Nigerian billionaire Solomon Onafowokan's Coleman spent $20 million generating its own power

Coleman Technical Industries has spent more than $20 million building its own gas-fired electricity supply, capital its managing director said would otherwise have gone into machinery and thousands of additional jobs.

George Onafowokan, managing director and chief executive of the cable manufacturer, said the company still pays as much as $8.70 per thousand standard cubic feet of gas after making that investment. He described the pricing regime as a disincentive to industrial investment and called the gap between domestic and export gas rates a major policy failure requiring urgent attention.

"Coleman alone has invested more than $20 million in gas-powered electricity generation," Onafowokan said in an interview. He said manufacturers are forced to spend heavily on self-generation and then pay again at the meter.

He put the competitive level for domestic manufacturers at about $3.50 per thousand standard cubic feet, less than half what Coleman currently pays. Lower gas prices would allow manufacturers to expand output, hire and compete on export markets, he said.

The company was founded in 1975 by Solomon Kayode Onafowokan, the Asiwaju of Remoland, who remains chairman and ranks among Nigeria's wealthiest industrialists. George Onafowokan, his son, returned from a career in the United Kingdom to join the business in 2002 and led the restructuring that turned it into the country's largest indigenous manufacturer of electrical and telecommunications cables. The elder Onafowokan has said the handover was deliberate, telling guests at the company's 50th anniversary in October that he planned the succession years in advance.

Coleman runs an embedded gas power plant across its production sites and operates the first XLPE medium and high voltage cable plant in West Africa. It commissioned what it describes as Africa's largest fibre optic cable factory at Sagamu in Ogun State in October, a plant projected to produce about nine million kilometres of fibre a year for Nigeria's broadband market. In February the company offered up to $37 million (N50 billion) in commercial paper through Afrinvest under a wider N100 billion programme.

Onafowokan extended his criticism to the cost of capital. He said high borrowing costs alongside high energy costs have continued to undermine Nigerian manufacturing, and that the government's $1 trillion economy target depends on making both cheaper for factories and farms.

He backed the Central Bank of Nigeria's decision to hold the benchmark rate, while signalling he expects it to come down. The Monetary Policy Committee retained the monetary policy rate at 26.5 percent at its 306th meeting in Abuja on July 20 and 21, the second consecutive hold following a 50 basis point cut in February. Headline inflation eased to 15.91 percent in June from 15.93 percent in May.

"In my own opinion, we are still striking the right balance, but I do not see the current rate being maintained for much longer," Onafowokan said. He predicted reductions of 25 to 50 basis points at each of the next two committee meetings.

He also called on the central bank and the Ministry of Finance to recapitalise the Bank of Industry and other development finance institutions so they can supply long term, affordable funding to manufacturers, agriculture and small businesses. He said he was not proposing a return to direct central bank lending across sectors, but that the bank should become a catalyst for industrialisation alongside its price stability mandate, pointing to the government's ongoing recapitalisation of the banking system as the model.

Onafowokan credited the government for decentralising electricity generation and opening the sector to greater private participation, calling the reforms a step in the right direction.