Why doesn't Africa's largest economy have enough power? - CNBC Africa

Why doesn't Africa's largest economy have enough power?

Western Africa

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Nigeria looks to privatisation in the power sector. PHOTO: wicfoundationinc

“If South Africa can do 40,000MW, then Nigeria with our population we should be able to do three times that, given the size of our economy, which is now the biggest in Africa,” said Wale Shonibare, CEO of UBA.

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Shonibare says that privatisation is the answer to long sustained investment as government cannot take on the entire burden of investment in the power sector.

“It has to be smart privatisation with regulation because it’s a sector that government has to retain involvement in it because it affects the lives of Nigerians. There has to be regulation to ensure that there isn’t monopolistic abuse in the system,” he said.

Power projects that get prioritised will be driven by markets. But the ones that are best prepared with secured and strong sponsorships will likely be funded.

(READ MORE: Can Nigeria achieve its 2014 power target?)

Shonibare says that one must be aware of the risks involved on both the level of the project as well as the sector risks.

“In Nigeria we know that there is still work to be done around the tariff, there’s work to be done around gas supply and one of the weaklings is also in transmission so there’s work to be done there also collections and reductions of losses by distribution companies.”

The return on investment is related to the risk and Shonibare says that projects with a strong PPA, predictable source of gas and that have everything are well linked up should have a lower risk rating and therefore should be able to get better competitive financing.

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