20 February 2012

Nigeria again delays power sector privatisation

Nigeria has again pushed back the timeframe for selling off state-owned power assets, its privatisation agency said on Monday, another setback for reforms which investors hope will unlock the potential of Africa's second largest economy

Reuters | Feb 20, 2012

Despite holding the world's seventh biggest gas reserves, Nigeria only provides its 160 million people with enough electricity to power a medium-sized European city.

Those who can afford it rely on expensive diesel generators. Those who can't light candles and lanterns.

President Goodluck Jonathan unveiled power privatisation plans 18 months ago as a major flagship policy and pledged state power generation and distribution assets would be sold off last year.

If he could fix Nigeria's notoriously creaky power sector where several of his predecessors have failed it would revive his presidency, which is struggling to shake off corruption and a growing Islamist insurgency in the north.

He would also leave one of the most impressive legacies of any Nigerian leader. But several government deadlines on privatisation have been missed and the Bureau of Public Enterprises has set out a new timetable.

"According to the revised bid timeline issued to investors by the privatisation agency, the announcement of the preferred bidders for the 17 successor companies ... will be made on/or before October 23, 2012," a BPE statement said.

It said part of the reason for the delay was the need to address concerns raised by power industry officials at a conference with the Nigerian government in November.

Power infrastructure can be roughly split into three sections: generation, transmission and distribution.

Nigeria plans to award a management contract for transmitting electricity from power plants to substations and privatise the bulk of six power generation plants and 11 distribution firms, which supply end users.

Manitoba Hydro of Canada and state-owned Power Grid of India are the two companies short-listed for the transmission management contract.

Frequent electricity blackouts have long been a brake on growth in sub-Saharan Africa's second biggest economy and economists say solving the problems could launch GDP growth from its current rate around 7 percent a year into double-digits.

Nigeria was hoping to produce 6,000 megawatts of power by the end of this year, up from the current 4,000. This would still only scratch the surface of the minimum 40,000 megawatts needed for a nation of around 160 million people.

Decades of Nigerian administrations have cashed-in on crude exports rather than investing in plants to refine fuel or developing gas for domestic consumption, which means the poorest half of the population live without power.

Nigeria estimates it will need $10 billion a year of investment over the next decade to meet its energy needs.

(Reporting by Joe Brock; Editing by Tim Cocks)

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