US-based multinational General Electric has indicated that it is in the process of expanding its investments into sub-Saharan Africa as part of the recently announced Power Initiative. General Electric can point to a 100-year record of involvement in Africa and has operations in several sub-Saharan African countries, one of which is Nigeria where it has already identified projects in which it can participate.
In the past year, General Electric and the Federal Government of Nigeria have signed several memoranda of understanding agreements outlining cooperation in the energy, healthcare and rail transportation sectors. Ground breaking for a US$250 million manufacturing facility in the port city of Calabar in Nigeria took place on 18 June 2013. General Electric Nigeria’s president and CEO, Lazarus Angbazo, is of the view that Nigeria is a country where the General Electric portfolio – the full General Electric portfolio – fits perfectly in terms of the needs of the country and the capabilities of the country.
“The fundamentals of the country have proven attractive to the American corporation to the extent that top management starting with Jeff Immelt [the CEO], John Rice [vice chairman] and Jay Ireland [CEO of General Electric Africa] are making a commitment [to increase activities] based upon a sound understanding of the long-term fundamentals of the country,” said Angbazo.
The facility General Electric is currently building in the Calabar Free Trade Zone is expected to provide local servicing capability for power-generating equipment in Nigeria. Up to 70% of the installed turbine bases in Nigeria were made by General Electric. The manufacturing facility has the capability of both servicing and manufacturing General Electric equipment and will also make Nigeria a hub for servicing General Electric turbine generating machines for all of Africa. General Electric also supplies a lot of equipment used in the oil and gas sector of the country.
Angbazo further indicated that General Electric intends to invest up to $1 billion over the next five years, including the aforementioned $250 million, with the balance to be spent in services and support.
Nigeria has many opportunities in the power sector that have attracted General Electric and Angbazo indicated that the company has committed to helping to develop up to 10,000MW of incremental power-generating capacity. He sees opportunities in the opening up of the power sector for private investment as the independent power producers are expected to need turbines and machines, which the company could help to service and maintain.
General Electric is also in the process of identifying projects that it can support with its project development capability as well as with equity as opposed to just selling turbines. Angbazo sees “all the essential elements for a real stampede of investments in Nigeria’s power sector”.
This is another positive step in the right direction for Nigeria’s power sector, as it moves on the journey to providing more electricity to its economy. With the Manufacturers Association of Nigeria estimating that power supply accounts for 30% to 40% of production costs in Nigeria, compared to 5% to 10% in countries with more reliable national grids, the implications for the country of greater investment in the sector speak for themselves.
Imara is an investment banking and asset management group renowned for its knowledge of African markets.