ABUJA (CWN) – Engineering firms, utilities companies and financiers from around the world met with Nigerian President Goodluck Jonathan on Thursday to get more information on his multi-billion dollar plans to privatise the power sector.
Jonathan unveiled the most comprehensive blueprint yet to end chronic power shortages in Africa’s most populous nation in August and a credible reform programme could help boost his popularity ahead of elections due next year.
The continent’s biggest oil and gas producer estimates it will need annual investment of at least $10 billion over the next decade to meet its domestic energy needs and is seeking to woo foreign investors with pledges to improve regulation.
The 2-day “presidential retreat”, to which 200 delegates have been invited from ministers to private power companies and investment funds, is the first opportunity for potential investors to challenge government directly on the plans.
“Looking at the huge challenges ahead of Nigeria, we just want to see how serious they are first,” said an executive from one European engineering firm already active in Nigeria.
“There’s been lots of talk … Nigeria could be a big potential power market in the future, but investment in power plants is big money and it takes time,” he said.
Despite being a major oil and gas producer, Nigeria relies on diesel generators to power everything from phone chargers to luxury hotels because of constant power outages.
Average per capita energy consumption in the nation of more than 140 million people is just 129 kilowatt hours (kW h) compared to 239 in Ghana, 491 in India and 12,607 in the United States, according to Nigerian government estimates.
The country’s energy deficit is estimated to be 23,000 megawatts (MW), representing an annual opportunity cost to sub-Saharan Africa’s second biggest economy of some 20 trillion naira.
Under the reform strategy, Nigeria will privatise power generation and distribution. Government will continue to own the national grid but its management will be privatised.
Previous privatisation efforts, most recently of former state telecoms monopoly Nitel, have been dogged by controversy and investors say the roadmap for reform will need to be backed up by cast-iron guarantees on the regulatory framework.
“We have flown in for this conference because we feel the government is serious about this. This is the first time we are seeing a robust framework like this in the power sector,” said an executive from a second European engineering firm who has been visiting Nigeria for years.
A big stumbling block in privatisation in a country most of its people survive on less than $2 a day is setting a pricing regime which keeps power affordable for the poor while allowing private firms to recoup investment.
Jonathan’s blueprint foresees a “lifeline tariff” for the poorest and a rate which varies with consumption and can be pre-paid, making it more affordable for the lowest-volume users.
A positive reaction from such a large gathering of foreign investors could be a fillip for Jonathan’s campaign in what are set to be Nigeria’s most fiercely-contested presidential elections since the end of military rule a decade ago.
Polls always raise political uncertainty in such a young democracy but investors appeared to shrug off any concerns.
“We are not too worried about elections. We feel there’s a lot of high-powered negotiations going on and we are ready to start if we get a deal today,” said the second European engineering executive.