Interview for
eBizguides, December 12th, 2003
You are in charge of two important sectors for the
development of Nigeria. Especially power is a key for success,
can you tell us what is the current installed capacity and
output level in Nigeria?
The power sector in Nigeria is a sector where the president,
Mr. Obasanjo, has put a lot of emphasis. Between 1999, when
this administration was formed, and now there has been a 70
% improvement in the country’s generating capacity.
Today we have 4200 MW capacity and we have an output of 3300
MW on a daily basis. Regarding distribution capacity there
has been a 25% improvement. We have increased distribution
capacity from 6000 MW to 8000 MW. The Government is still
investing in the sector and there is an ongoing reform in
the sector, this reform is designed to bring in private sector
participation and private investment to the power sector.
I believe that with these initiatives, we will be able to
achieve even greater heights by the end of this administration
in 2007.
What are the expectations then for the year 2007
in terms of power generation increase as well as improvement
on the distribution efficiency?
We still haven’t met the national demand. The goal
by 2007 is to meet the entire national demand and have some
excess capacity, that is the objective of the current administration.
What are currently the main challenges Nigeria is
facing in terms of power generation and distribution?
One of the big challenges is the funding of the sector; we
believe that for the time being, the Government has to support
the sector with budgetary funding. We believe that this is
one of the constraints for meeting our own growth expectations.
Beyond that we expect to create a conducive environment for
private sector to come in and invest. We have been working
on this, but it is one of the main challenges we face in the
sense that the power sector is relatively underdeveloped.
Those who are ready to invest would often demand commercial
risk guarantees, which sometimes the Government is not in
a position to provide. We are also faced with the challenge
of getting the Electric Power Sector Reform Bill through the
National Assembly. We believe once the bill is passed the
opportunities will be much more apparent to prospective investors.
Those are the main challenges beyond our routine day to day
operational challenges relating to improvement in our service
delivery, efficiency levels etc…
There are already several private companies active
in the power sector in Nigeria. How are the liberalization
and privatisation processes developing?
There are indeed a few independent companies operating in
the sector. Recently, we have had a first with AES investing
in the power sector in Nigeria; the investment is the region
of USD 240 million. The sector is not yet completely liberalized,
so AES has entered into power purchase agreements with the
utility company, which is NEPA. We believe that we must liberalize
the sector, as we reform the sector there will be more opportunities
for IPP’s (Independent Power Producers) to come in,
build power plants and sell the product to consumers in Nigeria.
The sector reform program, on which we are working closely
with the World Bank, has progressed considerably. From January
onwards, we will start the process of unbundling the utility
company into semi-autonomous business units. Right now we
have a vertically integrated monolithic utility.
Where are the main investment possibilities in the
power sector currently and what are the incentives accorded
to companies in order to stimulate investment?
Initially, Government will continue to invest to strengthen
the network. The grid is not yet completed, so Government
is going to continue to invest in that sector. Government
will also, for some time, make some investment in new generation
capacity because of demand shortfalls. We expect the private
sector to make investments particularly in the area of generation.
We have Agip, which is building a 480 MW power plant in the
Niger Delta. That project should come on stream by the end
of 2004. The investment there is quite substantial. We believe
Shell will be investing in new generating capacity in Rivers
State. Beyond that we have also received a number of unsolicited
expressions of interest from IPP’s who are quite keen
on investing in generation in Nigeria. What we are trying
to achieve now is to restructure the sector to create new
businesses out of what used to be one big NEPA. We believe
we could consider the option of concessions in the medium
term with the distribution companies. We expect that the transmission
company will remain in the hands of Government, but with the
unbundling of the generating sector and the distribution sector,
that will make the sector much more viable and more attractive
to investors. So, we expect substantial investment to come
in the area of distribution. All this, of course, will be
driven by the passage of the power sector reform bill, which
we expect to hopefully pass through the Assembly by the end
of the first quarter of 2004. With the power sector reform
bill in place and the regulator in place, certainly the Nigerian
power sector will start looking much more attractive to investors.
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(continues)
By 2007 the national demand is expected to be covered,
are there also plans to generate excess and export it to neighbouring
countries?
Yes, currently we already export power to Niger Republic.
We supply around 93% of the demand of Niger Republic. You
might also be familiar with the West African Power Pool Project.
Of all the countries within the pool, Nigeria has the most
advanced interconnections with Niger Republic. We have three
interconnections between Nigeria and Niger Republic and we
are working on an additional interconnection. There is also
an interconnection project between Lagos and Sakate in Benin
Republic. That project is partly funded by the ADB and we
expect it to commence early in 2004. There is also the West
African Gas Pipeline Project. We expect that substantial economic
development opportunities will follow from the completion
of the project.
When it comes to steel production, your government
is doing great efforts to revitalize the steel industry in
the country. Can you tell us what is the current status in
this sector and what you want to achieve in terms of steel
production?
Government is determined to produce steel in Nigeria. Over
the last 40 years, Government has invested close to USD 10
billion in the steel industry and steel plants. It is a sector
that has not been very productive. We have two steel plants
with a substantial production capacity. Together they have
a capacity of 1.85 million metric tons. We have three inland
rolling mills and the rest of the related facilities like
the iron ore project and a few others. Government has invested
substantially in those areas and the reform program of the
Administration will eventually see those facilities being
privatised or put under concession. The Ajaokuta plant already
has been concessioned to an American company called SOLGAS
Energy. We expect the second plant will be privatised by the
end of the first quarter of 2004. We are trying to put in
place the necessary infrastructure like the rail lines and
the port facilities that would facilitate the manufacture
and trading of steel.
What is the position of Nigerian steel and its competitive
advantages in front of the heavily subsidized productions
of American and Europeans steel mills?
I don’t believe that if we try to export our steel
towards those regions it would be profitable, but the local
demand is quite substantial. It is estimated to be above 2
million metric tons and this is where we want to focus on.
Everything that is produced locally can be consumed locally.
It would only be after meeting that demand that we would start
considering competing in a market that currently is not very
lucrative.
The Aluminium industry is also under your wing, can
you tell us how this industry is evolving in Nigeria?
Our aluminium smelter facility has a huge capacity, around
150,000 metric tons. Unfortunately it is not in production
and hasn’t been for several years. It is also slated
for privatisation under the current reform program. There
has been considerable keen interest from investors in that
facility. We expect that by the end of the first quarter,
that facility will also be privatised. Besides the smelter
in Ghana and the one in Cameroon, there is no other smelter
in West Africa. It is a viable facility and once it is privatised,
it should start producing aluminium within a very short period.
We are currently concluding the exit agreements with the developers
of the facility. Once we conclude those exit agreements, then
that facility will become a much more attractive investment.
We have received expressions of interest from ALCOA and Russia
Aluminium, the big players in the industry.
Can you tell us about your professional background?
I am a lawyer by profession. I was trained outside Nigeria
in the United States and the United Kingdom. I came back to
Nigeria where I started my own small law practice. I got into
politics 11 years ago. In 1992 I was elected into the Senate
I served until Abacha sent us all home. In 1997 I went again
into politics. In 1999 I was appointed Special Adviser to
the President on Public Utilities. In 1999 as well, I was
seconded to what is now the NDDC (Niger Delta Development
Corporation). In 2000 I was asked by the President to chair
NEPA in an executive capacity until the end of 2001, after
that I went back to my post of Special Adviser and in 2003
I was appointed Minister.
What would be your final message for investors interested
into the sectors your Ministry represents?
Nigeria has a population of 133 million people, less than
40% of these people have access to electricity. If you start
from that perspective, you can imagine what the demand is.
Our current levels of generation, transmission and distribution
are not meeting the current demand, so we do have a shortfall
in supply. The power sector is being reformed and the opportunities
are the most attractive in Nigeria today. The power sector
is far bigger than the telecommunications sector and you have
seen what has happened with the deregulation of that sector.
I believe it will look like a child’s play when the
deregulation of the power sector takes place. There is a huge
demand for energy in Nigeria and that demand is not being
met. I would believe the opportunities for investment for
foreign investors in the power sector is just phenomenal.
The returns on investment are going to be quite reasonable.
I don’t believe any sector of the economy offers the
opportunity the power sector offers. With concerns like the
steel and aluminium industry, anybody producing steel here
will find sufficient incentives and a huge domestic and regional
market.
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