Successful electricity privatisation in Nigeria possible

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“We are sitting in the biggest privatisation market on the continent if not in the world. It was really important that the government did this, and I think the effect of it is that it has unlocked a whole new industry now,” Lazarus Angbazo, CEO of General Electric Nigeria, told CNBC Africa during an Innovation Africa panel discussion.

“I think as a tool for advancing economic and infrastructure development, the government has been pretty successful doing it here in Nigeria.”

Nigeria has been on a hot pursuit in the privatisation of its electricity sector, but flaws such as the lack of substantial investment at certain stages of the privatisation process has interrupted the full implementation of the plan.

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According to Solomon Adegbie-Quaynor, country manager for Nigeria at International Finance Corporation, privatisation could be a successful step for Africa’s largest economy but private sector incorporation forms a core principle of the plan’s success.

“Privatisation is really one of the ways in which you can bring private sector participation but it doesn’t always have to be privatisation. What’s more important is to create the right enabling environment to bring private sector participation. We are also looking at people entering into Greenfield Independent Power Producer projects as well,” Adegbie-Quaynor explained.

“The more important thing is really the enabling environment, and simplicity is really the key. Ultimately it’s a regulated business, and investors coming into this business want certainty.”

(READ MORE: Nigeria to monitor private electricity sector)

According to the International Energy Agency, more than 95 per cent of people without access to electricity live in sub-Saharan Africa, highlighting one of the biggest economic challenges but also a huge opportunity for discerning investors.

Countries such as South Africa and Kenya however show the possibility of state and private sector participation certain levels in the power production process. South Africa’s power utility Eskom is state-owned, as well as KenGen in Kenya. Both countries nonetheless have unstable electricity supply and capacity.

Andrew Alli, CEO of the Africa Finance Corporation, however believes that certain models, whether private or stat-owned, will differ in each country.

“Different models can work in different circumstances. If you look across the African continent, power in South Africa is still delivered by Eskom, which is a state-owned company, whereas Kenya for example has a very successful private sector although with government involvement structure. This has worked well over the past 15 years since they’ve brought Independent Power Producers into that market,” said Alli.

“Nigeria again is trying very private sector solutions, which I think is right for this county. There’s no one formula, and what is important today is how you can get large quantities of power to as many people as possible and as cheaply as possible.”