Elumelu Calls for Urgent Power Sector Reforms to Boost Economy

•Commends CBN on FX management

By Nume Ekeghe, Emma Okonji and Nosa Alekhuogie

United Bank for Africa (UBA) Plc Group Chairman and Founder, Tony Elumelu Foundation (TEF), Mr. Tony Elumelu, has called for urgent reforms in the power sector to boost economic activities.

Elumelu, who is also the Chairman of Transnational Corporation of Nigeria, also urged the federal government to invest more in electricity supply in order to create an avenue for innovation and economic development.

He spoke yesterday during an interview on ‘The Morning Show,’ a programme of ARISE NEWS Channel, the broadcasting arm of THISDAY Newspapers and lauded the Central Bank of Nigeria (CBN) for its foreign exchange management strategy as well as efforts to unify exchange rates.

He stressed the need for the federal government to focus on diversifying the economy in a bid to increase the country’s forex inflow and reduce the dependence on oil revenue.

Also, responding to question on insider loan in companies he served as chairman, Elumelu stated that strict corporate governance are upheld in all the organisations.

Commenting on the need for reforms in the power sector, he listed the three components of power supply as generation, transmission and distribution.

He said Nigerians would do better in business and creativity if they had steady electricity supply.

He decried the situation where inadequate electricity supply was crippling innovation and the economy.

He said: “Transcorp through Transcorp Power and Afam Power today in Nigeria own the highest generating capacity in Nigeria that can generate 2,000 MW of electricity per day. But unfortunately, we do less than 500MW at this point in time and the major constraint in this area is gas; then there is the issue of transmission and there is the issue of payment.

“For this to work well and for us to generate more, we need to have gas and our group has invested in oil and gas. And so, for us as a group, it is not necessarily for oil, it is because of gas because we want to be able to ensure that we have gas from our oil and gas production to convert to electricity.

“The acquisition we did recently, I’m happy to say, it is already supplying gas to our power plant. But going back to the subsidiary element, the issue of transmission, we need to make sure we stabilise our transmission for take-up.”

He said Transcorp invested in the power sector to help Nigerians have access to electricity because businesses across all sectors of the economy like health, e-commerce, manufacturing, SMEs, among others, need power.

“They cannot grow their businesses without adequate electricity.

Nigerian and African youths are multi-talented, but they need a steady electricity supply to be creative and innovative,” he said.

Elumelu said if the government improves access to electricity in Nigeria, the Nigerian youths will create the Nigerian version of Silicon Valley and the likes of Steve Job and Bill Gates, explaining that what is holding Nigerian youths to a large extent is the lack of adequate electricity.

“Nigeria needs at least 100,000 MW of electricity a day to power the economy but today we operate less than 5,000 MW and we need to do more,” he said, adding: “Government, therefore, needs to create the enabling environment for businesses to thrive.”
He commended the CBN and its Governor, Mr. Godwin Emefiele, for the support given in the area of metering.

He said to drive the economy, power generation has to be increased by fixing the gas supply to generating companies, adding that there was the need to make sure that the transmission lines are utilised to evacuate the power as well as ensure that power generated is taken by Discos and the end-users and they pay.

The business mogul said: “Power is still a critical sector; we need to invest and the stakeholders need to make sure that it works. And when it works, the country’s economic development becomes more real.

“Every sector of our economy needs the power sector and I think we need to prioritise it more. But I commend efforts going on and also by making sure we privatise the remaining ones. The transmission lines need to be fixed and we need to make sure we improve the payment system.”

He advocated the privatisation of the entire value-chain of the power sector.

Elumelu stated: “The area of privatising the transmission lines, I think that ultimately, it should be privatised. What some of us have advocated is that the Gencos, the Discos and the entire power stakeholders should come together and have a deal with the federal government to take over the transmission lines and it would be in our self-interest to make sure it works.

“We have the transmission lines and it doesn’t work when you are generating, there is no way you would evacuate your power. That sector is so critical and pivotal for the survival of the power sector. It is critical to improving access to electricity, and where it is now there is no problem but what is important to us is that we have expanded capacity.”

When asked about the recent development at First Bank Nigeria Limited, Elumelu declined to make a comment.

But he said the decisions arrived at in resolving the board crisis in the bank were appropriate and beneficial to all major stakeholders.

He said: “You need to understand the unique situation of this question. I am chairman of a competing institution and it may not be prudent for me to express a judgment or comment on this because it may not be very professional of me.

“But I know the shareholders of the bank, and I also know the regulatory mindset, and the regulators want a safe banking environment and I believe the shareholders also seek that in due course, I believe they would be able to resolve the issues. I must say the banking sector has done very well, both the regulatory part and the participants.”

Responding to questions on if UBA is exposed to insider trading and lending with his other businesses, he stated that his oil and gas interests were financed by a consortium of local and international banks, excluding UBA.

In addition, his other ventures have exposure below the threshold and the loans are serviced.

He said: “The oil and gas acquisition we just made, UBA did not participate in the funding. It is a club of international and local lenders. The local receiving bank for our proceeds is Union Bank of Nigeria and the international receiving bank of our oil sales is Standard Chartered Bank, London.

“The transaction was funded by consortium of banks – Standard Chartered, ABSA IN South Africa, Afrexim, Union Bank, Fidelity Bank in Nigeria and a host of other international banks. So, we are mindful of all this and we are very prudent in making sure we do not put pressure on the bank.

“We also put in equity investment and when we need to get investment, we try not to put pressure on the institution. What is important is that it is within the limit UBA should be exposed to a company and it is by the way performing very well. Our loans are performing very well.”

On CBN forex management strategy, Elumelu said he supported efforts being made by the regulator to achieve convergence of rates.

He said: “Two years ago, our vice president conveyed a meeting of a few of us to express our opinion and talk on the economy. The position then was quite critical at the time. But today, when things have improved, you should be also critical to say that things are moving in the right direction. On the convergence, I support it 100 per cent and I think we are there.

“When you are in the saddle or seat you would see things more differently. For Nigeria, we generate foreign currency largely from oil. We used to produce around 2.5 million barrels before and today, we are doing 1.4 million barrels per day and that should have an impact on our foreign currency which is no rocket science.

“Also, there was a time oil was $100 per barrel and it dropped to almost $40 per barrel and today it is at $69 per barrel. So, there is a basket of so many things we have to watch as economic managers in making decisions and there is a lot of pressure on our foreign currency.

“What people want to see from outside is a low exchange rate, but from the business world, people want to predict that this would be available and I think to a large extent, it is happening
Elumelu, who also spoke about the ease of doing business in Nigeria, said government must improve on its policy to attract more investors.

“The truth of the matter is that investors, who are looking for where to invest their money, will go to countries where the policy on the ease of doing business is investor-friendly. The private sector must also work with government to ensure that the ease of doing business in Nigeria improves,” Elumelu said.

Speaking on the impact of Tony Elumelu Foundation, Elumelu said it was established seven years ago to empower young Nigerians and Africans, stressing that the future of Africa remains in the hands of the youth who have key roles to play in developing Nigeria and the continent.

He said: “I strongly feel it will be a waste of resources to save so much money in banks without using such money to empower people, especially when there is poverty among the masses. It is for this reason that we established Tony Elumelu Foundation to empower young people and make successful businesses out of them.

“Every year, the foundation supports young people with a seed capital of $5,000 each, which is non-refundable and the foundation supports 1,000 people every year. We train them for 12 weeks and appoint business mentors for them and we create a networking platform for them to interact and grow their business ideas.”

According to him, the foundation gets support from United Nations Development Programme (UNDP) and the European Union, stressing that the EU recently released $25 million.

He said the fund would be used for the next batch of trainees.

Elumelu stated that about 10, 000 Nigerians, including other Africans, have benefited from the training offered by the Tony Elumelu Foundation in the last seven years.

On the issue of girl-child education, Elumelu said there was a need to close the gap on gender inequality.

“I am a direct beneficiary of women’s impact in molding the society, through the training I received from my mother, and cherish to support the girl-child education in order to bridge gender inequality,” Elumelu added.

Giving details of his exit from UBA as managing director and chief executive officer, Elumelu said the orders came from the then CBN Governor, Malam Sanusi Lamido Sanusi, who felt that all bank CEOs that had served for 10 years, should step aside at that time.

“That day, we had a Bankers’ Committee meeting and at the end of the meeting, the then CBN Governor, Lamido Sanusi, told me that CEOs who had done 10 years will step aside. I called the chairman 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 here – 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, then the regulators themselves, they wouldn’t like it.

“So, four constituents will 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, and that is 20 per cent, and it’s not enough to go to court,” he added.

He, however, said he was already planning to exit as the bank’s CEO at the age of 50, before the directive came, adding that within 24 hours of CBN directive, the bank appointed his successor.