Sabo Malami is the Group Managing Director of Elsahal Group of Companies, with interest in energy and petrochemicals, agriculture, properties, logistics and marine services. In this interview with VALUECHAIN, he spoke with YANGE IKYAA about his journey through business and entrepreneurship, his challenges and how he surmounted them, as well as his current negotiations with NPDC to acquire one of its marginal fields and increase its production output from 8,000bpd to 30,000bpd. Excerpts:
You are known to have firmly established yourself rather very early in business and in a sector that seems seriously challenging, so how did you all start?
Before I started Elsahal Nigeria Limited in 1998, I left Kano for Lagos in 1994. I started as a clerk, in fact, a contract staff with Isyaku Rabiu Group of Companies, recording trucks that loaded rice and sugar at the Apapa Wharf, that’s how I started. I used to be at the Port, I was recording all trucks that loaded rice or sugar, then gradually, we started being sent to the market. I remember one of my brothers, my cousin that was sent to Daleco Market in Lagos; that market is a rice market, so we used to bring Isyaku Rabiu Rice and later BUA Rice to the market as distributors.
Then, I was appointed as Assistant Warehouse Manager in 1997 with SUB International, which used to be one of the rice distributors in Lagos. Later in 1998, I was also promoted to Warehouse Manager, then from 1998, I registered my own company, Elsahal Nigeria Limited, and that was how I started for the rice trading and general agro services.
In 1999, I now started oil and gas trading, specifically buying and selling PMS and AGO; we would buy from NNPC Depots, and other depots and then take them to the north of the country, so that’s how we started oil and gas business up until 2009, when there was global meltdown and we entered a major period of serious challenge. We were almost sent out of the market because of the losses and a lot of other market challenges or shocks that followed.
So what happened from there when the prices of commodities became an issue and a lot of people were running away from the market because of failure; how did you transit, what area did you go into in order to survive?
Actually, what we did when the market was tough was that we decided to diversify, we decided to go into the upstream segment of the oil business because, then from 2006, 2007 up to 2008, we started importing through market arrangements with Vitol and a few other IOCs. Then we also bought from local companies as off-takers; when they imported, we bought from them, like Fola Uyo, AP, now Forte Oil, Oando, even when they used to be Unipetrol and Texaco. Those companies are the companies that we used to buy white products from; 5 million litres, 3 million litres, and so on and so forth.
You moved from downstream to upstream because of the challenge there, so now, how are you finding the experience since then?
The experience is good, it’s very good because the difference between downstream, midstream and upstream is that in the midstream or downstream, you can invest, open an LC of N1 billion and you may end up making a profit of just N10 million to N20 million. But going to upstream, we realized that it is capital intensive but at the end of the day, the margin is good. Unlike the midstream, you can invest a billion naira in the upstream and make up to 40 to 50 per cent in profits, that is a wide margin; you can’t do that in downstream.
So, what specific services are you offering in the upstream segment of the industry?
We currently do trading, we export what we call pentane plus, which is actually a gas component too. We have partners in Singapore and Geneva, we have an office there in Switzerland, our partner’s office there, and at the same time, we also export the product to our various clients in the international market.
You were talking about your services, looking at the mission statement of your company, the intention from incorporation was for you to offer services and satisfy your customers locally and internationally; in your own assessment, how satisfied are your customers with you?
Our customers are satisfied in various sectors, in the agro allied sector, in oil and gas, the property sector, and you can keep mentioning them. So, we believe that we satisfy the customers more in terms of the services, especially the oil and gas services.
I have been thinking about this, your involvement with petrochemicals, a very wide area, profitable and challenging as well, but if you look at the market now, there is Dangote Petrochemical Complex in Lagos, the largest of its kind in the world, with projections to fully hit the market with products by year end; how are you positioning yourself to contain any kind of competition from there, if there actually is?
Actually, so many people believe that with the coming up of Dangote Refinery, the petrochemical services and products, maybe the market will be full, the competition will be much, but it is not like that. The refinery specifically, don’t expect that because it is there in Nigeria and the cost of shipping wouldn’t be involved in the refined products, so Dangote will sell his products cheaper than what the international market is doing, it’s out of it. They built the refinery and the petrochemical complex to maximize profit, so they are going to sell it at international price, and our own is that we get all our products locally and we are already in the market and we also have the neighbouring countries that we export to. Even though it is a small, mini plant that we have, we are OK with what we have and we are satisfying the market.
How many plants do you have?
We have one.
Where is it located?
It is actually located in Kano but the main blending plant is in Calabar, precisely at Tinapa, so we have two operations running concurrently in Kano and in Calabar, one for the northern market and the other for the southern market.
I’ve also been thinking about this issue of fuel subsidy removal, which has been advanced and reversed so many times, but that is what the market believes in and it will eventually come, but with increased prices because the market will react; are you afraid of your business suffering from any kind of market reactions if the subsidy is removed?
No, not at all. In fact, that is even when we will make money because the market will be competitive. Like I mentioned, Dangote Refinery cannot start when the subsidy is still ongoing, they cannot start selling. The subsidy has to stop before Dangote Refinery will kick off its supplies to the market, so the market is good without subsidy.
Talking about the PIA, it took about 20 years or thereabout but it finally came, and now it has come to stay with a lot of reforms around there; what can you say is the impact of that law on your business; any pluses, any minuses?
Yes, in fact, almost all the clauses are good for our businesses. For example, like I earlier said, it makes the business to be competitive. Before now, the upstream was actually dominated by the international oil companies and even up till now. But with the PIA, the bill has given the local companies opportunity and power to act like, or play the role of the IOCs, so that is part of the competitive market we are envisaging, and I think that is just a starting point. I have been following up on the bill ever since and I could remember when the late Rilwan Lukman started the argument and I was following up.
In fact, I still have documents, I still have the first document, the first draft of the PIA; I still have it before it translated into so many versions and, finally, PIB is now called PIA.
OK, are you looking at any marginal fields acquisition or something like that?
Yes. In fact, with our foreign partner, we already have a memorandum of understanding with NPDC, working out a way to bring funding to one of their assets, which is one of their marginal oil fields, to fund and develop in order to increase the production. It is already an existing field, it is producing, it’s a producing field and it’s now just to scale up. I think they are doing about 8000 barrels per day now, so we are trying to fund it and leverage our technical knowhow to increase the production to at least, we are looking at, within a year from taking over, producing between 25,000 to 30,000 barrels per day.
I want to ask you this question before we depart from here, we are looking at this issue of energy transition and I think it is the number one thing on the international energy agenda at the moment, moving from fossil fuels to renewables and cleaner fuels that can power growth and development without further degrading our environment; do you think you are better placed to play in that area of renewables and transition fuels, or are your models still the old models?
No. Actually, part of the plan we have is that we always look ahead. We have a consultant on one side working on renewable energy strategy for our company and, at the same time. Just as you know, with time, the fossil fuels, the PMS, the AGO will be wiped out or play a minimal role. So, we look ahead and we have worked out modalities to achieve that.
Currently, we are working with Niger Delta Power Holding Company (NDPHC), we are working with their Renewable Energy Department to actually achieve some of the renewable energy targets for Nigeria, especially on power generation, and that is the step we have taken and we are going to achieve that before the year ends.
Are you looking at specific locations in Nigeria where you will work on your renewable energy projects?
Yes, we have land in Abuja and Kaduna. We have about 309 hectares of land combined. So, initially, we tried to set up agricultural businesses but we have decided to put it aside for solar farms.
Okay, we are finally trying to wind up this interview but I want you to talk to us about this issue of your property market, which is an area of opportunity, even for job creation and personal comfort for the citizens and also for the business owner in terms of profits. What are the specific offers that you can talk about as being developed by you?
Actually that’s to also let you know that initially when the PIB started, when the process had just begun, NNPC decided to register a subsidiary, NNPC Properties, and I could remember we tried to partner with them to build houses, especially estates, malls; we had even done some presentations. There was a presentation we did in 2012 to NNPC Properties and we have even signed an agreement to build then about 1000 houses but with the delay of the PIB, there was no space for private participation. That’s why I said that the PIA is good for business.
Now, we have some areas that we are building now or developing. In fact, we are also partnering with some of the cooperatives, like in the oil and gas, some of the cooperative societies, to build houses for them. We have already signed an MoU and we have started implementing that. We have a site in Katampe and we have a site in Guzape. We also have another site here in Jahi, so that’s what and where we are working on at the moment and we have a Managing Director that is managing that arm of the business specifically.
Do you also have areas where you build and sell, apart from those MoUs with those parties you have mentioned?
Yes, yes, it’s actually part of the one we give out and, at the same time, sell some. They are developed side by side because the market is huge.
