A Review of the Nigerian Energy Industry

‘Clear cut tariff reform will promote power sector investment’

15 October 2015, Abuja – FBN Capital Limited has stated that investment in the power sector can be encouraged through sustainable and consistent cost reflective tariffs. A  Vice President of the firm, Abiola Baruwa, made this known as part of a stakeholder forum focused on ‘Managing the Risk of Releasing Private Sector Capital for Investment in the Power Sector,’ during the 2015 Powering Africa conference that recently held in Abuja.

 

Power distribution transformer.
Power distribution transformer.

The discussions were held against the backdrop of the need to encourage foreign investments in the power sector given that local banks were instrumental in providing acquisition financing during the privatization phase of the Nigerian power sector and have therefore substantially invested in the sector.
Speaking at the event, Baruwa stated: “The major factors foreign investors are looking at before investing in the power sector are consistent and sustainable cost reflective tariffs and a substantial de-risk of the power sector. The power sector can be de-risked by allowing competitive gas prices, the power sector regulator (NERC) ensuring consistent and stable regulation, clear direction of government’s policy on transmission (including government’s clear funding plan for transmission which needs to be executed immediately). Until these factors are properly addressed, international investors will continue to be skeptical about investing into the sector.”
A cost reflective tariff is a critical requirement for local and international investors in the Nigerian power sector. She also urged the government to provide requisite legislation to unlock the largest pool of local funding available which is the pension fund deposited with pension fund administrators.

 

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