UPDATE 1-Nigeria scraps Canada power contract in privatisation setback

Wed Nov 14, 2012 6:57am EST
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* Power outages biggest brake on economic growth

* Canadian firm's appointment was welcomed by industry

* Political interference key concern for foreign investors

By Joe Brock and Felix Onuah

ABUJA, Nov 14 (Reuters) - Nigeria has terminated a $24 million electricity contract with Canada's state-owned Manitoba Hydro, the presidency said on Wednesday, in a setback for plans to privatise a moribund power sector that is holding back economic growth.

The hiring of Manitoba to manage the national power transmission network had been seen by industry experts as a major step forward for the reform process.

The presidency said President Goodluck Jonathan annulled the deal because "due process was not followed in the award of the contract". But his decision could add to fears about political interference in the sector that analysts say are holding back badly needed foreign investment.

Africa's most populous nation of more than 160 million holds the world's ninth-largest gas reserves but is blighted by power cuts which last several hours a day, forcing businesses and individuals who can afford them to rely on diesel generators.

Economists say a successful power privatisation could push growth in Africa's second largest economy into double digits, from around 6.5 percent now. Yet critics question the integrity of the process, which looks set to leave much of the sector in the hands of powerful local oligarchs with scant experience.   Continued...