Interview: Tony Elumelu

What more do you think can be done to encourage entrepreneurship in Nigeria?

TONY ELUMELU: Entrepreneurship is key for me, but, more importantly, it is key for this continent and Nigeria in particular. We have a large number of unemployed young people and are still too reliant on foreign aid and assistance as a driver of economic activity. I do not think that model has worked well and do not think it is sustainable. I believe Africans, through entrepreneurship, can transform not only individual lives but entire societies. It is a self-sustaining model. This is what I call “Africapitalism”, and it informs a lot of what we do within my group. For example, the Tony Elumelu Entrepreneurship Programme, which was recently seeded with $100m, is supposed to identify, engage with, train, fund and mentor 10,000 Africans over a period of 10 years. We are seeing very strong interest across the continent, with over 20,000 applications received at the end of the first phase, which closed on March 1, 2015.

A critical factor will be creating a more enabling environment for these entrepreneurs to do well. There are soft and hard issues. Hard issues include roads, electricity, water and internet bandwidth, which allow all types of businesses to profit. Spending money on diesel generators does not make them competitive. Soft infrastructure includes the rule of law and adequate, but not debilitating, regulations to encourage fair trade, innovation and competition. We must encourage our government to see the relationship between the success of entrepreneurs and a country’s economic wellbeing and growth. This should ultimately be the engine and main driver of growth for our economies. If these entrepreneurs don’t do well, we all fail.

What is the biggest misconception international fund managers have regarding business in Nigeria?

ELUMELU: There are quite a few, but it depends on who you are dealing with. They believe that there is no rule of law, that corruption is rife and that things just don’t work. Yet in many areas – property rights, for example – Nigeria is very strong, irrespective of who is in power, and asset sequestration is largely unheard of. Certainly things could be better, but this is the case in most countries. Because many people do not recognise the full potential in Nigeria, returns are higher than in most markets. In telecoms, for example, MTN’s initial investment in Nigeria was around $285m and a few years later it was the market leader, posting billions in profit. If Vodafone had entered the market at the same time, this might not have been possible.

That said, we certainly need more foreign partnerships and foreign direct investment, and we need people to see Nigeria the way it is. Very few places in the world see returns like we achieve here. Our investment in the Ughelli Power Plant paid about $75m in dividends in the first year, which simply does not happen in such a capital-intensive sector.

Where have you seen the most effective strategies for diversification implemented?

ELUMELU: In Nigeria, the federal government relies on oil revenue from the export of more than 2m barrels per day, which the national oil company participates in, albeit peripherally, and on taxes from oil-related activities. The impact from the recent drop in global crude prices has been significant and is evident through the depreciation of the naira. Previous administrations started the process of economic diversification, but this takes time, discipline and steadfastness. I think 2015 will be a challenging year, but recent events could be a blessing in disguise. People commonly blame the executive arm of government for not being prepared for the decline of oil prices, forgetting that in recent years many at the sub-national level have gone to court to compel the federal government to increase oil-based allocations. I doubt people will be so averse to savings in the future. The world is changing and we have seen countries without Nigeria’s abundant resources growing simply because they created an enabling environment for people to come and invest their own capital.