Lagos, Nigeria, August 3, 2010
—A roundtable of public and private sector infrastructure experts convened by IFC, a member of the World Bank Group, is recommending rapid action by the Nigerian government to help ensure that private capital can play a larger role in solving Nigeria’s infrastructure bottlenecks, especially power.
IFC convened the fourth quarterly session of its infrastructure roundtable series during the final week of July. The roundtable session focused on encouraging medium-scale power generation projects serving a core group of industrial customers. Such examples can help meet urgent needs by Nigerian consumers for lower-cost energy. These projects could also demonstrate the effectiveness of private initiatives and encourage further policy changes leading to a larger scale, longer-term transformation of the sector.
Jyrki Koskelo, IFC VP for Global Industries, said, “The long-term success of the Central Bank of Nigeria’s banking sector reforms is dependent on government rapidly encouraging market demand for capital in large, commercially viable projects, especially in infrastructure. To improve the competitiveness of Nigerian small and medium enterprises, power and transport infrastructure have to be improved and transformed sooner rather than later.”
IFC challenged prospective private financiers and project sponsors at the roundtable to pool and commit their risk capital for early-stage project development that will create well-structured projects capable of attracting further equity and debt financing. Koskelo committed IFC to reciprocate through financial and advisory support of such efforts.
Solomon Adegbie-Quaynor, IFC Country Manager, Nigeria, said, “Over 90 percent of Nigeria’s industrial customers self-generate base load power on a relatively small scale and with poor efficiency. We should encourage medium-sized gas-fueled efficient power supply with regulatory flexibility to distribute within and around industrial clusters, as well as to sell to the grid. Such changes would ensure that the productive sectors of industry, including SMEs, would receive reliable and affordable power supply that leads to increased employment and higher incomes for Nigerians.”
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IFC Infrastructure Roundtable, Nigeria
Fourth Quarterly Session
The IFC Infrastructure Roundtable in Nigeria made the following key recommendations to help resolve infrastructure bottlenecks at its meeting in Lagos in July 2010:
-Expediting development and financing of medium-size power plants with agreements from non-regulated industrial customers to offtake the power, with excess sold into neighboring clusters and the grid, with appropriate credit enhancements.
-Developing a project development funding facility to help encourage and incubate projects capable of attracting bank and other private financing.
-Supporting private equity infrastructure funds given its scarcity relative to the needs of the sector.
-Providing credit enhancements from development financing institutions to mitigate non-commercial risks, such as regulatory uncertainty.
-Improving the regulatory environment, including regulator independence, transparency on tariff setting and on-going adjustments, and streamlining licensing process.
-Investment to upgrade transmission and distribution.
-Providing incentives for expedited investments in gas supply and transportation.
About the IFC Infrastructure Roundtable
The IFC Infrastructure Roundtable in Nigeria is a forum that brings together private and public sector players to debate and share ideas on how private capital and project management expertise can be mobilized to help address the infrastructure deficiencies in Nigeria. The roundtable is committed to offering ideas that can sustainable improve the competitiveness of the Nigerian economy. Participants at the IFC infrastructure roundtable include infrastructure project developers, private equity funds, state government, regional development finance institutions (DFIs), and international and local banks. IFC’s strategy in Nigeria strategically prioritizes:
especially power which is the largest single constraint to private sector development and the competitiveness of the Nigerian economy; and,
, which is the largest contributor to GDP (40 percent) and largest employer (65 percent) in Nigeria, especially of the rural population.