An energy and logistics expert, Elvis Chukwudi Okonji, has urged players in the energy and logistics industry to deepen their core competence, build strategic reserves, review their finance strategy, diversify and adopt situation analysis and risk management for sustainable growth.
He stated this while speaking with journalists in Lagos. He insisted that industry players needed to envisage modifications to contractual clauses relating to endemics and pandemics, adding that the industry remained both labour and capital-intensive.
Okonji, who is also the pioneer Managing Director and Chief Executive Officer of GPC Energy and Logistics Limited, said: “COVID-19 brought to the fore the risk of pandemics and nature forcing the immediate shutdown of businesses.
“Majorly hit were the alcoholic beverages and construction materials segments, given the huge obligations associated with heavy-duty truck haulage, strategic cash reserves to cover a minimum of six to 12-month operations is ideal to sustain operations well into an unforeseen occurrence.
“The operability of the reserves will be player-specific bearing in mind the negative impact of double-digit inflation rates on future value.”
He argued that the COVID-19 pandemic also exposed the need to position logistics companies for more sophisticated sources of financing.
“We envisage a gradual switch in the industry’s heavy reliance on bank financing to equity financing to hedge long-term interest rate and foreign exchange risks.
“Also, commercial papers may be sought to bridge short-term financing needs, equity raising will improve leverage within the industry and position it for increased participation,” he added.
He said an industry player recently raised N12 billion through the bond market, which was guaranteed by Infra Credit, adding that this was a pointer to the increasing level of sophistication of transport companies.
“At GPC, we are discussing an N50 billion bond programme to facilitate our rapidly expanding business, tenors of over seven years suited for long-term financing and depreciation of assets are more realistic in the market.
“The critical resources for the industry are trucks, predominantly imported from Europe and China,” he said.
– The Guardian