BEYOND THE DREAM; WHAT ARE THE REAL CHALLENGES OF FINANCING GAS-FIRED POWER PLANTS IN NIGERIA?

Abstract

The giant of Africa is a name that is unique to one country – Nigeria. The size of its population, abundance of mineral reserves and its strategic location presumably sets it apart as a haven for investors. However, one cloudy side which continually casts a shadow on it is the state of its electricity industry. A solution to this growling issue would be the provision of adequate infrastructure to ameliorate the solution. Consequently, government has taken the decision to install gas-fired power plants, to take advantage of its rich gas reserves. However, it remains to be proven whether its vast market potential and abundance resource would be enough to attract investors towards eradicating its electricity power poverty and thereby impact positively on the development of its whole economy. Therefore, this paper does not venture into the different financing options available to the power sector, but focuses on ‘Project Finance’, a unique form of financing which mechanism lends against the cash flow generated from the project being financed with limited recourse to the assets of the project sponsors. It concludes that with the right detail, success is possible.

Keywords

• project finance;
• electricity industry;
• project vehicle;