Where Is the Foreign Direct Investment in Nigeria's Electric Power Sector?

Abstract

The main objective of the Nigerian electric power sector reform was to catalyse private sector investment in the sector. In essence, the reform involved the liberalisation and deregulation of the then wholly government owned and managed electric power sector. This was essential to augment whatever government funds were available for the upgrade of the country's collapsing electricity infrastructure. The idea was to attract majority of the investment from overseas. However, after the initial divestment of some of the government owned successor companies, it became apparent that majority of the investors in the assets were local Nigerian businesses; very few foreign investors were attracted to the nascent Nigerian electricity market.  This same scenario played out again a few years later, when the government conducted the sale of additional thermal plants under the National Integrated Power Project (NIPP). On this occasion, not only did the foreign investors not show up, local investors also refused to pay for the assets. Worryingly too, there have been very few green field assets built by private sector investors since the conclusion of the electricity reforms. This paper seeks to understand the reasons for the apathy shown by foreign investors and most recently local investors to the Nigerian electricity sector. The paper suggests options for turning the situation around and encouraging the much desired private sector investment in the sector.