Slow progress for privatisation in Nigeria

Privatisation, a critical marker in the success of President Olusegun Obasanjo’s reform programme, is making relatively slow progress.

by Financial Times, May 16 2006
Last Updated: 23 Jul 2013

The biggest potential targets for investors are the utility companies Nitel – the state telecoms company – and Nepa – the state power company. There are also the country’s four oil refineries. But none of them look particularly attractive from an investor’s viewpoint.

Nitel’s infrastructure, for example, has been very badly neglected. Its pre-tax income dropped to 1.5bn naira ($11m) in 2005 from 15bn naira ($113m) in 2002, and the market share of its mobile unit, M-Tel, shrank to 5% from 11% in the same period.

As regards the power company, it has already been broken up into 11 distribution firms, seven generating companies and a transmission company under the umbrella of the Power Holding Company of Nigeria (PHCN). The government is planning to invest $2.5bn into its distribution networks and generating capacity.

But there is concern that there had been no audit of the company's assets. And currently, its capacity is unable to keep up with demand, resulting in constant or lengthy blackouts. Finally, foreign companies are reluctant to invest in the oil refineries so long as the government maintains fuel subsidies that benefit those that handle lucrative import contracts.

And as for the record of privatisations so far, there is some doubt about its success. Critics claim that the process of bidding for state assets has been politicised to favour business figures who support Mr Obasanjo’s controversial plans to stand for another term in office.

Source: "Old empires cling to power as the march to privatisation begins"
Dino Mahtani
Financial Times, May 16 2006

Review by Morice Mendoza

Financial Times, May 16 2006 recommends

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