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Addressing the access-to-energy challenge in Nigeria

Addressing the access-to-energy challenge in Nigeria

In sub-Saharan Africa, lack of access to reliable energy is one of the most pressing social and economic development issues and is a significant contributor to the abysmal outcomes in health, nutrition, food security, education, security, business competitiveness, and employment.

The problem is particularly acute in Nigeria, which has an estimated energy gap in the range of 30 GW to 175 GW, a gap that will cost between $40bn and $200bn to address. Research shows that an estimated 28m households and 11m SMEs in Nigeria are either off grid or receive less than four hours of power per day (bad grid).

This amounts to 120m people living without access to reliable and affordable power – or 75% of the population. Nigeria is already the world’s most off-grid country, with up to 60m generators in the country generating far more energy than the national grid. But this approach, using expensive dirty fuels, is not efficient, cost-effective, environmentally sound, nor sustainable.

Addressing the access-to-energy challenge in Nigeria requires a combination of both the traditional large-scale power generation approaches and distributed power innovations that are smaller scale, lower cost, and quicker to market. The government has put in place an attractive regulatory environment and is supporting the growth of the off-grid energy sector through the Rural Electrification Agency (REA).

There remain major barriers for deployment of access to energy solutions in the country such as inconsistency regarding import duties, the lack of mobile money penetration, and financing. New and improving renewable and gas to power technologies and business models adapted to the particularities of the Nigerian market are emerging, suggesting that with the right financing, regulation, and consumer aspiration, the sector is at a tipping point in the country.

Opportunity For every challenge of the scale of the Nigerian energy access gap, there is also an opportunity. Market studies conducted by Dalberg in 2016 suggest that in Nigeria’s South region alone, there is a high willingness to pay for off-grid power with an estimated annual spend of $825m.

Extrapolated across the country, this amounts to $10bn in annual spend for off-grid energy. Other data suggests that Nigerians are willing to pay substantially more for alternative energy sources than their counterparts in East Africa and India, and also that the typical Nigerian household has a higher power load requirement.

Recognising the opportunity for substantial economic and social impact, there is an ever-increasing set of homegrown and international businesses entering the space, along with a growing number of investors.

In the midst of all this activity, new business models are emerging where there is a convergence of solar home systems and minigrids, as well as business models where the generation and distribution for minigrids is separated.

This is an exciting moment for the Nigerian off-grid energy space, and we look forward to collectively addressing the energy access gap household by household, community by community, and town by town and, in so doing, creating transformative impact for the country and its people.

Dr Wiebe Boer is the CEO of All On and a 2015 Tutu Fellow.

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Written by African Business Magazine

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