Coleman decries high gas prices amid $20m power investment as industrial growth hangs in the balance
The Managing Director of Coleman Technical Industries Limited, George Onafowokan, has issued a stark warning regarding the sustainability of Nigeria’s manufacturing sector, pointing to the exorbitant cost of industrial gas as a primary inhibitor of economic progress. Despite Coleman’s substantial commitment of over $20 million toward independent, gas-powered electricity generation, the firm continues to grapple with a pricing regime that Onafowokan describes as fundamentally incompatible with the Federal Government’s objective of achieving a $1 trillion economy.
The contention centers on the current domestic gas price, which stands at approximately $8.70 per thousand standard cubic feet. For manufacturers who have taken the initiative to bridge the national power deficit by investing in their own energy infrastructure, this cost structure serves as a significant overhead that erodes profit margins and stifles competitiveness in both local and international markets. Onafowokan argues that for the industrial sector to thrive, the pricing for manufacturers should be pegged closer to $3.50 per thousand standard cubic feet.
The Financial Burden on Industrial Self-Sufficiency
Coleman Technical Industries has, over the past several years, directed more than $20 million into the development of internal power solutions. This strategy was designed to insulate the company from the volatility and unreliability of the national grid. However, the anticipated benefits of this investment—namely, operational efficiency and cost predictability—have been largely neutralized by the rising cost of fuel.
The disconnect between the government’s push for industrialization and the actual cost of inputs has created a paradoxical situation. Manufacturers are being encouraged to build their own power plants to mitigate the energy crisis, yet they are being penalized by a gas pricing mechanism that treats industrial users with the same cost intensity as other, less critical sectors. According to industry analysts, this pricing disparity acts as a "hidden tax" on productivity, discouraging firms from scaling their operations or increasing their labor force.
A Chronology of Industrial Power Challenges
The struggle for affordable energy in Nigeria has been a multi-decade challenge characterized by several critical phases:
- 2013-2015: The privatization of the power sector was heralded as a turning point, yet it failed to solve the chronic gas-to-power constraints. Manufacturers began shifting toward captive power generation as a survival mechanism.
- 2019-2021: Global energy shocks triggered by geopolitical conflicts and supply chain disruptions began to reflect in domestic gas pricing, leading to the current high-cost environment.
- 2023-2024: The federal government introduced various policy reforms, including the decentralization of the electricity market, to allow states and private entities to generate and distribute power.
- 2026 (Present): Leading industrialists like George Onafowokan have moved from private lobbying to public advocacy, signaling that the current fiscal and energy policies have reached a breaking point for medium-to-large-scale manufacturers.
The Economic Argument: Why $3.50 Matters
Onafowokan’s call for a price reduction to $3.50 per thousand standard cubic feet is not merely a request for a subsidy; it is a strategic proposal based on the multiplier effect. Manufacturing, alongside agriculture and trade, is a labor-intensive sector. When input costs are high, the immediate impact is a contraction in production capacity. Conversely, a reduction in energy costs would theoretically allow manufacturers to:
- Reduce Consumer Prices: Lower energy overheads translate directly into lower prices for finished goods, providing relief to the average Nigerian consumer.
- Increase Export Potential: By lowering the cost of production, Nigerian goods can compete more effectively on the African Continental Free Trade Area (AfCFTA) stage.
- Drive Job Creation: Lower production costs allow for reinvestment in new machinery and human capital, facilitating the growth of the industrial workforce.
Economists note that value addition is the missing link in the Nigerian economy. Agriculture, while a vital sector, cannot generate the wealth required for a $1 trillion economy without a strong manufacturing base to process raw materials. Onafowokan emphasizes that these sectors are inextricably linked and that policy support must be holistic rather than fragmented.
Monetary Policy and the Path to Stability
Beyond the immediate crisis of gas pricing, Onafowokan addressed the broader macroeconomic environment, specifically the Central Bank of Nigeria’s (CBN) current monetary policy. The decision to retain the Monetary Policy Rate (MPR) at 26.5 percent has been met with mixed reactions from the private sector. While the high rate is a necessary tool to combat persistent inflation, it also limits the availability of affordable credit for industrial expansion.
Onafowokan expressed a measured view of the CBN’s strategy, describing the 26.5 percent rate as a "necessary sacrifice" to achieve long-term stability. However, he remains optimistic about a shift in the near future. "In my own opinion, we are still striking the right balance, but I don’t see the current rate being maintained for much longer," he noted. He anticipates a gradual easing of rates, potentially by 0.25 to 0.5 percentage points, within the next two meetings of the Monetary Policy Committee (MPC).
This expectation is rooted in the belief that the current inflation cycle will begin to show signs of exhaustion, allowing the apex bank to pivot toward a growth-oriented stance. Yet, Onafowokan was quick to caution that monetary policy alone is insufficient. He advocates for a more robust fiscal response, urging the Ministry of Finance to work in tandem with the Bank of Industry (BoI) to provide specialized credit facilities to manufacturers.
Institutional Support and the Role of the BoI
The role of Development Finance Institutions (DFIs) like the Bank of Industry is paramount in the current economic climate. For manufacturers, commercial bank interest rates are often prohibitive, reaching levels that make capital-intensive projects unviable. Onafowokan believes that strengthening the BoI’s capacity to lend at concessionary rates is essential for maintaining the momentum of domestic investment.
The call for stronger fiscal support is also a call for patience. Onafowokan acknowledged that the current economic team is navigating a period of complex correction. "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," he stated.
Policy Consistency: The Bedrock of Investor Confidence
The overarching message from Coleman’s leadership is one of long-term commitment. Despite the challenges, Onafowokan remains a proponent of "domestic direct investment." He argues that when local firms expand, it serves as a powerful signal to international investors that the Nigerian market is maturing.
However, the continuity of this investment depends on policy predictability. Investors—both domestic and foreign—require a stable regulatory and pricing environment to make long-term capital commitments. The current volatility in gas pricing is, in this context, not just an operational challenge but a structural risk that discourages the very industrial expansion the government seeks to foster.
Conclusion and Outlook
The situation facing Coleman Technical Industries is emblematic of the broader hurdles confronting the Nigerian manufacturing sector. As the government continues to refine its economic blueprint, the nexus between energy policy and industrial growth will become the primary metric of success.
For now, the industrial sector remains in a state of watchful waiting. The government’s response to the plea for a revised gas pricing structure will serve as a litmus test for its commitment to a manufacturing-led economic recovery. If the administration can reconcile the needs of the energy sector with the requirements of the manufacturing sector, the pathway to a $1 trillion economy may become significantly clearer. Should the current costs persist, however, the risk of industrial stagnation remains a tangible threat to the nation’s long-term prosperity.
Policy consistency, combined with targeted fiscal support and a recalibration of energy costs, remains the most viable strategy for transforming Nigeria’s vast potential into tangible, sustainable economic growth.
