Managing Political Risk in Nigeria's Electric Power Sector Reforms

Abstract

Nigeria recently concluded the initial phase of the reform of its electric power sector. This basically involved the unbundling and subsequent divestiture of hitherto wholly owned government electric power assets. As a prelude to the asset sale, the sector was liberalized in other to enable and catalyse private sector investment and operations. Since a number of the investors involved in the purchase of the assets were from abroad, them it igation of political risk became very prominent in the negotiations between the government and the private sector investors. This paper seeks to identify some aspects of political risk that were of concern to the private sector investors and discuss how they were managed in practice. The paper also evaluates whether the management of political risk had the desired impact of encouraging and stimulating further private sector investments in the sector. The paper concludes that political risk was managed in a haphazard manner thus stalling further overseas investments in the Nigerian electric power sector.