Can you give us an update on JMG's growth and diversification goals?
We have diversified and entered into home appliance wholesale as well as supplying electrical and home appliances to supermarkets and malls. As we started from zero, we saw great results in 2016. Certain sectors have improved while others did not do that well; however, in general there was slight growth. Our diversification also covered elevators; we became the agents of ThyssenKrupp and did well in that business. We also diversified into the transformer business and things have picked up there. In addition, we started a lighting business with GE directly and have small projects for lighting, retrofitting LEDs, energy saving, and others. By the end of 2017, we had also invested in some renewable energy products such as solar panels and inverters. Our diversification is moving as expected, though our expectations were not that high because the economy was experiencing a recession. The recession, however, gave us time to position ourselves in the market, and it was a great time to start and await growth.
What is the status of your plans to become an independent power producer (IPP)?
We are preparing to start doing IPPs across the country and have already done a few projects where we sell power. The IPPs we expect—ranging from 5-100MW—depend on the projects and the appetite of the market. There are currently many issues in the market such as the gas price, exchange rate, and gas pipelines that exploded in the last year; the subsidized power sector is suffering. We have the capability, though we cannot yet see an attractive market and are thus taking on smaller projects. We have done 6-10MW projects with several multinationals and sell them power. We are also into the resale of generators as the aim is to sell power by kilowatt-hour.
What should the government do to make the sector more attractive?
Our revenue is in naira, though all purchases are in dollars. On one side, the risk is too high as there are no hedging instruments that can minimize or litigate this risk, and this is one of the major issues in terms of generation. There are many risks in terms of currency and gas prices; on the other hand, companies are collecting in naira and there is a major risk that cannot be accommodated. Another factor is that even if companies have local funding, the interest rate in Nigeria is 26-27% or more. The private sector funding of 8% has long been exhausted and no small IPP is able to benefit from the power sector fund of 8%. With 26% interest one has to meet its targets of NGN38 or even less and then sell to the consumer at NGN38. With the interest rate, it is not possible to have new equipment. In terms of gas supply, 2017 was a disaster and in one sense the environment surrounding this sector is not supportive enough. In terms of what could be done by the government, the pricing and tariff needs to be revised as soon as possible as it is not cost-effective and for us as a business it is not interesting. The gas pricing also definitely needs to be looked at.
What are your expectations for 2018?
I expect marginal macroeconomic growth for the country and the company. Growth will be different for different sectors; however, in general we will grow. We might grow more than the GDP growth in certain sectors. There are signs of growth in oil production and in agriculture, though we will not see huge investments in the export business or the government focusing on revenue other than oil.