Energy in Africa  :: English Version

Nigeria has started a cautious deregulation process by opening up the power sector to competition. While President Olusegun Obasanjo has decided the sale of state-owned power company Nepa would wait until the last phase of the programme in 2001, he has broken its monopoly.

Private firms can now participate in the generation and distribution of electricity, and there has been a rush of interest from foreign investors. "We have received so far 15 applications across the world from independent power producers; the government is presently formulating guidelines for their operations," Minister of Power and Steel Bolalge told a recent energy seminar in Lagos.

Oil multinational Mobil has entered into an agreement with the government to build a 350 megawatt gas-powered plant on Nigeria's south-east Bonny Island.

Others including Shell, Chevron and Agip, which have substantial operations in Nigeria, have indicated their intention to build power plants to utilise large amounts of gas from oil production currently flared off in the country's oilfields.

United States company Enron has signed an agreement with Nigeria's Lagos State to build a 560 megawatt power plant in Lagos, a city of more than 10 million people; Spain's Radiotronica is negotiating with Nepa a joint venture that covers generation, transmission and distribution of power.

The major spur for reforms in Nigeria's power sector has been the abysmal performance of Nepa, known among Nigerians more as "Never Expect Power Again" than the National Electric Power Authority.

As the government monopoly in charge of electricity, it was spared neither the corruption nor neglect that afflicted public institutions in the last decade-and-a-half of military rule in Africa's most populous country.

"As power supply in the country became increasingly erratic, the energy crisis became a major factor in the rapid economic decline witnessed by Nigeria during the period," said management consultant Ogeh Onyechi.

"Even for those who considered acquiring stand-by generators, it often meant increasing the cost of business to often unbearable levels," he added.

Nepa had become so run down that despite an installed capacity of 5,400 megawatts, it was generating only 1,600 megawatts by the middle of this year, failing to meet national demand of 2,470 megawatts.

Changing the situation in the power sector is the key to Obasanjo's plan to revive economic growth and alleviate poverty.

"As we enter the next century, power generation will receive a boost of not less than 1,000 megawatts resulting from the refurbishment of existing power stations and the establishment of temporary power stations by private investors," said Ige.

The government's target is to reduce power cuts, which have become a way of life in Nigeria, by 50 percent by the end of the year and relegate them to being a thing of the past within two years.

Nepa, Ige said, was ready to purchase power under free market terms from companies such as Enron, which plans to start generating 90 megawatts from a barge to be stationed on the Lagos lagoon by the end of the year.

The main attractions for investors in Nigeria's energy sector include a huge population estimated at over 110 million people and vast reserves of natural gas of more than 117 trillion cubic metres. Oil multinationals have plans to liquefy much of the gas for export and for local and regional energy needs.

A joint venture including, Chevron and Shell, will pipe Nigerian gas across West Africa for power generation in Benin, Togo and Ghana. Nigeria is also discussing supplying more electricity to western neighbour Benin and northern Niger.

Opportunities seen in Nigeria's power sector led to the signing in August of a memorandum of understanding with the United States for co-operation in developing the potential regional market. This took place during the visit of American Energy Secretary Bill Richardson to Abuja.