British American Tobacco (BAT) Nigeria managing director Nick Hales is

not easily rattled. He calmly recounts the story of muscling in on the

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turf of Nigeria’s cigarette smugglers, who in 1999 controlled 80% of

the 12 billion-a-year cigarette market. “They don’t play by the same

rules as you. You turn your back and they’re onto you,” he says.

Pressed for more detail, he refuses to elaborate on the more sinister

methods employed by these illegal cartels, blithely adding that “every

risk can be managed”.

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Formed in October 2000, BAT Nigeria is a fully-owned subsidiary of the

worldwide BAT Group. In November 2000, it merged with the Nigerian

Tobacco Company, a bankrupt subsidiary of BAT, to form the largest

tobacco company in the country.

Integrative process

By September 2001, BAT Nigeria had signed a memorandum of

understanding with the government to invest $150m in Nigeria, an

integrative process that would have an impact on all aspects of the

tobacco industry, from leaf growing through to the manufacture and

distribution of tobacco products. It was a mutually beneficial

relationship. In exchange for concessions to establish new productive

capacity, BAT Nigeria was to be instrumental in reforming the sector,

not least to counter the illegal trade in smuggled cigarettes.

The objectives were clear-cut: better regulation, increased government

revenues, decrease contraband and counterfeit sales, and the

revitalisation of tobacco growing areas. A leading light in corporate

social responsibility, BAT Nigeria voluntarily undertook to decrease

advertising to consumers. In 2002, it paid more than N6.5bn ($47m) in

taxes to the government, more than 10 times the revenue going to

government coffers before it commenced operations. Illicit cigarette

sales have largely been eliminated and the strengthening of rural

tobacco growing initiatives continues apace.

BAT Nigeria has now increased its market share to 70%, up from the 12%

held by the Nigerian Tobacco Company in 2000. At present 50% of BAT

Nigeria’s sales are produced locally and this is set to rise to 100% by

mid-2004. A lucrative contract to manufacture other brands is in the

offing.

Mr Hales commends the support offered by the government, not just in

concessions but also to fast-track issues through bureaucracy.

Nigeria presents a varied mix of problems. Security is paramount and is

outsourced to a third-party service provider; the company has had to be

self-sufficient when it comes to power, water and sewerage; and the

rapid expansion and large-scale investment of the cellular network

operators has pushed up average salaries due to skills shortages. This

all requires pragmatism. Whereas fast-moving ports, such as Singapore,

can clear goods through customs within days, in Nigeria it is best to

plan for months. “If you add three months into your supply chain, you

can operate and plan accordingly,” says Mr Hales. He says that certain

“critical path” inputs for a new factory were cleared through customs

within four days, which is testament to the co-operation of the

authorities when necessary.

Jobs for locals

Mr Hales has high praise for the calibre of recruits. He believes that

his experience refutes the myth that Nigeria lacks necessary skills.

BAT Nigeria sent 120 technicians to South Africa for training, meaning

that the expatriate contingent employed at BAT Nigeria is low.

Ultimately the number of foreigners will be reduced to zero. “There are

a lot of young people with a good theoretical background but lacking

practical experience. Always, there is an immense desire to succeed,”

he says.

Experience in similar environments is valuable, he says. Mistakes were

the kind that seemed so obvious in hindsight. For example, as part of

its roll-out of assistance to tobacco growers, BAT Nigeria provided

some brand new pick-up trucks. A number of hijackings quickly forced a

rethink; once the vehicles were exchanged for less desirable,

second-hand versions the problem disappeared.

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