HomeIndustry SectorsFinance and PolicyNigeria pledges better regulation for power investors

Nigeria pledges better regulation for power investors

Barth Nnaji 
29 June 2010 – The man charged with turning around Nigeria’s dilapidated power sector on Monday promised faster reforms to encourage foreign investors to take part in a planned privatisation programme.

Barth Nnaji, who was appointed by President Goodluck Jonathan a week ago to lead a task force on boosting power supply in Africa’s most populous nation, said government alone could not invest enough to meet its energy needs.

Nigeria is home to Africa’s biggest oil and gas industry but underinvestment and mismanagement have left its power sector unable to meet demand, leaving businesses and individuals who can afford it reliant on diesel-powered generators.

“Access to supply is 40% of the population. It should be growing at 6% per annum if we want to achieve our objective,” Nnaji told a conference on Nigeria in London.

“The government of Nigeria alone cannot do it … We should begin to attract investment form the private sector. This government has decided to reinvigorate it, accelerate reform.” Jonathan, who took office last month after the death of President Umaru Yar’Adua, has made ameliorating chronic power shortages a top priority and has said Nigeria will privatise generation and distribution next year.

Nnaji said federal and state governments did not plan to maintain executive powers in the joint ventures formed by the privatisation, adding they would be minority shareholders.

“(Government) will be in only for five years, then they will divest,” he said.

Successive presidents have pledged to boost Nigeria’s power generation — which regularly plunges to well below its 3000 megawatt capacity due to poor maintenance and mismanagement — but little concrete progress has been made despite hundreds of millions of dollars earmarked for investment.

The lack of a strong regulatory framework, particularly around the tariff regime, has been a major disincentive to private sector involvement.

“If you want international players, you have to make sure you have a transparent regulatory environment,” Orli Arav, head of project finance at Frontier Markets Fund Managers, told the conference.

Nnaji said he was determined to put in place a framework that would not be altered each time there was a change in government and create a competitive, private sector-led power sector within the next five years.

“The agenda of my task force is to see that this reform is driven to a logical point of no return, so we are not going to have one government come in and try, then another government come in and stop it,” he said.

He said one critical step would be to build additional generating capacity of some 3,000 MW over the next three years and that the government planned to hold a conference in the coming months to discuss private sector involvement in this.