Nigeria: 90 million untapped electricity customers

Off-the-grid technology offers massive investment opportunity

Nigeria’s electricity grid hit an all time low recently when the national power grid did not produce a single megawatt of electricity for about three hours on March 31.

Power outages in Nigeria are so common place that according to OnFrontiers Expert Godfrey Ogbemudia, an off-grid electricity specialist and Project Director at Nigeria’s Community Research and Development Center, most commercial businesses run almost 100% on back-up generators to keep things going.

Still, the entire country being off-line was a rarity.

“I think this was the first time that all the generation plants had to be shut down at once and were not producing anything at all,” said Ogbemudia.

But the way Ogbemudia sees it, the inadequacy of the nation’s power grid translates into a vast opportunity for both foreign and indigenous investment in “off-grid,”alternative energy sources – particularly solar power.

Despite being Africa’s largest economy and most populous country with 185 million people – it is estimated that more than half of Nigeria’s population does not have access to electricity.

Current system inadequate

About two years ago, the Nigerian government began privatizing the dilapidated power plants that had failed to meet the needs of the country, but problems clearly persist.

Nigeria would need to produce 40,000 megawatts (MW) of electricity to serve the population.

But according to Ogbemudia, the current production and capacity fall far short of that.

“If you combine the 23 generating companies (GENCOs) together in terms of
installed capacity for both the gas and hydro power plants, it’s about 12,067MW –
but you never get this from them. According to the National Energy Regulatory
Commission (NERC), the installed available capacity is about 6,840MW. But right
now since 2015, the actual generating capacity is 3,941 MW.”

Despite the privatization efforts, the current grid system is riddled with problems and is incapable of producing the amount of electricity the country needs.

“It is now clear that the line on the grid can not serve Nigeria and that renewable energy is the way forward,” said Ogbemudia.

Ogbemudia sees solar mini-grids – which can produce from 5MW up to 100MW – as one of the most viable alternatives.

The ‘best’ time to invest

The list of challenges to investing in Nigeria is long: government policy, corruption, terrorism, security, theft/vandalism, lack of skilled technical personnel, expensive import tariffs, currency inflation and the difficulty of securing financing are a few that immediately come to mind.

Despite all the challenges, Ogbemudia says right now is the “best time” to invest in off-the-grid technology in Nigeria.

The Nigerian government signed a new energy policy last May with several incentives and tax holidays for companies that produce solar energy.

Financing for projects has been a major challenge, Ogbemudia explained, because interest rates from Central Bank of Nigeria are in the double digits and private commercial banks won’t give loans with less than a 20% interest rate and usually expect the loan to be paid back within five years.

But the USAID-led “Power Africa” program, along with the World Bank, British Department for International Development, GIZ (the German development agency), and other international organizations have made addressing the financing issues a priority and are working to reduce interest rates for renewable energy.

U.S. President Barack Obama launched “Power Africa” in 2013 with the aim of doubling access to electricity in sub-Saharan Africa. In order to achieve this lofty goal, U.S. government agencies have pledged $7 billion in investment, financial guarantees and technical assistance. Nigeria is one of six focus countries in the initial phase of the project (along with Ethiopia, Ghana, Kenya, Liberia and Tanzania).

And while there has been a lack of skilled workers to build and operate the solar systems, new training centers are being developed to add to the work force.

Ogbemudia also points out that Nigeria is a big place – its about twice the size of California – and not all of it is controlled by the terrorist organization Boko Haram that has dominated headlines about Nigeria in recent years. South East and South West Nigeria, as well as North Central and North West Nigeria are considered safe areas for investment.

Ogbemudia is clear that renewable energy is not for the short-term investor.

“It can take about five to six years before you can break even,” said Ogbemudia. “The best way to make money in renewable energy is to have several mini-grids in several locations at one time. ”

“If you look at the size of the market – 50% of the population are yet to be connected to the grid,” said Ogbemudia. You are looking at about 90 million Nigerians. It’s a huge number.”

About the OnFrontiers Expert consulted for this article

Godfrey Ogbemudia is a solar photovoltaic (PV) electricity specialist who has designed and implemented a series of solar off-grid projects throughout Nigeria. He has consulted on alternative energy projects for several international organizations and is a training facilitator on solar PV application. To speak with Godfrey or similar experts reach out to hello@onfroniers.com.

About OnFrontiers

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Founded in 2014, OnFrontiers is a global advisory network and research firm that provides rapid access to targeted, high quality insights in hard to reach frontier markets.