ITV: Emmanuel Nnorom, Chief executive, Heirs Holdings
TAR: When Transcorp was launched in 2004, it seemed like the era of the chaebol – these big Korean-style conglomerates that ignited industrialisation – was finally upon Nigeria. I think it’s fair to say that many were left disappointed. What has changed?
EMMANUEL NNOROM: At inception Transcorp had many top executives in the country as board members. At this stage, the direction was not very clear. There were competing interests. But in 2010, Tony Elumelu bought the controlling interest in the company and since then has refocused the company. Transcorp as a conglomerate has Transcorp Hotels, which has the largest hotel in Abuja, a 670-room hotel. And in the last four to five years, the hotel has done quite a lot in terms of improving the facilities, and more recently doing a proper upgrade for the first time in 30 years of the life of the hotel. All the rooms have been upgraded completely. That was a project of $100m to do the upgrade. Also, within the same period, Transcorp has a space in Lagos where some piling work has been done. The other superstructure works are yet to start.
Another is in the power sector. Transcorp acquired a controlling interest in the Ughelli power plant, rated as Nigeria’s best station […] Over the last 18 months, we have invested over $30m to get new turbines. Some days we are the largest [single] producer of power in Nigeria. We have a capacity now of 702MW and are producing almost 90% of that most days. We are investing more in that sector by bringing more turbines onstream, hopefully before the end of year, to have about 850MW.
So all these redevelopments going on are an example of the turnaround that Heirs Holdings has been engineering for Transcorp since 2010. Of course, many other things are in the pipeline […] One of them is the oil block which is currently being explored. After that, it goes into commercial production. We see quite a lot of more positive direction towards having a better result, and shareholders are now beginning to have returns on their investments. Three years ago, dividends were paid for the first time, bonus issues done. And the yet-to-be-released results for 2017 are positive.
How much of Heirs Holdings does Transcorp represent, given that the other major part of the company is United Bank for Africa (UBA)?
It’s actually more than half. It’s one of our biggest investments because Transcorp has these two subsidiaries: Transcorp Power and Transcorp Hotels. And then also you have Transcorp Energy and so on. So it’s quite significant to our operations.
Is Nigeria’s economic turnaround something that will stick, and how much of a part will oil play in that?
The economic recovery in Nigeria is quite a positive one, as we saw in the first-quarter reports from both the International Monetary Fund and from our federal official statistics. It’s expected to continue in 2018. Our investment generally for 2018 is on course. We are investing more in the oil and gas sector, and you can see also from the recovery of the oil price that that’s a good sign that the investments we’re channelling will yield positive results. We have an oil block in our group that’s directly under Heirs Holdings on which we are doing extensive work in terms of the commercialisation process. We also have an oil block that’s under Transcorp which also will come onstream. For this year, these are the plans that, as I said, are looking positive – especially with the increase in the price of oil on international markets.
And you have an investment in Tenoil as well.
It’s a subsidiary, so they are the ones that actually operate the oil block. They do all the oil work, including getting the contractors, supervising them, the exploratory part of the job, testing and then of course commercialisation.
The local content act provided a boost for indigenous oil companies. Did Tenoil benefit from that policy framework?
Generally, the content law allows for a lot of local entrepreneurs to be involved in the oil sector, of which Tenoil is one. We have presently these two oil blocks. We have a lot of work to do and so while working with other local suppliers, contractors and so on we believe we’ll be able to achieve our results. But it’s not like we’ve grown into, let’s say, oil servicing or perhaps maybe procurement – we are not going into that.
Heirs Holdings has some heavyweight investments in Nigeria’s financial sector. We’re almost a decade beyond the toxic-asset crisis of 2008/2009 and Nigerian banks appear a lot more robust. Do you feel there’s a more mature skills base in the industry now? Are they able to lend more ‘accurately’ to various sectors?
In terms of the ability to originate deals, the banks in Nigeria are very well equipped. If you look at when there was a whole lot of privatisation in the power sector, it was largely supported by Nigerian banks. If you look at oil divestments that took place some three to four years ago, they were largely supported by Nigerian banks.
I think the issue is that with more capital […] and being able to also manage risk better, Nigerian banks are actually very strong and resilient in terms of any shocks. And even when the oil price was low – early last year and so on – it didn’t really cause any crashes […]
But the key thing is that you now have very strong banks in Nigeria. They are better managed. Governance levels have improved significantly. Just last week the Nigerian Stock Exchange gave awards to many banks. UBA, for example, was one of the banks that got an award for governance. Delays from court action appear to have improved, so that banks can take some decisions quickly, [for example] if you need to recover your assets that you’ve lent out.
Some banks are also now taking some very hard decisions. You’ve seen banks pulling out of Africa because they didn’t understand the business very well; they couldn’t cope with it. Some years back, some others would have held on.
Where are we on the access to foreign exchange?
For us as users of banking services there has been a lot of improvement from last year in terms of availability of foreign exchange. Of course there may be a little concern sometimes, but it’s improving.
The central bank – almost every week – intervenes in the markets, and the period when the rates were a bit uncontrollable are now over in my view: we see that we have more stability, the foreign exchange reserves are up and negative factors are now under control.
This interview first appeared in the April 2018 print edition of The Africa Report magazine