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Nigerian government officials and power-sector executives visited Hong Kong yesterday as part of an investor roadshow to sell 10 gas-fired power stations.
Despite extensive oil deposits, Nigeria’s political leaders have struggled for years to improve access to electricity. The privatisations are part of a plan to transform the sector. One of the main goals of the strategy is to increase generating capacity to as much as 40 gigawatts by 2020, from today’s level of about five.
“To provide you some background as to how we got here, two important tools that led to the reforms of the sector — the Nigerian Electric Power Policy (2001) and the subsequent Electric Power Sector Reform Act 2005 — were products of about five years’ work by sterling experts in the field of electricity and utility reforms,” said Hajiya Zainab Kuchi, the minister for power, who was speaking at the InterContinental hotel in Hong Kong. “The act was a necessary foundation for charting a new course for a sector that had delivered far below the most liberal expectations of Nigerians.”
That is putting it mildly. The World Bank, in a report published in May, estimated that 82 million Nigerians lack access to electricity — out of a population of 174 million. Only India has a bigger electricity deficit, where more than 300 million people have no access to electricity, but even there the rate of progress has been much faster.
The study examines the period from 1990 to 2010 and found that Nigeria, which is Africa’s most populous country, has added an average of just 1.8% of extra capacity a year — even worse than the Philippines. Across sub-Saharan Africa, energy access fell behind population growth both for electricity and for non-solid fuels for cooking.
The 10 power stations up for sale in Nigeria are owned by Niger Delta Power Holding Company (NDPHC), which is 53%-owned by states and the local governments, while the federal government owns the remaining 47%.
The roadshow started in Lagos before moving to London and then Hong Kong. It will finish in New York next week.
Nigeria is hoping to sell 80% of the power stations through the privatisation, but the offering will raise only a fraction of the proposed $48 billion of investment during the next seven years.
It is also in the process of talking to investors about a $1 billion bond for later in the year, having hired Deutsche Bank and Citi as bookrunners.
The plants have a total capacity of 4.3GW and buyers will benefit from a tax holiday, various exemptions, pioneer status, reparation of profits and a value added tax rate that is the lowest in the world, according to the Nigerian delegation.
Gebriel Suswan, governor of Benue state and chairman of NDPHC, said that Nigeria “will provide security for investment in the country and we are giving enough assurance of opportunities to investors in the country”.
