The Co-Head of Africa, Practice, Hogan Lovells, Arun Velusami, has predicted that there would be increased Foreign Direct Investment (FDI) in natural gas to the Nigerian economy due to the current invasion of Ukraine by Russia.
Velusami, who stated this during a media briefing in Lagos, said with the current situation in Europe, EU countries are seeking to reduce their reliance on Russian gas, therefore, Nigeria stands a better opportunity to gain from this due to its enormous gas resources and because countries in Europe are seeking to diversify from the supply chain.
He also stated that part of Nigeria’s goal is to continue its expansion and industrialization as a major manufacturing hub for Africa, and working in line with that is the drive to increase the power generation and distribution capacity.
He remarked that the telecommunication industry has promoted digitalised service across many sectors in the economy thereby driving online, real-time services and transactions such as online banking, e-commerce, and others.
He expressed confidence that if the government makes the economy attractive for investors to build and operate power plants, there is the likelihood that investments in the power sector would increase.
He further explained that when building infrastructure oftentimes, involves either federal or state government, and what investors want is the certainty that there would be the consistent and supportive policy towards their investments, “for instance, if they are building a power plant, investors and lenders wants to be sure that government is standing behind the obligation of the utility.
He added that a lot of infrastructure projects are financed and they are long term in nature, therefore investors want to know that their investments in the long term would be supported by the government.
Velusami remarked that government has a key role in attracting and maintaining infrastructural investments, “if the government decides that the investments are a priority and they are willing to stand behind the obligation of the utility, this would attract investments in the long-term.”
According to him, “Some countries have attracted more investments and installed more power plant generating capacity which will require less use of traditional power generating sets. If the Nigerian government makes the economy attractive for investors to invest in and build power plants, there is the likelihood that investments in the power sector would increase.
“When an international investor is looking to develop a power plant, they look for the most stable and attractive place to invest. To a certain extent, Nigeria is competing with other countries to access international funding, it is not a direct competition because some funds and lenders focus on Nigeria, because throughout Africa, there are a number of countries they can invest in and Nigeria needs to improve the investment climate to make herself an attractive investment destination to build and operate power plants, then investments in the power sector will increase and also transition from smaller power sets to power plants. It is not an issue of not using power generating sets, everyone needs the power to survive.
“Government should focus on making the investment climate attractive to bring foreign investors to build these power plants. If you take a solar power plant, there are two opportunities, either you sell directly to the Distribution Companies (Discos), utility, or industrial consumers. You need the government to stand behind the utility and support them in order to attract investment in that sector. When it comes to selling at a local level to Discos, I understand that it is something that there have been through some regulatory reforms. Nigeria needs to build domesticate capacity in healthcare delivery. There are foreign companies seeking to invest in the area of healthcare delivery.”
