Privatisation Raises Hopes For Nigeria Power Sector
Nigeria’s struggling power sector could be on the verge of a long-awaited turnround after the announcement of winning bids for five state-ow...
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Nigeria’s struggling power sector could be on the verge of a long-awaited turnround after the announcement of winning bids for five state-owned electricity plants.
The $1bn sell-off of the government’s thermal and hydropower generation companies is part of a wider privatisation effort that also covers power transmission and distribution.
Although Nigeria has Africa’s biggest population, its second-largest economy and huge gas reserves, it produces only about 4,000MW of electricity, forcing businesses and residents to rely heavily on generators. South Africa, which has its own electricity supply issues, generates 10 times as much power and has less than a third of Nigeria’s 160m population.
“This is a game changer for us,” said Atedo Peterside, chairman of the National Council on Privatisation’s technical committee, speaking after the televised bid announcements in the capital Abuja on Tuesday.
“It may still take time to see the effects, but I think everybody realises that things will be different now.”
After he took office in 2010, Goodluck Jonathan, the president, had promised to fix the power sector. Attempts to improve supply during the past two decades saw $40bn dollars spent with little improvement. Corruption and opposition from businessmen in emergency power generation and the sale of diesel for generators are usually cited as reasons for the failure to reform.
Before privatisation, Nigeria’s state-run power utility was split into six generation and 11 distribution companies. The sale of the plants attracted strong interest from some of Nigeria’s richest businessmen as well as retired military generals.
The highest bid came from a consortium that included the listed Nigerian conglomerate Transcorp and the US company Symbion Power, which offered $300m for the 932W Ugheli power plant. A Chinese, Nigerian and British group secured the 1,020MW Sapele plant for $201m.
Femi Otedola, the Nigerian oil tycoon, was also a winner. His company, Forte Oil, together with Shanghai Municipal Electric Power Company and BSG Power, owned by Israeli billionaire Beny Steinmetz, bid $132m for the Geregu plant. Management contracts for the two hydropower plants, Shiroro and Kanji, went to consortiums that included several Nigerian companies, Russia’s RusHydro and China Three Gorges Corporation.
The preferred bidders have six months to make full payment before the plants are handed over. Disposal of the remaining generation company, Afam, has been delayed after some controversy.
Barth Nnaji, the former power minister, who was credited for driving energy sector reform and for increasing electricity supply during the past year, stepped down last month after it was revealed that he had an interest in one of the bidding consortiums for Afam. The resignation was an extremely rare event in Nigerian politics, and afterwards Mr Nnaji said that “powerful vested interests” had tried to force him out.
Opeyemi Agbaje, managing director of Resources and Trust Company, a Lagos consultancy, said that despite the hiccup the privatisation process had been “reasonably well managed and relatively transparent”.
“Some will say the president’s friends and former military leaders have benefited, but it was never going to be poor people bidding for these assets,” Mr Agbaje said. “Privatising power is the most critical economic step we can take.”
Although the economy is growing steadily, at more than 6 per cent this year, analysts believe that could rise to closer to 10 per cent if the power problems are fixed.
The preferred bidders for the 11 distribution companies will be announced on October 16.
Manitoba Hydro signed a contract in July to manage Nigeria’s power transmission.
News Source: FT
Although Nigeria has Africa’s biggest population, its second-largest economy and huge gas reserves, it produces only about 4,000MW of electricity, forcing businesses and residents to rely heavily on generators. South Africa, which has its own electricity supply issues, generates 10 times as much power and has less than a third of Nigeria’s 160m population.
“This is a game changer for us,” said Atedo Peterside, chairman of the National Council on Privatisation’s technical committee, speaking after the televised bid announcements in the capital Abuja on Tuesday.
“It may still take time to see the effects, but I think everybody realises that things will be different now.”
After he took office in 2010, Goodluck Jonathan, the president, had promised to fix the power sector. Attempts to improve supply during the past two decades saw $40bn dollars spent with little improvement. Corruption and opposition from businessmen in emergency power generation and the sale of diesel for generators are usually cited as reasons for the failure to reform.
Before privatisation, Nigeria’s state-run power utility was split into six generation and 11 distribution companies. The sale of the plants attracted strong interest from some of Nigeria’s richest businessmen as well as retired military generals.
The highest bid came from a consortium that included the listed Nigerian conglomerate Transcorp and the US company Symbion Power, which offered $300m for the 932W Ugheli power plant. A Chinese, Nigerian and British group secured the 1,020MW Sapele plant for $201m.
Femi Otedola, the Nigerian oil tycoon, was also a winner. His company, Forte Oil, together with Shanghai Municipal Electric Power Company and BSG Power, owned by Israeli billionaire Beny Steinmetz, bid $132m for the Geregu plant. Management contracts for the two hydropower plants, Shiroro and Kanji, went to consortiums that included several Nigerian companies, Russia’s RusHydro and China Three Gorges Corporation.
The preferred bidders have six months to make full payment before the plants are handed over. Disposal of the remaining generation company, Afam, has been delayed after some controversy.
Barth Nnaji, the former power minister, who was credited for driving energy sector reform and for increasing electricity supply during the past year, stepped down last month after it was revealed that he had an interest in one of the bidding consortiums for Afam. The resignation was an extremely rare event in Nigerian politics, and afterwards Mr Nnaji said that “powerful vested interests” had tried to force him out.
Opeyemi Agbaje, managing director of Resources and Trust Company, a Lagos consultancy, said that despite the hiccup the privatisation process had been “reasonably well managed and relatively transparent”.
“Some will say the president’s friends and former military leaders have benefited, but it was never going to be poor people bidding for these assets,” Mr Agbaje said. “Privatising power is the most critical economic step we can take.”
Although the economy is growing steadily, at more than 6 per cent this year, analysts believe that could rise to closer to 10 per cent if the power problems are fixed.
The preferred bidders for the 11 distribution companies will be announced on October 16.
Manitoba Hydro signed a contract in July to manage Nigeria’s power transmission.
News Source: FT
