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How Nigeria's plan to privatize its electricity company could light up Africa

Privatization isn’t easy, however. Nigerians need look no further than neighboring Cameroon. While an American company brought cash and expertise, they were initially stymied by the endemic corruption in the electricity network.

By G. Pascal ZacharyGuest blogger / August 30, 2010

In this Tuesday, Aug. 24, 2010 photo, a woman sells fish by lantern light in Lagos, Nigeria. Nigeria's president announced a multi-billion-dollar plan Thursday to repair and privatize the oil-rich nation's decrepit national power grid that forces people to rely on private generators to provide electricity. (AP Photo/Sunday Alamba)

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OK, Nigeria isn’t for sale, not all of it at least, only the national electric power company.

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In a country where most people lack reliable electricity to their homes and workplaces, the government’s declaration of an intention to sell of its pathetic state-owned electricity company is cause for celebration – and also reflection on what private-ownership will bring if the government manages to sell even a controlling stake to outsiders.

The government said Aug. 26 it wants foreign investors to put $10 billion into its ailing electricity company, Power Holding Company of Nigeria. The long list of potential investors includes Canada, Turkey, Saudia Arabia, China, and India, but not the United States.

Surely Nigeria offers profitable opportunities for foreign investors – and the promise of improved living standards for all but the top 10 percent of Nigeria’s population who already live in relative opulence. Electricity is the critical technology for African countries to master. The difficulty is more political-economic than technological. State-ownership, while sometimes warranted, has been an utter failure in the electricity sector in Nigeria and in many other African countries.

Privatization isn’t easy, however. Nigerians need look no further than neighboring Cameroon, where 10 years ago an American electricity supplier, AES, purchased a controlling stake in Cameroon’s entire electricity system, dominated then as now by hydro-power sources. To date, the purchase by AES is the only case of a single company taking over responsibility to supply electricity to the residents of an entire African country.

While the Americans brought cash and expertise, they were initially stymied by the endemic corruption in the electricity network. Not only were customers routinely looting the company by stealing electricity or hijacking equipment, employees were conniving with the crooks. When I visited Cameroon in 2005 expressly to study the privitization, AES had installed a new local management that ultimately got its arms around the worst abuses of the old regime. Service vastly improved. Yet at a price: tariffs rose also. AES then faced a new problem: resentment at rising rates, without gratitude for the improvements brought by foreign investment expertise.

Nigeria likely will follow a similar path, if indeed the privitization occurs at all or even if Nigeria sells off different pieces of its electricity network to different investors. After all, the electricity supplier touches the lives of everyone. Power outages in Nigeria are of course a symbol of the impotence of a government that controls mammoth oil reserves and permits vast gas flaring that might even be used to generate electricity for beleagured locals. Even hardened socialists and their statist cousins must by now despair that the government can ever reform on its own the Nigerian electric power company.

But private investment is no panacea. While it ultimately may provide relief for those who live too much of their lives in darkness or by the dim light of a kerosene lamp, privatization may ignite new types of frustrations that neither the state nor private investors will be prepared to manage.

Hints of the possible mayhem were quick to emerge. Following the privatization announcement, workers at the state-owned electricity company went on strike, reinforcing their image as greedy incompetents yet at the same time causing more severe blackouts than what passes for normal.

The turmoil over who supplies electricity and how is worth the struggle. Nigerians can talk about shooting satellites into space, or the massive expansion in mobile phone use, or the creative explosion of the footprint of Nigerians on the Internet. These are impressive achievements. But until Africa’s most populous country masters the most important technology of the 20th century, neither Nigeria nor Africa can enter the technological world of the 21st century. Electricity is a foundational technology on which so much else depends. No other technocratic project in Nigeria could be more important than renovating, improving, and indeed democratizing electricity delivery for all.

--- G. Pascal Zachary blogs at Africa Works.

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