Cablegate: Nigerian Manufacturers Seeking New Electricity Sources
VZCZCXRO6954
PP RUEHMA RUEHPA
DE RUEHUJA #2691/01 2851138
ZNR UUUUU ZZH
P 121138Z OCT 06
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 7444
INFO RUEHOS/AMCONSUL LAGOS 5279
RUEHZK/ECOWAS COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHFMISS/CDR USEUCOM VAIHINGEN GE
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK
RUEAIIA/CIA WASHDC
RUEKDIA/DIA WASHDC
RUEATRS/DEPT OF TREASURY WASH DC
UNCLAS SECTION 01 OF 02 ABUJA 002691
SIPDIS
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: ECON ENRG PGOV NI
SUBJECT: NIGERIAN MANUFACTURERS SEEKING NEW ELECTRICITY SOURCES
1. (SBU) Summary. Embassy Abuja hosted Iftar dinners in Kaduna and
Kano on October 2 and 3. Northern political figures were emphatic
that they relied heavily on the U.S. Government to "safeguard"
Nigeria's federal electoral process in the spring of 2007. The
president of the Manufacturers Association of Nigeria (MAN) said
industry's greatest problem was the shortage and unreliability of
electric power. Domestic manufacturers have no confidence that the
Government of Nigeria (GON) would address the power issue. As a
result, companies are concentrating on establishing private sources
of electricity. In late September, northeastern Nigeria suffered a
five-day power outage that affected Plateau, Bauchi, Taraba, Borno,
Gombe, Adamawa, and Yobe States. End Summary.
2. (U) Embassy Abuja hosted Iftar dinners, to mark the breaking of
the Muslim Ramadan fast, in Kaduna and Kano on October 2 and 3,
respectively. Embassy officers met with a wide range of northern
political and business leaders at these functions. Political
figures with whom economic officer spoke at the Iftar dinners,
including two Kano State gubernatorial candidates, were emphatic
that they relied heavily on the U.S. Government to "safeguard"
Nigeria's federal electoral process in the spring of 2007. The
Nigerian politicians did not discuss issues or even individual
political figures. Instead, their focus was on the country's Muslim
north as a separate political bloc whose democratic interests they
insisted only the United States could guarantee.
3. (U) During a meeting on October 3, MAN President Bashir Borodo
said the main problem his members faced was the shortage and
unreliability of electric power. Borodo reported MAN members' other
main concern was the GON's macroeconomic policies. In his opinion,
a new administration would continue President Obasanjo's "stable"
macroeconomic policies. He praised these as successful in capping
inflation at an "acceptable" level. The MAN chief lamented how poor
macroeconomic policies and high GON deficits for most of the period
since 1993 had harmed Nigerian manufacturers. Borodo said it
remained difficult for MAN members to obtain needed replacement
machinery or spare parts because of previous or existing government
policies.
Alternative Sources of Electric Power
-------------------------------------
4. (SBU) Regarding Nigeria's chronic electricity problems, Borodo
said domestic manufacturers had no confidence that the GON would
address successfully the power issue, so his constituents were
concentrating on establishing private sources of electricity. The
MAN chief noted that at many companies in Nigeria, employees spend
the entire day at their workplace unable to do any work because of a
lack of electricity. He commented on the "psychological cost" of
repeated power outages and said those occurring especially in the
middle of domestic manufacturers' decreasing production runs were
"killers."
5. (U) Borodo said recent laws streamlining the electricity sector
would aid Nigerians in establishing private electricity companies.
He noted that MAN was in the process of registering an energy
subsidiary. Borodo commented that MAN members prefer working with
existing electricity companies and buying a 1-2 percent stake in
those enterprises, to gain some ownership control. He told us he
was looking for a company to run an electricity network well, while
MAN would supply the customers. Borodo said he was talking with the
Jos-based, privately owned Nigerian Electricity Supply Company
(NESCO) to supply electricity over a Jos-Kaduna-Kano axis. He asked
whether the U.S. Department of Energy would be willing to assist the
MAN in developing a plan for Nigerian companies to create private
electricity networks. The MAN chief underscored that Nigerian
manufacturers remain the country's largest user of electricity, and
"we pay our bills."
Electricity-Sector Reform
-------------------------
6. (U) Before the National Electric Power Authority (NEPA) assumed,
by law, a monopoly over electricity distribution in Nigeria, NESCO
was known for its efficiency. On September 20, 2006, the Bureau of
Public Enterprises announced it had incorporated a special-purpose
entity, the Nigeria Electricity Management Agency, Ltd. (NEMA) to
manage the legacy liabilities of the Power Holding Company of
Nigeria (PHCN). NEMA acts as a trading licensee in the electricity
sector and is involved in bulk purchases of electricity and in
reselling these to power distribution companies. The PHCN replaced
NEPA as part of a reform and privatization effort, and on July 1,
the PHCN was "unbundled" into 18 independent entities.
ABUJA 00002691 002 OF 002
Major Power Outage
------------------
7. (SBU) A large portion of northeastern Nigeria recently suffered
power outages lasting up to five days after a 25-year-old tower on
the Kaduna-Jos transmission line collapsed. Repair work began
September 19, the tower was re-erected on September 26, and it began
carrying electricity on September 27. The tower's collapse caused a
power outage, and at times a total blackout, in Plateau, Bauchi,
Taraba, Borno, Gombe, and Adamawa States, as well as in parts of
Yobe State. This outage followed a similar one five months ago in
several eastern states after electricity towers there also
collapsed. (Comment: MAN President Borodo was unaware of the large
September power outage affecting seven states. This is an example
of poor communications within industry concerning major events
taking place within Nigeria and within various sectors. End
Comment.)
No Relief Soon
--------------
8. (U) In late August 2006, the World Bank's Nigeria country
director said Nigeria currently generated only 3,000 megawatts of
electricity, compared to the national demand for at least 10,000
megawatts. In May 2006, Minister of Power and Steel Liyel Imoke
said Nigeria would not have a sufficient supply of stable
electricity until 2056 - even if the GON spent no less than $10
billion annually on the power sector, to catch up with what he
termed more than 20 years of neglect. According to press reporting,
MAN said a "safe" estimate in 2005 from a survey of 200 consumers of
electricity (50 percent residential, 40 percent industrial, and 10
percent commercial) was that Nigeria's System Average Interruption
Duration Index, which measures the average total annual duration of
power-supply interruptions that a consumer experiences, was no less
than 1,000 hours per year, compared to 88 minutes in the United
States. (Comment: These figures illustrate that Nigeria will not
be able to solve its electricity difficulties cheaply or easily.
Thus MAN's pursuit of private electricity generation is an
encouraging development. End Comment.)
GROENING