12 things we learnt from Elumelu’s TV interview
Tony Elumelu, the chairman of Heirs Holdings, United Bank for Africa, Transcorp and founder of The Tony Elumelu Foundation, was interviewed by Arise TV on Wednesday, May 5, where he talked on a range of topics affecting the Nigerian economy. Gbemi Faminu of BusinessDay followed the interview. Here are excerpts:
During the interview, Elumelu was of the view that we have to drive economic growth in Nigeria. To achieve this power sector must work well and for the power sector to work well, there’s a need to increase generation and improve gas supply to generating companies.
There’s also need to ensure that the transmission lines are capacitised to evacuate the power, and ensure that power generated is taken by DisCos and that the end users pay the right amount.
Nigeria’s power sector is a critical sector in need of many investments and the stakeholders need to make sure that it works in order to actualise economic development.
Every sector of the economy needs a stable power sector to thrive and Nigeria needs nothing less than 100,000 megawatts of electricity.
Entrepreneurs, who are beneficiaries of the Tony Elumelu Foundation, say one of the major challenges they face is poor access to electricity, hence, despite the grants given, some of them find it difficult to succeed because they spend so much on electricity.
According to Elumelu, the transmission lines should be privatized and the Gencos and Discos should come together to strike a deal with the federal government to take over the transmission lines.
“Also some of us in the generating space have signified interest to be involved in the transmission end so we can collectively make it work.
“Although it is getting better, more can be done and basically what operators in the sector need is expanded capacity, We need to fix the transmission lines and improve the payment system. Each of the three components of the power sector must work well, proper generation, appropriate transmission and improved distribution,” he said.
The Transcorp Hospitality Business
The Transcorp Hotel project located at Glover Road Ikoyi is still in the pipeline, but there were issues with certain authorisation from the government that slowed things down, according to Elumelu.
He however said the project was in a good place now and before the year ends, some commercial activities would commence there.
The old Falomo Shopping Complex is an exciting project but government authorisation also delayed its implementation and commencement.
The project started during the Babatunde Fashola administration as Lagos State governor, it was however truncated during the Akinwunmi Ambode tenure but this current administration of Babajide Sanwo-Olu will revive it.
But now the government, the company and its investors are looking to restart the project. This time with a different design, which is an office complex, a mall and a hotel.
However, it cost three times more to implement the project now as against the time it was initiated, and this is one of the reasons why we had to change the initial concept. However, we want something extremely iconic established there.
Transcorp has two companies in the power sector, which are the Transcorp Power and the Trans Afam Power, and are both limited companies.
The Transcorp Power owns the Ughelli Power Plant, which has an installed capacity of 990 megawatts of electricity, and the second plant is Trans Afam Limited, which has a capacity between 980 and 990 megawatts. When combined both companies generate almost 2000 megawatts of electricity.
Trans Afam Limited is a $300 million acquisition and although the plant has not been completed, it is being handled by General Electric and they promise to complete it this year.
“The government believed in us after seeing what we did with the Ughelli power plant which was generating 150 megawatts daily, and we improved this to 750 megawatts which impressed the government this was during Goodluck Jonathan’s tenure as president,” Elumelu said.
Oil and Gas interest
Heirs Holding recently acquired 45 percent of shares previously held by Shell, Total and ENI in Oil Mining Lease 17 (OML 17). The acquisition of these investments is in line with the goal of making energy available and improving access to electricity in Nigeria and Africa.
“The OML 17 was acquired from those international oil companies after we made a case to the NNPC and we justified that we have the capacity and the capability to operate the asset and they permitted us to operate,” Elumelu said about the acquisition.
“It is a truly indigenous oil and gas company owned by Nigerians, operating in Nigeria. It has also improved since we took over, today we produce 31,000 barrels of oil per day and we are just starting. The goal is to achieve 100,000 barrels of oil production per day,” he said.
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Regarding funding for the acquisition, Elumelu said UBA did not participate in the funding activity, it was done by a club of local and international lenders, including Standard Chartered bank, ABSA South Africa, AFREXIM, Union bank, Fidelity and a host of other international banks.
We are very prudent in making sure we do not put pressure on the bank so we go out to source for funds.
Furthermore, proceeds from that business are handled locally and internationally by Union bank and the Standard Chartered bank, London respectively.
Although he refrained from commenting, he noted that what regulators and shareholders want is a sound and safe banking environment. Also FBN is known to uphold the provisions of best corporate governance, the most important thing is to ensure best practices and survival of the Nigerian banking system. In all, I believe it will be resolved soon.
Impact of COVID-19 on the corporate world and business activities
COVID-19 was tough and it changed a lot of things, although we never anticipated any of this, we are trying to embrace the new normal and work has continued to go on. We also have been made to realize that people are critical to work.
Government has so much to do in providing an enabling environment for businesses to thrive and while they are trying, they cannot be saddled with the responsibility alone; hence private organizations as well need to contribute their own quota to having a thriving business environment.
Foreign direct investment inflow
Nigeria is a huge market and although the macroeconomic conditions are improving, there are concerns around security challenges in the country.
Although there is no other place you can get the kind of returns on investments like you do in Nigeria.
According to Elumelu, the federal government and regulatory agencies are making moves to encourage investment inflow into the country but more can be done and everyone needs to work together to achieve increased investment inflow.
Need to diversify foreign earnings
Nigeria generates FX largely from oil. Not only has the price dwindled over the years but production is declining. From producing about 2.5 million bpd before, Nigeria now produces about 1.4 million bpd. The reduction in oil income has put a lot of pressure on the naira.
What people want to see is a low exchange rate and predictability especially as regards dollar availability. To achieve this, we need to diversify our foreign earnings as a country.
The FX market should be converged and we need to fix the country’s supply of FX. There is also need to create a right environment for businesses to thrive so that all of this will help the country’s foreign exchange
The TEF was established to create more successful African business leaders because the future of Africa is the young ones and entrepreneurship has a key role to play in developing the continent.
“This is its seventh year running and about 10,000 Africans have benefited from the programme. Annually we provide a 12 weeks training for 1,000 beneficiaries, mentorship opportunities, $5,000 non-refundable seed capital and networking platforms,” he said.
The initiative has also been able to get partnership with other organizations such as the UNDP, European Union which recently provided $25 million for 2,400 females across Africa, and other organisations.
The Afri-capitalism mantra
Elumelu said Afri-capitalism is not an ideology, it is just a call from one private sector person to another saying we all have a role to play in the development of our continent and we can do so by investing in critical sectors of the African economy like infrastructure, power, improving access to electricity, railways, etc.
We need to do all of this to help the continent develop by investing long term in these sectors, it creates economic prosperity for the investors and social wealth for everybody, making it a win-win situation.
It is like a new way of being involved in the true and meaningful way of developing the continent.
“At Transcorp for instance we invest in power to make money but more importantly we invest in power to catalyse the economic development of Nigeria.
“Our young ones are multitalented and if we improve access to electricity in this country, we will create our own silicon valley, our own Bill Gates. What is holding our people down to a large extent is power,” he said.
Also for the private sector to invest and thrive, the government must create an enabling environment.
To a large extent my mum played an important role in shaping me. I am a direct beneficiary of the catalytic impact of women in moulding and shaping societies and I want to continue to encourage that.
In the workplace, most of our CEOs are women, women get things done they are loyal and reliable. The time has come for us to realise the immense potential of women in shaping and making a good society.