Joe Brock Abuja
Nigerian President Goodluck Jonathan handed ownership of the bulk of the state electricity company to private buyers on Monday, completing one of the final stages of a privatisation process meant to end decades of debilitating power shortages.
Despite holding the world’s ninth-largest gas reserves, Nigeria produces only a tenth of the amount of electricity as South Africa for a population three times the size.
The Power Holding Company of Nigeria (PHCN) keeps the lights on for a few hours a day, forcing those who can afford it to rely on expensive diesel generators that burn up billions of dollars of fuel.
Despite slow and costly progress, Jonathan’s effort to privatise the sector and draw in investment may be the best chance to unblock a bottleneck to development. Improvements could be felt in two to three years, experts say.
“I congratulate our new owners who have taken over the engines and cables expected to drive not just the electricity industry but the socio-economic well-being of the nation,” Jonathan said. “To the Nigerian people, who have demonstrated great patience and confidence, putting up often with darkness, I say better days are coming.”
It has taken eight years since a law was passed to enable the process.
Most bid winners were oligarchs connected to the political elite, such as former military president Abdulsalami Abubakar, former military governor of Kano state Sani Bello, and tycoon Emeka Offor, although they have taken on some recognised technical partners like Siemens and Manila Electric.
Fixing electricity could reduce business costs by 40 percent, add 3 percent to gross domestic product and cut mass unemployment that fuels unrest, seen in oil theft in the south and Islamist insurgency in the north, economists say.
An estimated $40 billion (R403bn) has been spent on power reform drives in the past 20 years, most of it wasted.
The PHCN was split into six generation and 11 distribution firms, all sold separately, for about $2.5bn in total.
Private buyers for five generation firms and 10 distribution firms collected their share certificates and operating licences from Jonathan. Government officials said they would take physical ownership next month. Two remaining companies are expected to be sold within six months. Nigeria is also planning to sell off 10 new gas-fired power plants by next year.
Only six of these plants have been completed since former president Olusegun Obasanjo first unveiled plans for them in 2004.
If competent buyers get the plants it could be a boost for foreign energy operators with latent gas reserves such as Royal Dutch Shell and Chevron.
A lack of investment in the transmission network, which remains in public hands, poor gas supply and labour disputes threaten to delay progress in boosting power output.
The government has agreed to pay off more than 14 000 workers at PHCN at a cost of 384 billion naira (R24bn), which is about what it got from the privatisation. Jonathan said $750 million had been raised to help improve transmission.
To add capacity, Nigeria signed a deal last week for Chinese state companies to build a $1.3bn power plant. – Reuters