UPDATE 2-Nigeria leader unveils plan to end power shortages

Thu Aug 26, 2010 11:17am EDT

Related Topics

* Power sector needs $6 billion a year in investment

* Plan could be an election boost for president

(Recasts after launch of reform programme)

By Nick Tattersall

LAGOS, Aug 26 (Reuters) - Nigerian President Goodluck Jonathan on Thursday unveiled his strategy to end chronic power shortages in Africa's most populous nation, formally launching a major policy drive months ahead of presidential elections.

Lack of reliable electricity is one of the major brakes on development in the country of 140 million, and although Jonathan has not yet said whether he will contest the January polls, a credible reform programme could help boost his popularity.

Africa's biggest oil and gas producer estimates it will need annual investment of $6 billion over the coming years if it is to meet its domestic energy needs, and is seeking to woo foreign investors with pledges to improve its regulatory environment.

The plans are the most comprehensive blueprint yet designed to solve the nation's power problems.

Government hopes they will help unlock private investment, although financiers point out that formulating a plan is the easy part and investors will need cast-iron guarantees on the regulatory framework before they commit.

Much of the detail was already known, including the planned privatisation of generation and distribution and the construction of a new transmission network. [ID:nLDE67P1N9]

But the launch of the "roadmap for power sector reform" to an audience of business leaders and investors was Jonathan's biggest policy speech yet in the commercial hub of Lagos.

"Government is convinced that it is only by constructively engaging the private sector as partners in this journey of national transformation that we can be assured of success," he said, flanked by ministers, advisers and state governors.

Constant power outages are perhaps the greatest paradox of life in Nigeria, which despite producing more than 2 million barrels per day of crude oil, relies on diesel generators to power everything from phone chargers to luxury hotels.

FIGHTING CORRUPTION?

Successive governments have tried to fix the power problems, but powerful vested interests, such as billionaire tycoons who import diesel and generators, and the chronic mismanagement of state-run utilities has meant little progress has been made.

"This roadmap brings us to a point where we finally have a realistic plan that is actually technically, commercially sound, in terms of the role of the private sector, the role of government," World Bank country director Onno Ruhl said.

"The question is, will all the partners behind it actually rally around it and implement it ... If it gets implemented, it will deliver results," he said.

Fighting the graft and mismanagement that have hobbled the sector will be more of a political test than laying out plans. In the challenges to reform listed by ministers and officials, the issue of corruption was conspicuous by its absence.

"If there is anything that unites Nigerians, it is a desire for power, electricity," Finance Minister Olusegun Aganga said, adding that his ministry was focused on creating the right environment to attract investment as quickly as possible.

Nigeria has the world's seventh-largest natural gas reserves and plans to use them as the source for improving power supply.

Oil Minister Deziani Allison-Madueke said gas supply to the power sector was already at an all-time high but estimated that demand from domestic energy producers would rise to 3 billion cubic feet per day by 2015 from around 800 million now.

Jonathan has already announced plans for a $3.5 billion transmission "supergrid" to be jointly financed with the private sector, while the privatisation agency has said it is seeking core investors for 11 state-run electricity distribution firms.

Some of the firms in highly populated and relatively developed areas such as Lagos are likely to attract significant interest from foreign investors, potentially triggering bidding wars, investors say. Others in less-developed areas and with greater infrastructure challenges may be less attractive.

"It's great that they're seeking foreign investment, the question is what assurances will investors be given," said one foreign delegate at the presentation. "What is the regulatory framework and what are the guarantees it will not change." (For more Reuters Africa coverage and to have your say on the top issues, visit: af.reuters.com/ ) (Writing by Nick Tattersall)

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