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