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Banking

Power reform puts Nigeria at crossroads

Bond markets would suggest Nigeria’s future is assured. Progress has indeed been made in banking, sovereign finances and power-sector reform. But big challenges remain, as this autumn’s electricity privatizations amply illustrate.

More than ever before, Nigeria stands at a crossroads. From here, three possible futures are visible for a country set to become, at some point in late 2013, Africa’s largest economy.

In future one, a reform process, set in place by progressive president Goodluck Jonathan, endures. Over the next few decades, Nigeria is transformed from a fast-growing emerging market with outsized oil reserves into Africa’s economic powerhouse.

In the second future, the reform process fizzles out, leaving Nigeria to revert to what has in the past seemed to be its natural state: a country riven and constrained by petty politics, corruption and global investor indifference.

The final outcome is probably the most unappetizing, but one that, given the state of current power-sector reforms, might yet come to pass. In this future, the reform process holds sway, but it succeeds only in enriching an elite few at the expense of the country’s vast, impoverished populace. A two-speed Nigeria emerges, superficially powerful yet institutionally brittle: an economic oligarchy not unlike Russia in the 1990s.

Superficially at least, the country and its reform process appear to be doing just fine. Nigeria’s economy is set to grow by about 7.1%

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