Nigeria economy: Quick View – Investors complete payments to acquire state power assets

Event

Most bidders for state electricity generation and distribution companies have completed payment for the assets and are set to take over the utilities.

Analysis

All but one of the 14 preferred bidders for 15 power assets met the August 21st deadline to settle the outstanding 75% balance to complete the sales. Newspapers reported that the buyer of a distribution company missed the deadline, and the authorities are considering whether to allow an extension or to invite the reserve bidder to acquire that asset.

Payment by the majority of the investors – both local and foreign firms – for the power companies that were unbundled from the Power Holding Company of Nigeria marks a major step towards the transformation of the country’s notoriously inefficient electricity sector. After decades of mismanaging the power sector, the government is putting great store in the ability of privatisation to end the perennial and chronic power shortages that have hampered the country’s economic development. Besides the nearly concluded sale of five power-generation plants and ten distributors, the government is also in the process of offloading ten power plants that are part of the National Integrated Power Project.

However, turning the sector around will prove challenging for the new owners of state electricity companies, which will have to secure sufficient supplies of gas for thermal plants and ensure the adequate funding and smooth operation of the government – owned Nigerian Bulk Electricity Trading, which will purchase and resell electricity.

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