Privatizing electricity puts Nigeria on the right track: IEA economist

The chief economist for the International Energy Agency says oil-rich Nigeria has the capacity to extend electricity to all its 150 million citizens.

By , Staff writer

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    In this Aug. 24 photo, a man refuels a small generator on a store rooftop at Oshodi Market in Lagos, Nigeria. Nigeria's president announced a multi-billion-dollar plan last month to repair and privatize the oil-rich nation's decrepit national power grid that forces people to rely on private generators to provide electricity.
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Nigeria is going the right route by privatizing its electricity sector, says the chief economist for the International Energy Agency (IEA), referring to the government’s call last month for international investors to pour $100 billion into its ailing Power Holding Company of Nigeria.

But the No. 3 oil exporter to the United States could immediately solve its electricity woes if the government decided to reallocate a mere fraction of its vast oil and gas revenues, says Fatih Birol of the IEA.

“If Nigeria were to spend 0.4 percent of its oil and gas revenues on energy power and electricity, they would solve this problem immediately," he said in a telephone interview. "Other countries [aside from Nigeria] are not getting revenues from oil and gas. If left to the markets they will never get access to electricity."

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Africa’s most populous nation is an exception in being able to potentially find its way out of energy deficiency by wooing international investors and reallocating oil and gas revenues to help its citizens connect to the power gird.

Most of the 1.4 billion people worldwide who lack access to energy will remain in the dark unless the international donor community itself decides to target the problem, says Dr. Birol.

The greatest challenge to achieving universal access to electricity lies in sub-Saharan Africa, which takes up most of the African continent. There, half of Nigeria’s 150 million citizens help make up the 587 million Africans (nearly twice the population of the United States) lacking access to electricity, according to an IEA report released Tuesday on the sidelines of the annual United Nations General Assembly session.

Annual residential electricity consumption in sub-Saharan Africa, excluding South Africa, is roughly equivalent to consumption in New York State (about 40 terawatt hours). Some 60 percent of people in urban areas of sub-Saharan Africa rely for cooking on biomass – such as wood, charcoal, tree leaves, crop residues, and animal dung – which contributes to household air pollution that the World Health Organization estimates causes 1.45 million premature deaths each year.

While Birol says Nigeria is on the right track toward increasing access to energy, the oil-rich nation has far to go. According to the Central Bank, Nigerians spend $13 billion a year to fuel oil-operated generators, which provide more than twice as much electricity as the national power company.

And foreign companies may think twice about entering Nigeria’s electricity sector. Upcoming elections could strain a power-sharing agreement between the mostly Muslim North and the predominantly Christian South, potentially throwing the country into violence and hurting businesses, former Ambassador John Campbell warned this month in Foreign Affairs.

Then there's the fact that only one country has ever had its entire electricity supply taken over: Cameroon. In 2001 the country's government sold stakes in its state energy company to AES, one of the world’s largest power companies. The US company was at first stymied by corruption, but in the end privatization vastly improved services, according to analyst G. Pascal Zachary, who visited Cameroon to study the deal.

Still, a 2007 African Union report (pdf), “Privatization in Sub-Saharan Africa – an essential route to poverty alleviation,” found that “privatized energy firms were able to reduce prices sharply as a result of their ability to limit the amount of stolen or unbilled electricity.”

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