Interview with Dr. Chukwueloka Umeh, MD-CEO of Century Power Generation, Director of Nestoil Plc (Obijackson Group)
We shall start with a general outlook. 2015 was a very intense year for Nigeria. President Buhari is set for big changes. In order to create a valuable economy that will attract growth and create jobs the President has said that his main focus, besides tackling corruption and securing the Nigerian territory, will be in the power sector. What are your personal expectations regarding the ebb of changes?
Where do I start? We have a lot of expectations from the government and this is simply because power as we see it, is the foundation of a strong economy. In Nigeria we have over 170 million people but we currently produce less than 3,000 megawatts of power. You cannot do anything with that. We export timber, but we import toothpicks. Think about it. It takes a while to settle in doesn’t it? Imagine that every Nigerian holding has just a 24 watt bulb: that is how much power we have to go around.
So the expectation that I have from the government is that they need to set the foundations for power companies to succeed. The power companies can’t succeed without the entire value chain working. The value chain starts from gas generation to gas transportation and then power generation to power transportation and then distribution. The distribution companies collect money and then flow the money backwards to pay everyone else: the transmission company, the generating companies, the gas transportation companies and the gas producer itself. Everything has to work for us to have a properly functioning power sector in this country. In my opinion, I believe that the government is supposed to be a catalyst to help drive the growth of the power industry. They have done a few things so far but we need to see more and much more quickly. That is what I see.
You already touched upon it briefly, but what would you identify as the major challenges for the power sector?
I can’t say that one part is more challenging than the other; I think they are all broken. Currently Nigeria has the world’s ninth largest gas reserves but we produce very little. The gas we do produce, we have challenges transporting it. You have seen that the power production in the country has gone down, why? Because they are blowing up some of the pipelines that we have built in the past. The country is trying to develop a gas distribution network but it is not moving quickly enough. Then we have to look at transmission: our transmission rate is very unstable, even if we were to generate 30,000 megawatts today, we don’t have enough transmission infrastructures to transmit this power to the distributors. If we can get 30,000 megawatts of power to the distributors, they cannot distribute that power because they have very old infrastructure and their collection is not up to par. So you see... they are all interrelated. We have to fix all of them simultaneously.
The beauty of investing in Nigeria is that when you are here you are able to see the opportunities and depending on your appetite for risk you have the ability to make a lot of returns in a very short amount of time.
And in terms of the infrastructure security in Nigeria?
We have seen a spate of pipelines being destroyed in the past month or so. There is much we can do. When Nigerians start to understand that this infrastructure belongs to all of us, it is not necessarily that an IOC (international oil company) owns the pipelines, or the government owns the pipelines or an individual company owns the pipelines... they all belong to us as a people. If we don’t have security around the infrastructure we have, it is going to affect everyone. You can see what has happened: the power supply in Nigeria is dropping, the dollar is very high, the price of petrol has gone up, and the price of goods has gone up. The only way we can stabilise all these things is by making sure our infrastructure is secured. It should be a collective effort. If it is secure then we can actually produce power reliably so that people can build industry. The average Nigerian is an entrepreneur, but if the average Nigerian doesn’t have power or security, roads or railways to move their goods, then things won’t work and that is what we are seeing today. The very few rich are getting richer, the poor are getting poorer and this is simply because we don’t have the infrastructure and the little that we do have, we are not really protecting. We need to see it as something we all own. If you see your neighbour doing something they are not supposed to be doing to the infrastructure, such as stealing cables or trying to blow something up, you need to speak up so we can all secure what we all own together. That is the way I see it.
How do you see the second half of 2016?
That is an interesting question. People ask us what we think is going to happen as far as oil prices are concerned. You can speculate. They also ask us what is going to happen as far as to what the dollar is going to do in the country and so on and so forth. We all have speculations but what I think is that we know where we are trying to get to, we know our final goal; from that standpoint we are slowly but surely working towards that final goal. That final goal is simple: produce more gas, produce more electricity, and distribute it. Now because of the challenges we see in the country, companies are being forced to reinvest in different sectors, not just the oil and gas sector; people are now looking at agriculture, manufacturing etc. and when you start looking at these other avenues of generating funds, I think the country is going to be in a better position to build up the economy we have been talking about for a long time. I see the second half of 2016 as a time when the companies that are surviving are going to look to invest in different sectors other than just the energy sector. More foreign investment is coming in even though Nigeria looks somewhat unstable, foreign investment is coming in. To me, this is the way to go.
What is Obijackson Group’s footprint in Nigeria’s power industry?
Obijackson Group has 12 subsidiaries within it. One of those subsidiaries is Century Power. Century Power has a lot of support in my opinion. First of all we own some oil fields. Those oil fields have a lot of gas deposits. We currently have over 7 trillion cubic feet of gas deposits in some of our oil fields. That is enough gas to produce a lot of power for the next 30 years. We also build pipelines. We have the premier indigenous pipeline building company in the country called Nestoil. We can produce gas and we can pipe that gas to wherever it needs to go to produce the power. Century Power will obviously start generating power in the next few years once we are done building the IPP that we are working on. For me, the way I look at our group is, we have a large base that makes us strong, and because of this base I think the company is able to grow from strength to strength. In these hard times we have gone back to take another look at our portfolio to see if we are in the right industry, if there is more that we need to be doing to become a stronger company, and to look at the efficiency of our company. We are becoming leaner and more efficient and as you do so you find that you have more available resources to invest. That is really what we are doing as a company.
What are some of the investments you are looking into?
Some of them I can’t really talk about but we have put in a significant amount of money into developing the power plant. We have invested money in developing our gas assets and now we are looking into investing in gas transportation pipelines. We have invested in the aviation industry to help us be more nimble and efficient in some of the businesses we do. We are also looking at other sectors; we have made investments in telecoms and we have invested in infrastructure building. Our group owns a major stake in Julius Berger the premier construction company in Nigeria. These are a few of the sectors we are looking at; unfortunately I can’t really talk about them right now but we are looking to help make this economy more robust.
Could you summarise your personal vision for the group itself? Where would you like to see it in three years’ time?
I would like to see our group take its place as an infrastructure developer. The reason I say this is because we cannot grow an economy without having a robust infrastructure. If you look at every other developed country or developing country, they have got their infrastructure right. This provides reliable jobs; it forces people to get the right training, not just in the universities but in the technical colleges as well. You will have the white collar workers and the blue collar workers. When we have this robust company that people can look at and say “when I finish school or training, I may be able to get a job in this company” it helps people to get the right training. You also find other companies that will be willing to do the same thing, so if you have our group developing the infrastructure, you will have other people that want to do the same thing and then you will see foreign investment coming in at a faster rate. This is what we have seen happen over the past few years. We have had several companies invest with us in our oil and gas ventures but we want to see more of them. As we develop the company we will see these investments grow.
You already mentioned foreign investment but in general for Nigeria, what is the climate at the moment? Where do you see it heading from an investment standpoint?
Nigerian investment is not for everyone. I don’t say that lightly. When you walk into this country you see the possibilities in investing in varied industries here. We have foreign companies that invest in agriculture here, we have foreign companies invested in power production, we have a lot of companies invested in oil and gas production, we have companies here that are now doing manufacturing. So there is a lot that can be done here. However, folks that want to invest here have to understand that it is not like doing business in Europe, it is definitely not like doing business in Asia, it is quite different. The beauty of investing in Nigeria is that when you are here you are able to see the opportunities and depending on your appetite for risk you have the ability to make a lot of returns in a very short amount of time. People have the belief that Nigeria is corrupt. Granted there is corruption in this country but there is corruption everywhere else too. You come in and invest like you would in any other country and watch your returns grow. We have companies like GE that are now investing in Nigeria. Ten years ago that was not possible. I worked for GE for many years in the US. Many years ago they would never have invested in Nigeria but they have come to see the possibilities, they have come to see the potential for growth and they are making big investments here as are many other companies. They are trying to manufacture goods here, to assemble goods here, and the way I see it is that the possibilities are endless. First of all you have to get over what you see on CNN and what you hear on the BBC. Don’t worry about all of that, come and see for yourself. Some people come here and fall in love with the country and they don’t go back to their own country, they stay here, build a life here and invest. Those that have done so have made a lot of money, much more than they would have made anywhere else in the world. I came back to Nigeria in 2011. I left a great career in GE to come back here simply because I also saw the possibilities. But beyond making money, you are touching lives. In my opinion, that is a big deal. You are able to help build up an economy and watch it grow. That is a big deal; you can’t get that in many other places around the world today. I say to those that want to invest and make money “please come, there is a lot to be done here”. We are doing it, we are putting our money where our mouth is and we are showing other people. In the past 5 years we have grown several businesses. I have personally started several businesses within our group. I started off in this group just running the power business and now I head five of the companies that we own. There is the power generation company Nestoil, B&Q Dredging, our engineering company and the aviation company. Doing that in the space of five years is fantastic. I also watch some of our investments in some of the new companies that we have invested in such as Smile Telecoms. I don’t see where else you can go to get this kind of opportunity and this kind of growth in just five years. It’s amazing. I say to people that want to invest here, “Please come, there is room for everyone”.
I would also like to say that the current government of Nigeria has its heart in the right place but beyond that you have to do more. They have to understand that bureaucracy kills invention, it kills initiative. We can regulate the energy market as much as we want to but that stifles growth. We must let the energy market grow organically. We must do whatever we can as a government to support the few companies that are investing in the energy industry, in gas generation, in gas transportation, in power generation, in power transmission and in power distribution. They must support these companies properly with regulation and sometimes with investment and sometimes with tax breaks to support them to encourage them to do what they need to do quickly. It shouldn’t take two years or three years to get a power generating license; it should take months if you really want to encourage people. It should take months to sign a power purchasing agreement and so on and so forth. These are some of the things that the government can do to support companies like us to encourage us to keep investing.
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