Gloomy predictions about the future of Africa’s biggest economy often overstate the downside, according to energy and power entrepreneur Tonye Cole.
Tonye Cole is staying calm – seemingly a tough act for an entrepreneur whose principal interests are in Nigeria’s oil and gas sector, which has been decimated by a slump in the oil price and the country’s political turmoil. Its complex, but they’re interesting times as well. Once you get into complexity, you always find opportunities, Cole says. The challenge for anyone who manages a business is whether or not they can see the opportunities in the complexities.
Cole’s Sahara Group is, by the standards of the current crop of Nigerian domestic energy companies, one of the old guard. Founded in 1996, the company began as a trader and middleman, before moving upstream into exploration and production and, latterly, downstream into the power sector.
Although the company has moved out into other parts of the continent, it is still heavily exposed to Nigeria and, consequently, to its political uncertainty and its vulnerability to the current oil price shock. With investors typically jumpy around election time, the electoral commission’s decision to delay the poll by six weeks, from 14th April to 28th March, caused no small panic in the markets.
Worse still, it comes against a backdrop of near economic crisis, precipitated by the halving of the oil price over the past six months. With 70% of its government revenues derived from the hydrocarbon business and its currency buttressed by oil money, the country’s fiscal position has deteriorated rapidly.
The naira has fallen sharply from its target rate of 160-178 to the US dollar to hover close to 300, creating funding challenges for banks, many of whom have borrowed internationally, and now face the prospect of servicing dollar-denominated debt with naira incomes. Upstream oil and gas businesses have suffered badly. Last month, Seplat CEO Austin Avuru admitted that the industry was in “survival mode”, while analysts predicted widespread consolidation. The stock market has plunged as international investors dump shares. Hundreds of millions have been wiped off the value of the country’s largest lenders.
However, Cole says, Nigeria has been here before. International analysts and observers are periodically gripped with the notion that the country is on the verge of collapse, but the business community carries on regardless.
“The bottom line is that people have always underestimated the Nigerian economy and they have always underestimated the Nigerian people,” Cole says. “They tend to be quick to judge in the negative what the reality is. There is a perception-reality gap which is as wide as the Grand Canyon.”
Fiscal and macroeconomic indicators only tell half of the story of the Nigerian economy, according to Cole. “When you ask Nigerian businesses, people who are invested in Nigeria today, who are going through an economic blip during this political transition, most of them are certain that they will overcome whatever is going on. It’s a readjustment of reality. Life continues.”