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Investors, electorate eye Nigeria power reform plans
August 25, 2010 / 5:16 PM / 7 years ago

Investors, electorate eye Nigeria power reform plans

* Power shortages main brake on economic growth

* Reform could unlock billions of dollars in new investment

* Lack of electricity a key concern for electorate

By Nick Tattersall

LAGOS, Aug 25 (Reuters) - When Nigerian President Goodluck Jonathan presents a roadmap on Thursday for ending chronic power shortages, it is not just infrastructure financiers and industrialists who want to hear what he has to offer.

Jonathan has made bringing reliable electricity to the nation’s 140 million people a cornerstone of his administration and it is no coincidence that he has chosen to unveil his power sector reform programme at a rare public presentation in Lagos less than five months before presidential elections.

Constant power outages are perhaps the greatest paradox of life in Nigeria, which despite being the continent’s biggest oil and gas producer is reliant on belching diesel generators to power everything from phone chargers to luxury hotels.

Government after government has pledged to fix the problem, 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.

“Stable power is a number one priority for Nigerians and Nigerian companies ... His predecessors have promised to sort out the power problem, but to no avail,” said Kayode Akindele, a director at consultancy Greengate Strategic Partners.

“President Jonathan has made it a key pledge ... There is no time to assess his performance in this sector with elections in a few months, but it will definitely be a key plank of any presidential bid by him,” he told Reuters.

Jonathan has not yet said whether or not he will run in polls due in January, but recent announcements by his administration suggest he is gearing up for a bid.

He has pledged to partly privatise a domestic power sector made up of inefficient state monopolies, ringing the right bells with foreign investors who stand ready to invest billions of dollars once the sector is properly regulated. [ID:nLDE6640QU]

It has also raised hope among some that Jonathan could, at last, be the leader who solves the country’s most pervasive problem. Some of his fans have suggested a decline in blackouts in recent weeks is already the fruit of his labours. Others point out heavy rains have filled hydroelectric dams.


Nigeria’s generation sometimes plunges below 1,000 megawatts (MW), largely due to a lack of maintenance at power stations, around a tenth of the country’s basic needs. South Africa, with a third of Nigeria’s population, has ten times the capacity.

The central bank says 60 million people rely on generators and spend $13 billion a year fuelling them.

Some parts of Jonathan’s reform programme are already known.

The government said in May state power company PHCN would increase the amount it pays energy firms such as Royal Dutch Shell (RDSa.L) and Exxon Mobil (XOM.N) for their gas, the main source for electricity generation, over the coming years.

The previous gas pricing regime gave energy companies too little incentive to provide gas for domestic power generation.

Jonathan has said Nigeria will privatise electricity generation and distribution next year, and the privatisation agency this week announced it was seeking bidders for 11 electricity distribution firms. [ID:nLDE67M1LQ]

Two weeks ago, he announced plans for a $3.5 billion “supergrid” to be financed with the private sector and development agencies, which would boost generating capacity to over 14,000 megawatts (MW) by the end of 2013. [ID:nN10164666]

Nigeria’s Business Day newspaper said on Wednesday the World Bank had pledged $800 million to help fund the reforms.

The central bank said on Wednesday it was ready to release $2 billion in funding to stimulate lending, much of it to help the development of projects in the power sector. [ID:nLDE67O108]

“This is one of the key pillars of reforms and of his political agenda,” said Bismarck Rewane, head of Lagos-based consultancy Financial Derivatives.

“If he can come through with power reforms and they are sustained, it could be a political game changer,” he said, but added electoral reforms also promised by Jonathan would be needed too to ensure he had a credible mandate.

Political analysts point out that while Jonathan is making all of the right noises, laying out the plan is the easy part. Fighting the corruption and mismanagement that have bedevilled the sector will be much more of a test.

A strike by PHCN workers could mean even Jonathan will be relying on generators to power his presentation on Thursday. It could also be a sign of the battles still to come.

For a factbox on the reforms, please click [ID:nLDE67O1ZC] (For more Reuters Africa coverage and to have your say on the top issues, visit: ) (Writing by Nick Tattersall; editing by Sue Thomas)

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