Nigeria Considers Broad Privatization to Solve Power Supply Crisis

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Researched by Industrial Info Resources (Sugar Land, Texas)--Nigeria's president Goodluck Jonathan has announced that, in a new drive to put the country's power generation sector in order and create credible opportunities for the $10 billion investment needed, responsibilities will be divided amongst the government and private companies. The private sector will be responsible for generation and distribution, while the government will continue to own the transmission system, but under private-sector management.

Having experienced many top-down announcements since the 1990s that were inspired by equal parts political ambition and election survival instincts, Nigerians are watchful of the new initiative, as similar plans have failed and swallowed billions of the country's dollars in the process.

Nigeria's businesses and industries, which suffer chronic blackouts, are willing to be positive about the new scheme, as their options between survival and closing down are dictated by the power supply. Workers at the state's Power Holding Company of Nigeria have staged a one-day protest strike driven by fear of redundancies precipitated by reforms.

The country's central bank estimates that Nigerians spend $13 billion annually on private generators to keep the lights on and machines running. National grid supplies sometimes fall as low as 1,000 megawatts (MW) for the whole country, when minimum real demand is 6,000 MW. This situation has become untenable to Africa's largest oil and gas exporter, which has a population of 150 million people.

The new initiative could see one of Africa's largest privatization campaigns, which will involve the government's selling 11 distribution companies that will be formed out of the state's Power Holding Company of Nigeria. Market watchers say that companies from Canada, Turkey, Saudi Arabia, India and China are looking with interest at the privatization potential. But officials estimate that electricity tariffs will have to rise by a factor of three to attract foreign investment. This price-rise scenario also applies to gas suppliers that currently gain more from export prices than from lower domestic rates.

Diezani Allison-Madueke, Nigeria's oil and petroleum minister, has said that reforms might see the gas price increased dramatically by 2013. She added that the power sector's growth would translate in the minimum to a gas demand of about 3 billion cubic feet per day by 2015 from the current level of about 800 million cubic feet per day. The president's power adviser, Barth Nnaji, has said that the target is to increase generation to 14,019 MW by 2013, which many Nigerians consider empty rhetoric in the face of an upcoming election.

In mid-August, the president said that $3.5 billion would be invested to build a 700-kilovolt power grid, which will be completed in four years. This will reduce transmission power losses and allow renewable energy sources onto the grid. Funding for this, he said, would come from the state, private investors, and international financing and development agencies.

Once the bidding for this project is finalized, the project management will be handed over to the winning company. Power Grid Corporation of India Limited (PGCIL) (New Delhi, India) is one of the shortlisted companies, along with Canada's Manitoba Hydro (Winnipeg, Manitoba) and Ireland's Electricity Supply Board (Dublin, Ireland). Some influential sources in Nigeria and international agencies are said to hold PGCIL's capacities and performance in high esteem.

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