World Bank warns Nigeria’s struggling power sector causing macro-economic imbalances

The current status of Nigeria’s power sector characterized by poor service and lack of liquidity is a source of macro-economic imbalances and a binding constraint to the revival of growth for the country, the World Bank has warned, while pledging to help the country mobilize private sector investments

Last week at the spring meetings of the World Bank and International Monetary Fund, the World Bank Group held a high level consultation meeting with government authorities to discuss the Group’s support for the Power Sector Recovery Program, which was approved by the Federal Executive Council in March.

The Power Sector Recovery Program, focuses on supporting implementation of power sector reform, reducing losses in the distribution companies, enhancing the sector’s financial viability, increasing access to electricity services, and mobilizing private sector investment.

“A full range of instruments will be deployed to help the Government mobilize investments directly from the private sector and through private sector guarantees,” said Sarvesh Suri, Director of Operations at the Multilateral Investment Guarantee Agency, an arm of the World Bank Group.

The World Bank reaffirmed its strong partnership with Nigeria in addressing the challenges in power sector, that include bringing its experience in developing financing solutions and attracting private sector capital in the country.

The meeting resulted in agreement on the next steps in developing the World Bank Group’s support, recognizing the need for concerted efforts to accelerate its preparation.

“The World Bank Group is committed to supporting the implementation of the Government’s Power Sector Recovery Program to re-establish financial sustainability in the power sector,” said Rachid Benmessaoud, World Bank Country Director for Nigeria.

A statement from the World Bank quoted Babatunde Fashola, SAN, Minister for Power, Works and Housing to have said at the meeting that the approval of the Power Sector Recovery Program by the Federal Executive Council demonstrates that the Federal Government is committed to the sustainable development of the power sector.

“The implementation of the Program is critical to achieving the objectives of the Government’s Economic Growth and Recovery Plan,” said Fashola, who is be being widely criticized for not being able to deliver power expectations since joining Buhari’s cabinet.

On her own part, Kemi Adeosun, Minister of Finance said there is need for well-designed derisking in order to attract private investors to the sector.

“All the agencies of Government will work in concert to ensure implementation of the Power Sector Recovery Program,” Adeosun stated.

Chairman, Senate Committee on Power, Steel and Metallurgy, Enyinnaya Abaribe assured that the legislative arm of the Nigerian government is fully committed to the successful implementation of the Power Sector Recovery Program,”

“We will make sure our oversight functions focus on the completion of projects and initiatives that support the effectiveness of the Power Sector Recovery Programme,”
Dan Asuquo, Chairman, House of Representatives Committee on Power who also participated in the discussions stated.

The World Bank Group congratulated the Government on its commitment to the Recovery Program, stressing the critical importance of the power sector for Nigeria’s development and for restoring macroeconomic resilience and growth.

The meeting discussed the action plan set out in the Program, stressing the need for strong interagency coordination to ensure that it attains its aims.

“Controlling the cost of electricity supply is a critical element of the Recovery Program that will require close attention to prioritizing investments based on least cost power development investment planning principles,” said Riccardo Puliti, World Bank Senior Director for Energy and Extractive Industries.

According to Bernard Sheahan, Global Director for Infrastructure and Natural Resources at the International Finance Corporation, a turnaround of the power sector will require the expertise and financing of the private sector.

“This would require continuous improvement in the investment climate in Nigeria and strong communications among stakeholders of the sector reform plan during its implementation,” he further noted.

 
Onyinye Nwachukwu, Washington DC