Nigeria’s power sell-off clouded by shady deals

ABUJA

For decades Nigeria has failed to fix chronic electricity shortages that stifle growth and help keep millions in poverty. That is about to change, the government says, when most of the power sector is privatised by the end of the year. Its target is to increase electricity output tenfold to 40,000 megawatts by 2020.

Turning on the lights in a country where power cuts are a daily ordeal could push Nigeria’s growth into double digits and help diversify its economy away from oil, which in 50 years has created a super-rich elite but has done little to reduce mass poverty.

Yet since power minister Barth Nnaji resigned in August over an alleged conflict of interest, doubts are gathering about the integrity of the process, as oligarchs with scant experience in running power firms line up for a slice of this lucrative pie.

As with Russia in its 1992-1994 sell off of state assets, it is entrenched political and business elites who look set to win much of Nigeria’s power sector, even while Western aid agencies are backing the process with tens of millions of dollars.

The government announced preferred bidders for 10 power distribution firms this week and has approved bids for five power plants, a major step forward. But already the companies who lost out and labour unions have said the process was fraudulent and the results to be scrapped.

The wealthy figures behind the consortia bidding already control vast stakes in Nigeria’s economy and political machine, and many of the assets only had one approved bidder each. It is often felt that since the oligarchs have such sway in Nigeria, it is better to have them in the process rather than outside it.

In past Nigerian privatisation efforts, unqualified bidders and political wrangling caused years of legal battles and delays after assets were awarded. Sometimes funds were diverted to people who failed to revive the firms and left debts unpaid.

There are some who fear that the power battle could become just as messy.

“For a sector being primed for the most comprehensive overhaul in its history, it was perhaps expected that entrenched forces of the ancient regime would not let go without a fight,” Nigerian policy analyst Sanya Oni said. “It is... the beginning of the long, difficult road.”

Despite holding the world’s seventh largest gas reserves, Nigeria produces less than a tenth of the amount electricity South Africa provides for a population a third of the size.

Some $40 billion (Dh147 billion) has gone into reforms in the last 20 years, says Control Risks, a consultancy, yet power has only improved slightly.

Sorting out this mess would seal President Goodluck Jonathan’s legacy.

The Power Holding Company of Nigeria is being sold as six generation firms and 11 distribution companies. A contract for transmission has been given to Canadian firm Manitoba Hydro.

Among the figures angling for a slice of privatised power is billionaire businessman Emeka Offor. His company, Chrome Group, is the highest bidder for firms in the capital Abuja and Enugu.

Offor made his fortune from government contracts, especially under military dictator Sani Abacha in the 1990s.

Another powerful figure lining up is General Abdulsalami Abubakar, who was military ruler for a year after Abacha’s death in 1998 and now chairs Integrated Energy, which has the preferred bid for electricity distribution companies in Yola, Ibadan and the two covering the commercial capital Lagos.

US and British aid agencies are overseeing this process. Britain’s Department for International Development (DFID) pays £200,000 (Dh1.18 million) a year for some embedded consultants who also have strong political ties, a source who has worked on one of the power projects they fund said.

A DFID spokesman said they had helped to make the privatisation “as transparent as possible”. DFID has spent £21 million since 2007 on the power sector. Since then, generation has risen by roughly 1,000 megawatts, according to Nigerian data. Tens of thousands are needed.

— Reuters