Nigeria government has terminated a $24 million electricity contract with Canada's state-owned Manitoba Hydro, the presidency said on Wednesday, in a setback for plans to privatise a moribund power sector that is holding back economic growth.
The hiring of
Manitoba to manage the national power transmission network had been seen
by industry experts as a major step forward for the reform process.
The presidency said President Goodluck Jonathan annulled
the deal because "due process was not followed in the award of the
contract". But his decision could add to fears about political
interference in the sector that analysts say are holding back badly
needed foreign investment.
Africa's most
populous nation of more than 160 million holds the world's ninth-largest
gas reserves but is blighted by power cuts which last several hours a
day, forcing businesses and individuals who can afford them to rely on
diesel generators.
Economists say a
successful power privatisation could push growth in Africa's second
largest economy into double digits, from around 6.5 percent now. Yet
critics question the integrity of the process, which looks set to leave
much of the sector in the hands of powerful local oligarchs with scant
experience.
"Mr President has cancelled the Manitoba power contract with immediate effect," Presidency Spokesman Reuben Abati told Reuters.
"Mr president would
not want to comprise due process in anyway ... I assure you that this
does not in any way affect the on going privatisation of the power
sector," Abati later added.
Choosing a firm to manage transmission took more than five years, in a process supported by the World Bank.
Standard and Poor's upgraded Nigeria's credit rating
last week but said a failure to push through reforms to areas like power
could put its more positive view at risk.
Manitoba was
supposed to start work at the beginning of September but transmission is
still in control of the government. Sources within the privatisation
process said the ministry of power was unhappy handing over to Manitoba.
"We had a clear
contract and we were meant to be given delegation of authority ... but
that didn't happen," Don Priestman, the head of the Manitoba-run
Transmission Company of Nigeria, told Reuters by phone.
"There are forces
working against reform," he added, saying a similar contract Manitoba
has in Kenya was working well.
The power ministry did not respond to calls for comment.
Nigeria is in the
middle of privatising the bulk of its power plants and distributing
networks, in a reform process supposed to give foreign investors the
confidence to provide the estimated $10 billion-a-year the electricity
sector needs.
Transmission is the
key link between power plants and sub-stations feeding end users, and
its poor management in the past has made investments in producing or
distributing power unprofitable, industry experts say.
Nigeria's lack of
power helps perpetuate social inequality in a country where the majority
survive on $2 a day or less.
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