Joe Brock Abuja
In an unwanted daily routine that has lasted 17 years, Phillip Cleatus sits in the dark doorway of his shoe-making shop in Nigeria’s northern city of Kaduna, waiting for the lights to come back on. President Goodluck Jonathan is trying to persuade Cleatus and 170 million other Nigerians that will soon change.
Yet while his plan to privatise power is creeping forward, it is likely to take decades to end the chronic electricity shortages that are among the main barriers to investment and growth in the economy.
Despite being Africa’s leading oil producer and holding the world’s ninth-largest gas reserves, Nigeria’s power output is 10 percent of South Africa’s and it has a population three times the size.
Nigeria is in the process of breaking up the defunct state power company into 17 private generation and distribution companies and selling them for about $2.5 billion (R22.4 bn) in total, as part of its efforts to increase electricity output tenfold over the next seven years.
If Nigeria got the lights working, it would reduce business costs by up to 40 percent, add 3 percent to its gross domestic product and cut the mass unemployment that fuelled unrest and insurgency, economists said.
The $13bn a year that Nigerians spend on diesel, most of which is imported, would be a thing of the past. Power from generators costs more than twice as much as from the grid.
“This is killing my business, I lose 45 percent of my annual profit to poor power supply,” Cleatus said.
A glitzy ceremony hosted by Jonathan last week celebrated the first payment by private companies that are taking over the unbundled state electricity firm and a deal by the World Bank to give an initial $145m risk guarantee for gas supply.
A close look at the private companies that won the bids shows a mix of oligarchs and influential figures connected to Nigeria’s political elite, and some recognised technical partners such as Siemens and Manila Electric.
This has raised some questions about the expected efficiency of the privatisation process and what it can deliver, but there are those who argue that effective business in Nigeria is impossible without political connections and patrons.
Electricity capacity had been in steady decline for a decade when Jonathan launched his reform plan in 2010, pledging Nigeria would boost electricity generation from 3 000 megawatts (MW) to 10 000MW by the end of this year and 40 000MW by 2020.
Generation has increased to about 4 000MW, but experts said there was no hope of meeting the government targets and power output would initially fall after the privatisation was completed at the end of this year. They expected some improvements would be felt in two to three years.
“It will probably take Nigeria another 50 years before it attains the same level of electricity consumption per capita as South Africa enjoys today,” said David Ladipo, whose company, Azura, is spending $700m to build a 450MW plant.
There are hurdles ahead. The government is struggling to get the funding it needs for crucial transmission and gas supply infrastructure.
In addition, Nigeria says it has 340 billion naira (R19bn) to pay off 40 000 state electricity workers, but powerful labour unions are blocking the retrenchment efforts.
Still, there remains optimism that wrestling power out of government hands will eventually lead to progress.
“Given the scale of the challenge and the history of the sector… reform is progressing very well,” said Fola Fabule, a Lagos-based investment banker focused on infrastructure finance. “The key… will be commitment to see reforms through.” – Reuters