Nigeria to privatise power generation

Nigeria to privatise power generation

By Tom Burgis in Lagos, August 26 2010 16:11


Nigeria’s president on Thursday invited foreign investors to join what could be one of Africa’s biggest privatisations as the country seeks to sell its power generation and distribution companies.Goodluck Jonathan called time on the state-owned power company, which has given Nigeria one of the lowest per capita supplies of electricity in the world.


The privatisation is aimed at spurring the $10bn of investment needed to revive the country’s power system. Mr Jonathan’s decision represented a victory for reform-minded officials tussling with vested interests who profit from widespread corruption within the electricity system.The president said: “The private sector will be responsible for generation and distribution companies, while the government will continue to own the transmission system but under private sector management.”


Potential investors from Canada, Turkey, Saudi Arabia, India and China were eyeing the privatisation, according to investors, financiers and officials.Luminaries of Nigerian business – who unanimously declare the power crisis the biggest obstacle to realising the country’s economic potential – rose to applaud the president’s announcement in Lagos, the country’s commercial capital.


But many have heard promises of reform before, only to see them dashed. Nigeria is sub-Saharan Africa’s biggest oil and gas exporter but most of its 150m people enjoy only a few hours of electricity a day at best.Private generators have become the main source of power in the absence of a functioning national grid – and running them costs Nigerians an estimated $13bn a year.


Advocates of the reform plan conceded that there were still battles fought. Workers at the state-owned Power Holding Company of Nigeria, many of whom would probably be made redundant under the reforms, staged a one-day strike to protest against the plan on Wednesday.With elections looming next year, Mr Jonathan declined to put a number on a proposed rise in regulated tariffs charged to electricity consumers. Officials estimated that the tariff would have to treble to make investment in distribution companies and power stations commercially viable. Mr Jonathan said only that the new prices would “give incentives to investors”.


The president has not publicly declared whether he will stand in the forthcoming election but is widely expected to do so.Oil groups such as Royal Dutch Shell have been reluctant to sell gas in large quantities to Nigerian power stations. The price on offer is far lower than the revenues available from exporting gas.


However, Diezani Allison-Madueke, oil minister, said the electricity reforms could allow the gas price paid to energy groups to increase dramatically by 2013.


Tom Burgis

West Africa correspondent

Financial Times

Mobile: +234 (0)808 505 6329

tom.burgis@ft.com

www.ft.com


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