AFRICAPITALISM

Nigeria 2016 | FINANCE | INTERVIEW

TBY talks to Tony Elumelu, Chairman of Heirs Holding, on the challenges and opportunities presented by Nigeria's electricity sector and the impact of domestic regulatory and political shifts on the local economy.

Tony Elumelu
BIOGRAPHY
Tony Elumelu is a serial entrepreneur and a philanthropist. Born, raised, and educated in Africa, he has been responsible for creating businesses across the continent, in sectors critical to Africa’s economic development. In 2010, he founded Heirs Holdings, an African investment holding company with investments in financial services, power generation, oil and gas, agribusiness, real estate, and hospitality. In the same year, he established the Tony Elumelu Foundation, an Africa-based and African-funded philanthropy dedicated to catalyzing entrepreneurship across Africa. He is Chairman of Heirs Holdings as well as UBA Group Plc and Transcorp Plc, which is Nigeria’s largest listed conglomerate.

What ambitions do you have in Nigeria's electricity market?

Before our acquisition of Transcorp National Corporation (TNC), Transcorp had a number of under-performing assets and had never paid a dividend to its 300,000 shareholders. TNC is now profitable, paid dividends in 2014, and is a major player in the evolving power sector of Nigeria, as the owner of the largest thermal plant in the country, the Ughelli Power Plant, which has a nameplate capacity of 1,000MW. One of the major challenges for both large and small businesses in Nigeria is ensuring access to a steady and affordable power supply. The irregularity of power and the cost of off-grid power means that many good businesses have floundered because operating costs are excessively high. We have an audacious but achievable aim to generate and provide at least 25% of Nigeria's power consumption needs in the next five years, and the wholly owned Transcorp Power Limited will play a significant role in realizing this ambition. I am also a champion of President Obama's Power Africa Initiative, which advocates for steady power as an integral right of all Africans. We have high expectations of the power sector in Nigeria and we are confident that we will democratize access to power for all Africans.

The Central Bank of Nigeria (CBN) has tightened monetary policy this year and restricted access to foreign exchange. How will the new regulations impact your business in 2016?

The CBN has made the decision to restrict foreign exchange and tighten monetary policy in response to the falling price of oil, which has also resulted in a devaluation of the naira. As long as Nigeria and other countries in Africa continue to rely heavily on oil or other primary commodities as their principal source of foreign exchange, African economies will remain vulnerable to the vagaries of world commodity prices. This has to change. At Heirs Holdings, we are committed to focusing on a wide array of industry sectors, and one of those is oil and gas. I doubt that the CBN's activities will adversely affect our activities. Our power business does require a lot of foreign exchange for plant development and maintenance, but we will fare well because our business model in other areas is sufficiently diversified, and a number of the ventures we are involved in focus on adding value to products and services produced in Africa as well as identifying markets for them both within Africa and beyond. Nigeria, and indeed all similar countries across Africa, need to move away from being so commodity-dependent. We need to create robust and diverse economies, focus on our competitive advantages, and be aggressive in the positioning of our offerings.

From an economic perspective, what is important about the recent elections and what policy direction do you hope to see emerge?

From an economic perspective, I am very happy that the recent elections and transition in Nigeria were without incident. This is evidence of a growing political maturity. Business thrives in a secure and stable environment, so peaceful elections and transitions are good for business. Governments and policymakers also need to focus more energy and attention on a consistent policy regime aimed at ensuring that the right sort of incentives are created to make African economies more productive. We need home markets that are strong, stable, and pro-growth, as this creates a strong basis for foreign expansion. As an Africapitalist, I believe government and the private sector must work in a collaborative and sustained manner to solve problems, create wealth, and provide decent livelihoods to all of Africa's people. That is a worthy legacy and a narrative to define Africa's future.