The Possibility of Incorporating Power Sector with Financial Institutions in Nigeria

Abstract

Financial sources are paramount in power projects planning and development. Many countries adopted various approaches in looking for financial funds for power projects development and it was discovered that concessional lending and borrowing cannot be relied on due to some peculiarities involved in power sector. Power sector, naturally is not attractive to both local and foreign investors, while financial sectors are highly attractive to investors. Incorporating power sector with financial institutions in Nigeria will reduce the acute shortage of funds for power infrastructure development and upgrading. Electricity price risk and uncertainty discourage investors. Through incorporation, financial hedging can use markets such as forward or futures to manage price risk. This paper highlight the complexity nature of power systems operation and analyze the possibility of incorporating the sector with financial institutions.