Gas At $8.70/scf, Costly Loans Undermining Manufacturing Sector- Expert

The managing director, Coleman Technical Industries Limited, George Onafowokan has said high gas costs of $8.70 per thousand standard cubic feet and expensive loans from banks have continued to undermine the manufacturing sector.

Onafowokan in an interview said that Nigeria’s $1 trillion economy attainment depends on cheaper energy and capital for manufacturing and agriculture.

He noted that while the Central Bank of Nigeria’s decision to hold MPR at 26.5 per cent may provide short-term stability, the rate and other input costs remain too high for factories to expand and create jobs.

Onafowokan backed the CBN’s hold on rates, calling it “the right balance for now, but predicted gradual cuts of 0.25 per cent to 0.5 per cent in the next two MPC meetings.

“In my own opinion, we are still striking the right balance, but I do not see the current rate being maintained for much longer,” he said.

He however stressed that growth will not come from interest rates alone, saying “the economy is not controlled by monetary policy alone. Fiscal policy is equally important. We have to give the new team time because economic corrections do not happen overnight.”

Onafowokan argued that manufacturing, agriculture and trade, not oil, ICT or finance hold the key to mass employment.

“Agriculture cannot grow without manufacturing because value addition is what creates wealth and employment,” he said.

He added that products like cassava, palm kernel and eggs only create real value when processed.

He slammed the recent hike in Bank of Industry lending rates, saying DFIs should not charge manufacturers rates close to commercial banks.

“The Bank of Industry exists to promote industrial development, not maximise profits. It should provide patient capital for seven to eight years to enable businesses expand and create jobs,” he said.

He urged the CBN and Ministry of Finance to recapitalise the BoI so it can offer affordable long-term funding to manufacturers and SMEs.

On energy, Onafowokan said high gas prices remain one of the biggest obstacles to industrial growth.

“Coleman has invested more than $20 million in gas-powered electricity generation to keep production running and protect jobs. Yet the company still pays up to $8.70 per thousand standard cubic feet of gas,” he said.

He said domestic manufacturers should pay about $3.50/scf to remain competitive, stating that “the pricing regime is a disincentive to industrial investment. Lower gas prices would enable manufacturers to expand production, create more jobs and improve export competitiveness.”

He commended power sector decentralisation and incentives for gas equipment, calling the gas pricing gap ‘a major policy failure requiring urgent attention’.

Looking ahead, Onafowokan said investor confidence will hinge on policy consistency as elections approach.

While portfolio inflows have risen, he said Nigeria needs more Foreign Direct Investment and stronger Domestic Direct Investment.

“I am a stronger believer in domestic direct investment because it shows local businesses are expanding. If government maintains policy consistency, I see steady GDP growth and sustained economic expansion,” he said.