Opportunities for PPP deals in Enugu, a second-tier Nigerian city

By Bryan

I was born in the South-Eastern Nigerian city of Enugu, with a population of about 3 million, and several other significant features:

  • A hilly terrain (Enugu means “hilltop”)
  • A rich bed of natural resources, specifically coal
  • A relatively homogenous population, a direct result of Enugu’s location in the Igbo tribe-dominated South-East of Nigeria
  • An up-and-coming movie industry scene (Enugu has been called the center of Nigeria’s burgeoning ‘Nollywood’ film industry’)

I return to the city around once every two years, and have been able to follow its development from a traditional ‘coal city’ resource-exporter to a diversified city with the makings of top-tier Nigerian city. One of my visions for the city’s future is for it to develop into the central city of Nigeria’s East and a solid rival to the commercial center of Nigeria, Lagos city.

Mezu - Enugu

Enugu hilly terrain

Mezue - roads

Enugu roads

The good news is that Enugu’s current governor has shown a strong appetite for long-term infrastructure investments to help transform the city into a tier one city. In the context of the Sustainable Cities course, I see several opportunities for private sector involvement in Enugu:

  • Roads: Enugu’s roads have already seen massive transformation in the past 5 years with some major roads widened to double lanes and new roads constructed into rural areas. As the government accelerates this rollout there should be space for expertise and capital from private players, especially in the more difficult terrain in the hilly outskirts of the city.
  • Residential Real Estate: Enugu has been called a ‘civil servant’ city, a reflection of its economy’s reliance on government jobs and its traditional strength in sectors such as education and healthcare. One of the benefits of this status is that many residents of the city have steady incomes and are willing to invest in real estate. In addition, the increasing migration of people from rural areas into Enugu means that there is scope for a public-private partnerships to develop new flats and houses – for both the new buyers and low-cost renters.
  • Rail: Enugu is conveniently located to the trade cities of the South-East, and there are old railway lines (originally constructed by the British) linking the city to the North and the West of Nigeria. These lines have not been maintained and there is a role for a private player to partner with the government to bring them into the modern age.
  • Power: The power sector in Nigeria is nationally regulated, and there is a strong bias towards the petroleum industry (oil accounts for ~70% of the government’s revenue). One of the overhanging political conversations centers on the role of Enugu’s rich coal resources, which are currently less attractive due to pollution concerns. However, there might be some role for clean coal technology providers.
  • Airport: The Enugu airport is being currently transformed into an international airport.

One of the biggest challenges to a PPP deal negotiated with a second-tier developing market city such as Enugu is enforceability. Enugu can learn a lot from Chinese second tier cities, such as Changsha where I visited during an IXP trip last month, and where there is clear alignment between central and local government, yet enough independence at the local level to drive visionary change. Specifically there might be a role for Chinese private sector players to partner with the local government for new projects.

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The “smart” way to get energy efficiency right

By Lefteris Charalambous

Similarly to other goods discussed through our cases, electric power has also been challenged by the global trends of urbanization and sustainability. Generation is having difficulties in meeting the rapid increase in demand, especially taking into consideration environmental and social concerns. Although energy efficiency seems to have great potential in dealing with this issue, it has not really taken-off. I strongly believe that the development of “smart” infrastructure is one of the key elements to help spread energy efficiency measures.

As energy efficiency I define all measures implemented in buildings and vehicles in order to minimize demand amounts and optimize demand patterns (minimize peak, smoothen demand curves). Energy efficiency seems to be an easy way to meet increased demand without developing new capacity and having to deal with the resulting environmental issues. In this spirit, energy efficiency measures are always in the first part of the GHG abatement cost curves developed, with positive NPV projects [1].

In my opinion, there are two main challenges holding us back from yielding the full potential of energy efficiency.

Firstly, the structure of the current energy efficiency industry is very fragmented and modular making the development of integrated solution difficult. Many players (governments, energy regulators, energy service companies, contractors, engineers, software companies, equipment manufacturers etc.) are involved in energy efficiency making coordination, communication to the public and development of standards very difficult. Furthermore, the uncertainty and sometimes lack of focus of the continuous evolving regulatory framework drives opportunistic rather than strategic actions in the industry.

Secondly, the industry players have not been able to communicate the value of energy efficiency to the majority of the consumers. Most of the potential is found in existing, small residential buildings. Residential clients seem to be much more reluctant to make changes in their existing structures without clear benefits and guidance through the implementation. The industry players have not been able to deal with these issues and have been focusing almost exclusively on large commercial clients. Some countries are using enforcement through standards and subsidies (e.g. in Germany) that can be expensive for the government and result in inefficiencies (e.g. reduced completion).

“Smart” technologies can act as enablers to deal with the above challenges and create integrated energy efficiency solutions that will deliver the expected savings. The development of a smart grid and infrastructure can create a platform with common standards for all players involved (similarly to a common operating system), facilitating the integration of the currently modular and many times incompatible parts. Moreover, the interactive aspect of smart technologies can help the consumer understand, measure and manage savings. Hence the value is communicated, measured and realized in a very tangible way. Finally the data collected can help players in the industry further understand consumer demand and behavioral and develop relevant products.

An important open question is who will develop and benefit from this “smart” infrastructure. Is this the new role of utilities or previously irrelevant players will dominate this market (e.g. software companies)? How will the government regulate this new domain?

 

[1] Road towards a low carbon future: Global GHG Abatement cost curve, McKinsey & Company, 2009