THE renewed interest expressed by American infrastructure solutions company, General Electric, in deepening its investment in Nigeria, is a gesture that should be warmly embraced by the new administration. Among other pressing areas of infrastructure requirements, the country is in dire need of credible partners with the requisite wherewithal to deliver at a convincing level in the power sector, currently under the siege of a greedy and fraudulent cabal. The Buhari government has the opportunity and capacity to enforce difficult policy decisions, including a decisive crackdown on this cabal that has been fencing off credible foreign investors from the power sector.
The sector has tremendous growth potential. In a recent report, the vice-chairman of the technology and finance services company in Nigeria, John Rice, said meetings had already been held with the country’s authorities concerning how GE could be a part of the process of bridging the critical infrastructure gaps in Nigeria. “We can help in foreign sources of capital and may also put some capital into projects directly. Electricity is key and Nigeria also needs a freight rail system,” he said.
Nigeria, the largest economy in Africa and the continent’s top crude oil exporter, currently has an infrastructure deficit that requires $14 billion funding annually to bring up to scratch, according to the immediate past Minister of Finance, Ngozi Okonjo-Iweala. Indeed, Nigeria’s electricity woes are not new; the sector has suffered from decades of corruption, bad management, poor policies, and the lack of accurate planning for the future. That a country with an estimated population of 170 million currently depends on a meagre output of 4,000 megawatts of electricity, which sometimes fluctuates to less than 2,000MW, captures it all.
The impact has been very devastating, stunting the manufacturing sector of the economy, and creating a latent time bomb of mass unemployment, put at over 50 per cent among the youth. The country has yet to recover from the mass closure of businesses that affected over 800 companies between 2009 and 2011 as recorded by the Manufacturers Association of Nigeria. The informal sector has not also been spared, with practically every firm now relying on alternative sources of power supply.
Needless to say, Nigeria fares badly compared with other emerging economies. For instance, South Africa, with an estimated population of 54 million, generates over 44,000MW of electricity. Any wonder why that country is the most industrialised in Africa? Brazil, a country that was once held back by debts, is now one of the world’s top five economies because, with a population of just over 200 million, it can generate over 100,000MW of electricity. Yet, efforts are continually going into raising the bar of power generation in that country.
Unfortunately, the Nigerian government’s plan to confront the power conundrum through the privatisation of the erstwhile public utility, the Power Holding Company of Nigeria, was abused when corrupt government officials shut out potential credible investors and sold its unbundled units instead to their cronies and fronts, who had literally no antecedents in the electricity business. Of the dozens of companies from Europe and America that showed interest in buying into the successor firms, not one succeeded after they were frustrated out by the opaque and corrupt process of the sales.
The result has been a further tumbling in the fortunes of the power sector. After borrowing money from local banks to fund the purchase of the firms, there is no new line of credit available locally for the “investors” to channel into the companies as their creditors are already expecting them to service their loans. So, rather than improve on the quality of what they met when they took over, the so-called new investors are just sitting back and exploiting electricity consumers with arbitrary bills, forcing them to pay exorbitantly for electricity that is not even available.
Placed in good hands, however, the Nigerian power sector has the potential to drive the country into a new era of industrial development and economic prosperity. Apart from what can be harnessed from the abundance of wind, coal, hydro and solar energy, Nigeria has a gas deposit that is estimated to be the ninth largest in the world that can generate ample electricity for the country. In fact, it is believed that Nigeria alone has the capacity to supply the rest of Africa with electricity if only she can get her act together.
One of the key investment drivers, according to KPMG, a global management firm, is the increasing prevalence of peace, democratic elections and improved governance. The present environment offers a golden opportunity for a fresh start. There must be a new strategy built around diversifying the energy mix while deploying tax incentives to further attract the foreign direct investment necessary to build and rebuild our generation, transmission and distribution facilities. The interest from GE, a company already familiar with the Nigerian environment, therefore offers the platform to attract other companies with the technical know-how and the financial muscle into the power sector. The development is also timely because a new government is in place that should, hopefully, be doing things differently.
