afribank ‘crippled’ Omatek
By Kokumo Goodie, Lagos, Nigeria
Management of Nigeria's first original equipment manufacturer (OEM) to be listed on the floor of the Nigeria Stock Exchange (NSE), Omatek Ventures Plc, has explained that the combination of the reform of the Central Bank of Nigeria (CBN) and the problem that its major banker, Afribank, faced virtually crippled the firm which in the last three years failed to reward it shareholders in any form.
Recounting the ordeal of the firm to its shareholders at the last concluded pre-annual general meeting of the computer firm, its Group Chairman, Dr Timothy Farinre, thanked all shareholders immensely for their patience, support and understanding of the peculiar situation of the company in the last three years.
He expressed his sincere apologies for the delay in conducting the two AGMs.
According to him, Omatek had had to fund all its consumer schemes and all factory initiatives by itself without any funding from any bank in the last three years, as its banker, Afribank, had expressed its inability fund the firm.
Particularly, the Omatek Consumer Scheme with many states was a joint product with the bank and was canceled suddenly.
“Their (bank's) 10 year old mortgage (was) canceled and the offshore and local guarantee facilities could not be sustained as the bank had lost its offshore guarantee as well. The company has commitments and loyalty to its customers and the states consumer schemes were still sustained by Omatek despite these sudden challenges from Afribank, a tough situation after just being listed or going public,” the group chairman said.
In spite of all the odds, the firm posted a marginal increase of 7% in its shareholders funds which it said grew from N6,012,616 in 2009, to N6,449,331 in 2010, while the company’s net assets and the group’s net assets appreciated by 7% respectively.
For the Group Managing Director, Engr Florence Seriki, this is the benefit of buying from first class manufacturers as this turnover was mainly from the sale of another factory initiative, the 24-hour Alternate Power Solution, a hybrid solution with solar, UPS and inverters together with the new Omatek LED bulbs that last three to five years without replacement.
According to her, it was imported as a semi knocked down process as opposed to the computers that are completely knocked down (CKD) components and raw materials.
“These were easier to fund and this is a clear cut evidence of the immense opportunity in Omatek. If over a billion was equally done in this respect, then with funding available, the expected turnover of the company is expected to sky-rocket. The opportunities seen in this pioneering ICT factory are that which will place the group at the fore-front of Africa’s ICT and a champion in the innovation of ICT in Africa.
It would be recalled that Omatek had exited the SMEIS scheme through a private placement undertaken by Afribank Capital Ltd. which eventually culminated in the company being listed as the first computer company on the Nigerian Stock Exchange (NSE) in July 2008.
The factory had come up with various initiatives to drive and sustain the minimum order quantity (MOQ) requirement of its first class manufacturers of raw materials. One of such initiatives is the Omatek e-Xpress consumer scheme designed to assist Nigerians own computers through a convenient payment plan which spans between 12 – 24 months.
Recalling the genesis of the problem of the firm, Seriki said as a result of the huge capital requirement to effectively run the e-Xpress scheme, Omatek had aligned with Afribank Plc for an import finance facility and a consumer scheme partnership with the bank; and had domiciled re-payment of the consumer scheme with the bank.
The scheme was a monumental success as several state governments remitted monthly deductions of civil servants’ re-payment directly to Afribank. This led to the Omatek e-Xpress becoming a joint product of Omatek and Afribank Plc.
She said trouble began brewing when the bank started owing the company money on old finished invoices amounting to over N300 million and the previously granted import finance facility (IFF) for the factory had delays in its rollover.
Omatek had previously consolidated its funding arrangements with Afribank, shortly after the company was listed on the floor of the NSE.
Afribank guaranteed the company’s working capital and the sudden collapse of Afribank along with its funding arrangements, placed the company in dire straits, “making us run the company for three years with no funding from any Nigerian bank.”
On the role of the CBN, she said in the wake of the banking reforms from 2008 to 2011, some companies including Omatek were indiscriminately listed as bad debtors and placed on the credit risk management system (CRMS) list after the CBN conducted a bank 'stress test and audit of loan portfolios.'
“The IFF, the only facility the factory had was not rolled-over and the accrued interest which had accumulated rendered the account insolvent, despite various payments and reconciliation efforts, it was declared as a non-performing facility by the CBN but they were not conscious of the other debts due to Omatek from Afribank of over N300 million.
“Immediately, members of the board met with the CBN appointed management of Afribank and requested that the facility be restructured and all our outstanding invoices paid immediately. “Again, our demands were ignored and the company was required to make payments on the suddenly collapsed debt, otherwise the company would remain labelled as a defaulting debtor,” she lamented.
According to her, the board also received a letter informing it of the bank’s intention to decline on future consumer scheme initiatives with the company.
“This was damaging to the company’s image, as the scheme was a major vehicle through which revenue was being generated by the company. Coupled with this is the fact that we could not start afresh the process of replacing the global undertaking for payment of monthly rentals directly to Afribank from direct salary deductions from beneficiary’s accounts; also, noting that re-commencing this process afresh with another bank would have been an extremely difficult and laborious task. The bank eventually stopped the consumer scheme,” the group managing director explained.
Despite these challenges, Seriki noted, Omatek brought in several projects that could have written-off the sudden outstanding debts created, but the bank could not (do anything) as projects proposals were rejected and Afribank inflicted further damage by issuing a negative credit report to other banks, thereby preventing the company from obtaining banking facilities in the country.
“Omatek had boldly done most of these projects by itself. This also raises concern on SMEs generally in this country as we recall that the benefit expected from the Bank of Industry/CBN N500 billion intervention fund from the Federal Government of Nigeria (FGN) for the manufacturing sector, was also not fully utilised; due to some banks refusal to process and submit duly completed application papers for their customers.
“We have seen consequent attempts by banks to take advantage of the situation to try appoint their executives on the boards of these companies they were to bail out,” she said.
Seriki announced that the funding had been rectified and the ‘injustice done’ was corrected and the company name removed from CRMS whilst the company had restructured all its facilities back.
The company disclosed to the shareholders various projects in billions being handled currently, adding that the hope for a great future in this pioneering ICT manufacturing company was inevitable and very obvious.