Nigeria needs at least 100,000MW to power economy —Elumelu
Mr Tony Elumelu, Founder of Tony Elumelu Foundation, who is also Chairman of UBA Plc as well as Transcorp, was a guest on Arise News last week, where he fielded questions on various issues, such as the economy, business and philanthropy. The interview was monitored by the NIGERIAN TRIBUNE. Excerpts:
In 2010, you left your position as the GMD/CEO of UBA and then ventured into serial entrepreneurship. Today, you run Heirs Holdings, Transcorp, you are into oil and gas, the Tony Elumelu Foundation (TEF) and many more. How do you manage to juggle all of these and what are the challenges you face in terms of managing all your businesses?
In 2010, when I left United Bank for Africa (UBA), I founded Heirs Holdings, which is a family investment company that invests in key sectors of the African economy. We basically are driven by our philosophy of Africapitalism. We want to see the private sector play specific role in the economic development of our continent and that is why we founded Heirs Holdings. When we started, the ambition was to help to improve lives and transform the continent and we thought that the way to do this is by investing in critical sectors of the economy such as power.
Access to electricity we believe, is very critical for the economic uplift of our people and the development of our country. We also decided to make sure we have an integrated energy, not just power, but we had to make sure there is gas that helps the power to operate. That is why we are also investing in oil and gas. For us, it’s just to make sure the ecosystem is complete, and we help to power our country out of poverty and into economic prosperity.
We also believe hospitality is critical for attracting investment into our country and the continent hence the acquisition of Transcorp Hilton Hotel in Abuja and today, we are doing a lot. In the area of healthcare, we are also doing quite a lot to help improve the human capital of our country. We’ve seen with the pandemic that health is wealth.
Talking about the challenges and how we have been able to juggle all of this, as I’ve always said, investment and success in the private sector to a large extent depends on leadership surrounding itself with capable hands that are more intelligent than the leadership. In our group, we have quite a lot of work and it could be stressful, yes it’s tough, but I’m blessed with capable hands. If you look at Transcorp, we have competent leadership. Also, if you look at the area of healthcare, Dr. Awele Elumelu, my wife, runs our Avon Medical business; while Simbo Ukiri leads Avon HMO, our health insurance firm. These are great leaders who help to make this enterprise not to be as difficult as it would have been.
My job today is more of thinking, sitting at board sessions with them, providing some strategic direction at that level, while also allowing them to do what they know how to do. The challenge we face is basically the challenge as it is with any other enterprise, which is how to manage the macro and socio- economic issues. But basically, we are happy with what we are doing, and with the Tony Elumelu Foundation (TEF), we are also happy that we are able to impact lives and help to transform our continent through the economic empowerment of our young ones.
Taking it back to 2010 when you were forced to step down as MD/CEO of UBA at the age of 47, with so much to still offer the bank, would you look back and say – especially with the trajectory you have achieved – that the then governor of CBN, Lamido Sanusi did you a huge favour?
I will tell you this story. So that day, we had a Bankers Committee meeting and at the end of the meeting, the then CBN Governor, Sanusi Lamido Sanusi, said the CEOs who had done ten years would have to step aside. I immediately called the Chairman of UBA to explain what happened, and the next day, we conveyed an emergency board meeting.
At the board meeting, it was a divided household for the first time – some directors said no, we have to go to court to contest it, and about one or two other directors did not think so. But I spoke and I told the board members that there are five critical stakeholders: the customers of UBA, will they like to know that we took our regulator to court? No. Then the staff of UBA, will they be comfortable working in a bank that took their regulator to court? No. Then the shareholders, and then the regulators themselves, they all wouldn’t like it. So, four constituents would not like us going to court, there is only one constituent that may like it and that’s Tony Elumelu, which makes it one over five, that’s 20 percent which is certainly not enough to go to court. And by the way, 10 years is not bad. Also, I had been planning to move on and leave at the age of 50; so what happened kind of fast-tracked this. It was also why within 24 hours; we appointed a successor. The pipeline for succession at UBA is always there, about 1-5 people are always there to step in.
Looking back today, we’ve come a long way, and it’s always been about impacting humanity, improving lives and transforming everything we do. In business, we are known as turnaround experts; we take businesses and transform them. In philanthropy, we are also catalysing the creation of a new crop of African leaders. It’s all about transforming our society and making sure we leave the society better than we met it. For me, that opportunity, to start all these three years ahead of the planned time, was a blessing.
What’s your take on the power sector in Nigeria today, what do you think needs to be done to make it more efficient, particularly in terms of service delivery?
There are three parts in the power sector: the generation, the transmission and the distribution. Transcorp, through Transcorp Power and Trans-Afam Power, as at today in Nigeria owns the highest generating capacity. We have a generating capacity of about 2,000 Megawatts (MW) of electricity a day but unfortunately, we do less than 500 MW at this point in time. A major constraint in this area is gas, then there is the issue of transmission and evacuation of the generated electricity, and there is also the issue of payment.
For us to be able to generate more, we need to have gas, and this is why our Group invested in oil and gas. Investing in oil and gas as a Group isn’t necessarily because of oil, it is more because of gas. We want to be able to ensure that we have gas from our oil and gas production to convert it to electricity. With the acquisition we did recently, I’m happy to say it is already supplying gas to our Trans-Afam power plant; but we also need to make sure we stabilise our transmission lines. This country needs at least 100,000 MW of electricity a day to power the economy but today we operate less than 5,000. We need to do more.
Some other critical parts are payments, distribution, and metering. I must commend the CBN Governor, Godwin Emefiele. He has done very well because he came in to help increase revenue in that space. Up until the end of last year, we used to get less than 20 per cent payment for power supplied, but today, it has improved to 50 percent. Transcorp Power alone is owed over N100 billion, but it’s gradually improving. For the power sector in Nigeria to work well – if we want to drive this economy – we need to increase generation, make sure we address gas supply to generating companies, we need to make sure the transmission lines are capacitised to evacuate the power, we need to also make sure that power generated is taken by DisCos and the metering should be right for the end users to pay. If I generate electricity, I should be able to get money so that I can service my obligations as well as make sure that all the parts in particular are serviced to ensure the generating plants keep running. It is a critical sector, we need to invest in it, and the stakeholders need to make sure that it works. If it works, the country’s economic development becomes more real, if it doesn’t work, it’s going to be a problem.
I, through the Tony Elumelu Foundation (TEF), empower young entrepreneurs and if you ask them what the challenges they face in this country are, they will tell you that it’s poor access to electricity. And so, any amount you give, some of them will not succeed because they spend so much on electricity. Even in the hospital business, healthcare, every sector in our economy, we need to fix the power sector. We need to prioritise it more, but I commend the efforts going on now as government has been making sure we privatise the remaining GenCos. But the transmission lines need to be fixed and the payment system needs to be improved.
Do you think the Nigerian government should hands off transmission and are you going to make a bid for some of those GenCos that the government is proposing to privatise?
We will be interested in one of the Hydros. In the area of the transmission line, I think that ultimately, it should be privatised. What some of us have advocated is that the GenCos and the DisCos, the entire power stakeholders should come together and have a deal with the Federal Government, take over the transmission lines, and it will be in our self-interest to make sure it works. If you have the transmission lines and it doesn’t work, there is no way to evacuate your power. That sector is so critical and pivotal for the survival of our power sector, it’s critical for improving access to electricity. What is important to us as operators is to have expanded capacity, but I’m sure if you talk to people in the transmission line, they will also give you reasons why they have their own constraints. But to us, we want to see massive improvement; we should be able to capacitise that space. I think the Ericsson deal I’m told is able to make that happen, the details of that I don’t know but I’m told it will help to capacitise the transmission line.
Do you subscribe to the unbundling of the Transmission Company of Nigeria (TCN) for efficiency in the power sector?
What I do know is that we need to improve capacity in the area of transmission, and whatever we need to do to make that happen should be done. The time is now because we are all suffering this challenge. At times, the generating plant runs into difficulties because you generate and it can’t be taken, and the power plant can just break down. We don’t need all that frustration in the power sector. Whatever it takes to fix that sector, we should do so. Some of us in the power generating space have signified interest to be involved in the transmission so that collectively, we will be able to make it work. But even when that works, we need to make sure that people are metered and they pay. The distribution companies should also take what is supplied to them and they pay to NBET who will in turn pay the GenCos. So, each of the three critical parts must work well; the generating companies must generate, the transmission company must transmit, and the distribution company must make sure it gets to end users because that’s where people feel the impact of electricity.
Onto your oil and gas interest; earlier this year, Heirs Holdings acquired a 45 per cent stake previously held by Shell, Total and ENI in OML 17. Does that deal give Heirs Holdings operatorship or is that going to be handled by the Nigerian Petroleum Development Company?
Again, the acquisition of investment in oil and gas by Heirs Oil and Gas is one that speaks to our overall energy strategy. Our energy strategy is integrated to make sure we help the last person in Nigeria and Africa to have improved access to electricity. So, we acquired the OML 17 from the international oil companies you mentioned and then we made a case to the NNPC and we justified that we have the capacity and capability to operate the asset and they approved for us to operate. I’m happy to say that it is a truly indigenous oil and gas company owned by Nigerians, operated also by Nigerians and between when we took over and now, there has been an improvement. Today, we produce over 31,000 barrels of oil per day which is a slight improvement from what it was. We think we are just starting.
Our ambition is to produce over 100,000 barrels of oil per day because the asset in the past had produced close to that. We want to do what we know how to do which is extracting value for stakeholders. So, yes, we are really happy to have that responsibility to operate this asset and we think it will be done to the benefit of all stakeholders, the government, host community and the investors.
There are concerns expressed by market observers that those acquisitions are funded by UBA. Is that true? What’s UBA’s exposure to your companies by the way of insider lending?
Let’s start with the oil and gas acquisition we just made, UBA did not even participate in the funding. It’s a club of international and local lenders. For people to know, the local receiving bank for our proceeds is Union Bank of Nigeria. The international receiving bank for the proceeds of our oil sales is Standard Chartered Bank, London. The transaction, if people read, they would have seen it was funded by a consortium of banks, Standard Chartered bank, ABSA in South Africa, Union Bank, AFREXIM, Fidelity Bank in Nigeria, and a host of others. We are mindful of all these issues and we are very prudent in making sure we do not put pressure on the bank. So, we do go out to seek funds to support our operations. We also put in equity investment, our own investments but when we need to get funding, we try not to put pressure on the institution. The other businesses like Transcorp Power, UBA, participated in the syndication that was done for the Transcorp power acquisition. In total – UBA, AFC, FCMB, Fidelity, and two other banks. This is the limit of the exposure, but what is important to note is that it is within the single obligor limit and by the way, it is performing very well.
With the issue between First Bank of Nigeria (FBN) and CBN over insider trading, insider manipulation, insider lending, do you think that the situation could have been handled differently? How will you have handled this if you were to have advised?
I think you need to understand the unique position I am in here. I am the chairman of a competing institution, UBA, it may not be prudent for me to express judgment or comment on this. It may not be very professional of me. I leave that to those who are not so involved to comment. I know the shareholders in the bank, the regulators and the regulatory mindset. The regulators want a sound and safe banking environment. I believe the shareholders also seek that and in due course, I believe they will be able to resolve the issues. I believe the issue will be resolved.
What is important to me is best practices, sound corporate governance, survival of the Nigerian banking system. I must say that the Nigerian banking sector has done very well, both the participants and the players and the regulatory body. If you talk to people, you will note that UBA operates in 20 African countries, it is the only African bank that operates in the United States of America (USA) with a deposit-taking license, and a member of the Federal Reserve Clearing System in the US. We are also in the United Kingdom (UK). The toughest regulatory environment in the world is the USA. UBA, a bank with Nigerian heritage, operating in the toughest regulatory environment in the world with a two rating which is 80 percent in the USA, is something that must give pride to everyone in Nigeria and Nigerian regulators that an offshoot of the Nigerian banking system is doing so well. Across Africa, we see the standards, and I must say that regulations have changed totally in Nigeria. I commend the regulators, not only them, also those being regulated because it’s a two-way thing to create this kind of environment. I’m sure this will also be resolved.
You will have noticed the new trend, lots of multinationals are going to Ghana, there has been a furore about this. So I will like to ask, how can you sell Nigeria to the world and what does Nigeria have to offer? And how about Ease of Doing business?
The point you made is a valid point and one that keeps some of us up at night. My heart bleeds when you see conglomerates moving their investments or headquarters from Nigeria to Ghana. Nigeria is a huge market and honestly the macroeconomic environment needs to improve. The concern most of them have is the security challenges in the country but for us in the private sector, the best way we sell our country is through the investment that we make. When I go out and people say in Nigeria, things are bad, I say to them the glass is half full, there is nowhere else you get returns on investment as what you get here in Nigeria. I speak as an investor in Nigeria, in Africa and other parts of the world. But the truth is we just need to be totally aware of the trend of people moving out of the country to invest in smaller economies.
When I talk to the Minister of Industry, Trade and Investment, Niyi Adebayo, he tells me his plans, his ministry, and what they are doing to improve this. I know the Vice President of the country has been driving the ease of doing business, I know the Finance Minister and CBN Governor have been encouraging people. We just need to keep working together. For us in the private sector, when we invest in Nigeria, it tells our friends outside the country that we are not stupid, we are making economic investment decisions when we invest in Nigeria, it shows there are opportunities here. Ultimately, the ease of doing business must improve for the country to attract and retain investments in Nigeria. The aspiration for all of us is to make sure Nigeria is seen as a place where private capital should settle and all of us must play our own role in making this a reality.
What do you think of the forex management situation in Nigeria and how the CBN is going about it? We have numerous FX windows, and people have asked for convergence of FX, so what will you like to see?
In 2018/19, there was a time when the VP convened a meeting of a few of us to express our opinion on the economic issues. I took a position there, people were in attendance, and I was quite critical of certain things at the time, it had to do with some things you mentioned. But today, as things improve, you must also be bold to commend and say when things are moving in the right direction. Today, things are moving in the right direction. I support convergence a 100 per cent and I think we are there. On the issue on convertibility and other things, I think at times it’s easier to prescribe and when you are on the seat, you see issues differently.
Let’s look at Nigeria, we generate foreign currency largely on oil. We used to produce about 2.5 million barrels of oil before, today I think we do about 1.4 million barrels of oil a day. That should have an impact on our foreign currency, it is not rocket science. Also, there was a time oil was $100 per barrel, it dropped to $40, and thankfully today it’s back to $69 per barrel. There’s a basket of so many things you have to watch as economic managers in making decisions, there’s a lot of pressure on our foreign currency. What people want to see from outside is a low exchange rate, but in the business world, people want predictability – that this will be available when I need it, and I think to a large extent, that’s happening in Nigeria. But we need to do more, we need to improve our productive base as a country to make sure we diversify our foreign exchange earning sources as a country. We need to make sure we create the right environment that will enable people, businesses and entrepreneurs to thrive.
Talking about the Tony Elumelu Foundation, how many start- ups have you funded and what’s your impact across the continent with regards to job creation?
The Tony Elumelu Foundation was put together to help create more successful African businesses, because we believe the future of Africa is in our young ones. Also, entrepreneurship has a key role to play in developing our continent and some of us have been lucky growing up, and for me, it was an opportunity to democratise luck and give luck to those who have ideas. We all are who we are today because at some point in our lives, people gave us a helping hand to pull us up. I felt that it would be useless of me to say I have money in my bank account if there’s poverty all around us. The Foundation was set up to support young Africans, male, female, Nigerians, Africans. Every year, we support them with $5,000 each in non- refundable seed capital, at least a thousand people every year, we train them for 12 weeks and we appoint mentors to guide them, we created a networking platform, TEFConnect, the largest networking platform for African entrepreneurs so that they do well.
This is the seventh year, and as a Foundation we support on our own, 1000 people, but fortunately because when we go out, we preach our global advocacy that in the 21st century you must engage with Africa, not from outside, but from within. While we appreciate aid and donations for natural disasters, we know that we want our youth to become fishermen; to provide for themselves. We want to create entrepreneurs that will feed their families and maintain the dignity of existence and support our overall economic growth.
Today, we have partners including the United Nations Development Programme (UNDP), the European Union which just gave $25 million which is going to impact us this year. It will help to support 2,000 females across Africa. So, with the Tony Elumelu Foundation, we are happy with what has happened so far. About 10,000 Nigerians and young Africans have benefitted from the programme and we are still counting. Every year, the participation and support is increasing. We empower our own 1,000 entrepreneurs, and our partner institutions also help to scale to more thousands. We have done a lot with the UNDP in the Sahel region, the EU, the ICRC in Nigeria’s North East and Niger Delta, etc. and so, it is growing and for us, ultimately, we want all stakeholders to join hands in fixing unemployment.
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