Chronic problems with the electricity supply could be thrown into reverse by a private project that aims to transform the outlook for business in Nigeria

At Star Paper Mill in Owerrinta, near the eastern Nigeria industrial city of Aba , 20 large black diesel tanks are arranged in rows to one side of the main factory. The tanks hold about two-thirds of the 1m litres of fuel - worth almost $500,000 - that Star maintains on site because of the unreliability of the state National Electric Power Authority electricity supply.

Asked if Nepa's service has improved since the country's civilian government took office in 1999, Echeme Nnana Kalu, Star's chairman and managing director, replies: "We have been out of Nepa for nine years. So whether they are improving or not, I don't know."

Mr Nnana Kalu is one of many frustrated business people being targeted by an innovative new private power project planned by Bart Nnaji, a US-based Nigerian engineering professor. The initiative is aimed at helping companies stifled for decades by the widely ridiculed Nepa, which is said to stand for "Never expect power anytime".

The project is a test of the official policy of reviving the country's moribund industrial base; it could also hold wider lessons for development in countries where the state fails to provide basic business infrastructure.

"Someone told me: ' Aba people may wake up one day and find they are the first in the country with a stable power supply'," Prof Nnaji says. "That's our goal."

The country's electricity network has foundered during decades of underinvestment, official corruption and institutional collapse. The Manufacturers' Association of Nigeria, an industry body, has estimated that power supply problems add 30 per cent to companies' costs.

Prof Nnaji is hoping to exploit a confluence of political and economic desires to solve Nigeria 's chronic power problems. President Olusegun Obasanjo has set a target of installing 10,000MW of power supply by 2007, but official data late last year put power generation at 4,500MW and other observers say the actual figure is much lower. The only way for the government to fulfil its promise is to encourage independent power projects, some of which are being run by oil multinationals such as Eni of Italy. Oil companies such as Royal Dutch/Shell, eager to meet a 2008 deadline for stopping the polluting practice of flaring off waste gas, will provide the gas for Prof Nnaji's turbines.

While Prof Nnaji is a highly respected manufacturing engineering fellow at the University of Pittsburgh , he is also no stranger to Nigeria 's byzantine politics: he was a former minister of science and technology in the ill-fated 1993 transitional military civilian government that was overthrown in a military coup. He has earned goodwill from Mr Obasanjo's administration by setting up a successful project in 2000 in Abuja , the capital, to provide power to the central area including, occasionally, the presidential villa.

The professor, who is from the eastern Nigerian state of Enugu , plans to obtain the $115m of financing needed for the Aba project through a mixture of equity and loans. A financial plan is being worked out by KPMG, the accountancy firm, and Prof Nnaji hopes the project's backers will include Geometric Power, his own company, Nigerian financial institutions and the International Finance Corporation, the private sector lending arm of the World Bank. The IFC has already spent about $200,000 on technical expertise and feasibility studies for the project, which has a provisional start date of June or July next year.

d4 Prof Nnaji says more than 35 big companies have already signed binding letters of intent to take electricity accounting for just over half the project's 105MW capacity, generating annual revenues of more than $35m. The remaining power will be sold to small business and domestic users. The project aims to sell its electricity at 8 cents per kilowatt hour - a 2002 World Bank survey of 1,853 Nigerian manufacturing companies concluded that privately produced power cost an average of 19.05 cents per kilowatt hour.

At a meeting of local business executives, the enthusiasm for Prof Nnaji's project and the potential pitfalls awaiting it are clear. Concerns include the possibility of sabotage by Nepa staff who make money by linking customers illegally to lines to evade charges or give them better connections.

Prof Nnaji says his company will try to combat corruption by investing in line inspections. He adds that senior Nepa officials have been "wonderful", recognising how his project can help reduce the pressure on them. Under a law signed by the president this year, Nepa is due to be broken up into separate power generation, transmission and distribution companies.

After the meeting, Prof Nnaji drives through Aba 's potholed and rubbish- strewn streets to one of the city's centres of small-scale manufacturing. The area is highly industrious but conditions are basic and uncomfortable. In one shop, which makes shoes, men work mostly without light, fans or air conditioning, as Nepa power may be on for as little as an hour a day.
Across the street, workers sit in four tiny wooden cubicles smoothing shoe bases with electric lathes. In front of their workplace stand eight small generators. They are powered by gasoline, which has doubled in price in less than two years. Onyekachi Achinivu, one of the workers, says of Professor Nnaji's project: "It's what we are praying for."

The sentiments are much the same at J. Udeagbala Holdings, a conglomerate that makes pipes, soap and vegetable oils. Even when Nepa is available, the voltage is sometimes so low that it damages the factory's machines, says Chudi Onwunyirigbo, technical manager. The conglomerate takes about 40 per cent of its power from Nepa, at a cost of N3m ($23,000) per month; the remaining 60 per cent comes from generators at a cost of more than N11m.

There are potential dangers inherent in private sector power projects such as Prof Nnaji's, as Andrew Alli, International Finance Corporation country manager, acknowledges. If they are focused on big companies, they could further reduce the incentive for the government to improve Nepa's service to small businesses and residential users. Building many small-scale power plants could result in higher power costs than would be the case under a more integrated system. Yet Mr Alli says the cost worries are "frankly a theoretical downside", given that the cost of generating electricity privately makes power "probably the biggest factor" impeding competitiveness.

Back at Star Paper, Mr Nnana Kalu estimates that Prof Nnaji's plan could help the company at least halve the 40 per cent of production costs it spends on power. "Nepa is non-existent; it has failed," he says. "What the professor is trying to do is fill the gap that is there."