At the three-day Middle East Energy Conference, which was held in Dubai from March 7 to 9, half a day’s programme was devoted to discussing investment opportunities in Nigeria arising from the country’s $10 billion energy transition plan, the first of its kind on the continent. Nigerian dignitaries were eloquent about the country’s prospects until the conversation drifted to what the country was doing to curtail currency risks.
Some investors who offered comments during the panel sessions and others who shared their concerns with BusinessDay noted that while they were aware that investments everywhere in the world carry an element of risks, regulatory and foreign currency risks in Nigeria were too fundamental to ignore despite their positive view of the country’s energy transition plan.
“If an investor has problems repatriating money, that’s a big problem; that’s why there’s no direct flight from Lagos to Dubai,” Vishal Daryanani, head of an energy utilities trading firm with an office in Nigeria, said at an African-focused investor session.
Dolapo Kukoyi, managing partner at Details Commercial Solicitors, who was on a panel on investments into Africa, said while Nigeria allows for repatriation of dollars, the rules must be objective and well communicated to investors and the central bank needs to innovate ways that will make the process easier to attract much-needed investments.
Malador Sowe, CEO of Sierra Leona-based Disruptive Energy Solutions, said in an interview with BusinessDay that governments that talk about incentives should consider incentives along easing currency challenges for investors to find the continent attractive.
Along with currency risks, some investors were also concerned about regulatory overreach and the challenge with continuity of policies after a new government takes office.
Energy transition plan
The Nigeria Energy Transition Plan seeks to reach net-zero emissions in terms of the nation’s energy consumption by 2060, by cutting emissions across five key sectors: power, cooking, oil and gas, transport and industry.
With gas reserves of over 206 trillion cubic feet, Nigeria has chosen to leverage the resources to develop its power and industrial sectors and government officials on the delegation, according to feedback from investors, were impressed in their marketing of the plan.
Sule Abdullaziz, the managing director of the Transmission Company of Nigeria (TCN), the highest Nigerian government official on the delegation, spent the bulk of this time highlighting the challenges that often conspired to force the nation’s creaking grid to collapse.
The key challenges, he said, were financing, sabotage of the power transmission lines and sub-national governments’ penchant to impose arbitrary right of way charges before cables and poles can be laid in their regions.
Nonetheless, he encouraged over a hundred delegates gathered at a makeshift conference hall of the World Trade Conference including rich Arab sheikhs, EPC contractors and project developers that Nigeria was a fertile ground for investment leveraging its vast gas resources.
“It is said we are an oil-rich country, but in comparison to gas, we have just a drop of oil,” he said.
The TCN boss said the country was leaning towards China to finance some energy projects and invited other investors to leverage Nigeria’s plan to transit to cleaner energies using gas. He also said the renewable energy sector holds massive potential and is fast developing.
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Sowunmi Olabode, a senior legislative aide to the Nigerian Senate President, in remarks at the panel session, said while Nigeria contributes less than one percent of the global CO2 emissions, it is not unaware that he world is accelerating the transition from a fossil fuel-dominated to cleaner energies, the country seeks to translate its huge gas reserves into energy for its people.
Addressing investor concerns, Olabode said there was indeed some disconnect between policymaking and private sector operation and there is no sufficient forum for effective, constructive engagement. He said governments have realised that consistent regular and effective communication between private and public sector policy makers helps to improve the investment climate.
The event organisers, Informa Markets, brought together buyers and sellers from across different countries to explore the latest advancements in energy products and solutions. It provides opportunities to network with international energy suppliers, discover products and solutions that are changing the energy landscape, and build long-lasting business relationships. By the second day of the event, they said deals worth over $750 million were already reaching advanced stages but it was unclear if any would be coming to Nigeria.
It appears that investors keen to explore opportunities in Africa’s biggest economy have learned to live with the country’s inherent challenges including insecurity, spotty electricity supply from the national grid but the prospect of trapped funds keeps them up at night.
