Mr Ayo Sotinrin is the CEO of SAO group which provides developmental and financial advice to governments in Africa. He shares his experience in this interview with SAHEED IBRAHIM, how his group has been raising funds to develop critical infrastructure in Ondo State Excepts:
Based on your expertise and work done so far, how can you describe your intervention in Ondo state ?
We did a baseline study when we started and we know exactly what we are doing now. In terms of IGR of the state government, I think the revenue generation was about N600 million and currently, the state is pushing in excess of N2 billion every month. So, in a twelve calendar months we are generating up to N24 billion. So, you can see that massive leap in increase.
Two, how do you know if a state is attracting a lot of investments is the number of attractions in hotel accommodation. Many hotels are springing up in Ondo state.
Before now, we barely had seven major hotels in the capital of Ondo state. Now, I think since Akeredolu’s administration, we have more than ten hotels that are brand new that have sprung up.
We barely had a functional service from Abuja to the state in terms of airlines that function. Overland was probably doing two or three flights a week to the state.
As we speak, we’ve been able to convince two airlines to start flying the route in less than four years. Two airlines not only in Abuja also from Lagos. Air Peace flies everyday from Lagos to Akure, Overland also flies from Abuja to Akure everyday and it’s always full.
In the next four years, what kind of Ondo State do you foresee?
So far, we’ve worked with this government and we’ve achieved a lot in the space of three and a half years. We’ve been able to raise a lot of funds for different developmental projects in the state; projects funded by the biggest financial institutions in the world. If we’ve been able to raise these funds for different projects that span across different sectors, I want to believe that we can do more for another four years.
I believe for us alone, we will be able to raise about N1 billion or N1.5 billion in extra investment or capital to the state. So, I would say we would have an Ondo state that will rapidly develop. What people have not been able to achieve in the state in the last forty years, I believe we can do it in another four years.
I’m talking about massive livestock project within the agricultural space. I’m talking about massive oilpalm plantation springing up in Ondo state, talking about pigry project and so many other projects that will change the landscape and economic situation of the state in total.
I believe we can leap frog her IGR ahead of N24b to N30 billion in another four years. I just want to say we have experienced what government should be, what public-private partnership should be and what a tenacious government should be like.
Ondo state is actually the one to emulate by other state governments who want to develop their states better. We’re not saying we know it all, we are just saying with the right government, there’s so much we can achieve.
It is said that one percent increase in infrastructure leads to one percent increase in the state GDP. How possible is this?
If you start up a factory for example in the state, you would have to pay different taxes and those taxes are revenues accruing into the state which is called Internal Generated Revenue. For example, if you’re manufacturing bathroom slippers and you’re doing about a billion naira in a 12 calendar months, the taxes in Ondo state is about 14.5% which encompasses VAT. So, let’s even say it’s at 10%, it means that from your factory making N1 billion, you have to pay a minimum of N100 million to the state government as revenue and it comes in as internal generated revenue for the state.
The plan is not only to have many factories, if we have a 100 factories in Ondo state, we can multiply the IGR by 10 as revenue. If we peg it at N100 million each, then we can generate extra one billion, adding on top of the revenue that the state is already generating and this adds to the development of the state.
So, this is why it is very important to keep encouraging investors to come into the state and also creating the enabling environment for investments to thrive within Ondo state.
How have you been able to raise funds for the state and what are the financial implications on her economy?
You can’t develop a state without developing its infrastructure and you can’t develop infrastructure without borrowing money. It’s not borrowing money that is wrong, it’s the type of money that you borrow which actually can be right or wrong.
What we’ve managed to do is to look at the profile of the state and look at a sort of financial instrument that we think it is best for the state.
When I say we raised money, raising money does not necessarily mean we raised money that attracts interest rate alone; we applied what we called a blended financing method, where we make use of different financial capital, where we talk about grant money from development financial institutions, if you can justify what you want to use the money for. A lot of philanthropic types of money as well. We’ve done a lot of fund raising as well which no one is expecting anything back and also the most important one which is the development financial institutions we’re talking about, we’ve raised money from them because we believe that they are the cheapest source of capital and they don’t really put a strain or heavy burden on the state because the money is being loaned as a sovereign loan to the federal government of Nigeria for the state.
This sort of money is raised on the sovereignty of Nigeria as a country and they are the cheapest type of money anywhere in the world. They are called concessional loan. Interest rate that ranges from 0.5 to 2% plus if it’s denominated in dollars or in Euro.
Also, what we are trying to do is the economic development project that will have a lot of benefits to the state. In other words, directly or indirectly, they would have been paid even before the moratorium period, if judiciously used which is why we don’t provide just financial advisory services to government, we provide what I call development advisory service which encompasses all these things.
And the most important thing is sustainability of that particular instrument, meaning it has to be able to pay itself back.
How long have you been partnering with Ondo state government?
It’s been about four years, even though the government has not spent four years in office. The reason why I said it is four years is because immediately the governor won his election, he called a few of us, sat with him and we told him what we believed is the best way to achieve his goal for the state and after competitive bid, we were selected to be the sole investment financial adviser to the Ondo State government and we’ve not done badly so far.
What was the situation of the state before you began working with the state government, based on your assessment?
When we started, we looked at how we would develop the state and we had to start with baseline study for what’s on ground when His Excellency took over office. We looked around, we saw in the infrastructure space, there were a lot of gaps. Ondo state has a lot of infrastructure but it wasn’t developed and it wasn’t the fault of the last administration that didn’t develop it.
The reason it probably didn’t develop is because there was paucity of fund and for us, we focused on creating a parallel funding source through the budget of the state government because of our relationship and our extensive experience working with the international community and development financial institutions.
So, after doing a diagnostic study to get the baseline of what is already on ground in terms of infrastructural development, in terms of social amenities within the state, we came up with a wish list of projects and we did a prioritisation of those projects to select what we believe can be done in short term and also that we can do long term as well.
So, after doing that, we prioritised them and we took on the projects with the most impact which is based on the need of the people and those were the ones that we focused on and we went out to develop further and raised capital.
What has SAO capital being able to achieve in Ondo state so far?
Initially, we thought of having two parallel strategies to governance. One approach is to raise the capital for developmental project or social project that are not complete income generating. The second thing is to have economic development type project that will bring income into the state.
So, for the first one, we identified roads that were very key to economic development. I’m talking about rural roads that lead to farms, markets. We also identified major roads where you have huge traffic for people going in and out of the capital and also some very strategic locations within the state and also other social amenities that we thought the people needed and we’ve not done badly on that so far.
On the second one which is economic impact project that can actually bring revenue into the state, we also did a project study. On road project, so many roads in Ondo state that actually needed rehabilitation or total reconstruction and we focused on what would have the most impact, and the rural roads.
In the cities, you have better roads than rural roads. However, the people in the cities are mostly civil servants. The percentage of the people living in the urban area as compared to the rural dwellers, there’s a margin disparity like 70% to 30% ratio.
So, we chose these projects not based on the fact we want them to see this beautiful tarred roads. In the capital, we chose them based on economic benefits to the residents of the state. So, we focused on rural roads and we did a prioritisation of 500km roads out of a thousand kilometres surveyed and this was done over three to four months period and I’m proud to say that we’ve raised a lot of funds to do those roads.
These are projects we believe will not only add to the socio-economic status of the citizens but will also be a project that will be done diligently at all cost and delivered at time because the funders are very meticulous.
Also, we realised that there’s a lot of erosion in Ondo state. One is the sea incursion in Ayetoro and we also have a lot of massive gully sites across the state. So, what we’ve done is to also go out there with all the documentation we’ve prepared to raise another fund for erosion control for the sea incursion.
So, when the sea tide rises at Ayetoro, it washes up to a quarter of the community.
In recent years and this year, we also experienced that where people that lived 30 meters from the sea had there houses washed away. So, we actually have many projects and this is the first of its kind in Ondo state.
Let’s talk bout SAO Group. What is the organisation into?
SAO group actually started in the UK thirteen years ago as SAO Technology. We used to provide technology services to the banking industry and it metamorphosed into SAO capital that started in Nigeria. It is a social capital investment advisory firm. Under advisory, we do a lot of advisory for governments by helping them plan and develop better. We also do a lot of infrastructural advisory and create a financial capital advisory where we do a lot services as well.
We are one of the leading development advisory firms within the Africa sphere, not just Nigeria. Part of SAO portfolio companies is also SAO agro. We do stuffs in agro space. We are into investment in agro space across the continents.
We also do a lot of renewable energy projects (clean energy). We do a lot of solar project. We ply in the hydro space and we do anything that is typical clean power and gas as well.
On the advisory arm on the infrastructure side, we do advisory on all things I’ve listed that we also do investment in. So, we cross-pollinate between both.
One of our biggest projects is being we had advisory to 1100 megawatt king line power which obviously is phasing into two – 5.550 megawatts, capital raised so far is 650million dollars for that particular project.