Nigeria is Africa’s most populated country. In 2019, its population reached 200 million hence registering one of the highest demographic growth rate (2,54% yearly) in the world (WorldBank, 2019). Its economy is considered amongst the healthiest of the whole continent, as confirmed by roaring urbanisation. Currently, 51,2% of the population lives in urban areas such as the capital Abuja or other vibrant economic centres in the wealthier southern and coastal regions. Accordingly, about 4% of the population move to these centres every year (IndexMundi, 2019). Yet, Nigeria deals with an inadequate energy sector and faulty infrastructures that prevent the country from complete electrification and hinder progress towards a clean energy transition and the adoption of higher shares of renewable energy onto the grid.
As part of the OPEC family, Nigeria is one of Africa’s largest energy producer with a maximum crude oil production capacity of 2.5 million barrels per day (OPEC, 2019). The export of oil and gas products making up the bulk of its revenues. Petroleum aside, its subsoil is also endowed with abundant natural gas reserves, tin, iron ore, coal, limestone and other raw materials. Yet, for Nigerians to keep the light on is a day-by-day struggle.
Over the years, the Nigerian government has allegedly made considerable investments in the power sector. Nonetheless, the country has been suffering several grid collapses (over 200 in nine years, as many as 12 in 2019), resulting in hospitals being cut-off electricity from times to times and surgeons forced to operate by candlelight or using mobile phones at best (Adeshokan O., 2020). The general state of mismanagements is not a positive sign considering that Nigeria’s thirst for electricity is expected to grow at about 6% annually by 2035 (Adeniyi F., 2019). However, the Nigerian Energy Supply Industry (NESI) has undergone several reforms throughout the last decade partially liberalising its generation and distribution sectors although the presence of natural monopolies continues to hamper competition, particularly, as regards renewable IPPs (Independent Power Producers). On the generation side, there are 28 grid-connected power producers, the vast majority of which generates electricity from gas-fired power plants (71%) while the rest is made up by hydroelectric generators. The bulk of gas suppliers is situated in the wealthier Niger Delta, while northern areas generally lag in terms of the presence of power generation compounds. Transmission grids in Nigeria face the same uneven distribution being primarily concentrated in more developed regions.
According to analyst Fadekuyano Adeniyi, the NESI is currently coping with three inhibitive loops constituting barriers to full electrification and clean energy transition.
The first inhibitive loop lies in the persistence of natural monopolies across the distribution and transmission sectors and that of a monopsony (a market situation where there is only one buyer), namely, the state-owned bulk trader NBET (Nigerian Bulk Electricity Trading company), the only firm offering bulk trading services, impeding liberalisation. As a consequence, IPPs find it extremely difficult and inconvenient to try to enter the market at favourable conditions without government intervention. Since the early 2010s, Nigeria is undergoing a liquidity crisis which does not encourage investments whatsoever and outlines a second inhibitive loop. Overwhelming inadequacy is expected to undo market growth in the following years. Even though electricity demand is set to treble in 2034, generation and transmission constraints will not allow distribution companies to meet required performances. As in the most classic of vicious circles, because fewer bills are paid, distribution companies cannot run at full capacity and are driven into debt to generation companies which in turn will have to curtail production. Such conditions deter investments and create general distrust between distribution companies and consumers which are pushed to rely on alternative sources of energy: a third inhibitive loop.
Nigeria’s total installed capacity amount to some 12,310 MW. However, total operational capacity consistently failed to reach its full potential. In 2016, the sector peaked at 7,788 MW, but figures have averaged at 3000-4500 MW since 2010. Since early 2020, Nigeria has been operating well below 5000 MW. The government has been critical towards distribution companies, accusing them of having been under-performant. In response, they blame the Federal Government of Nigeria of having fallen short of fulfilling its promises hold it as the main responsible for the energy sector ‘s scarce performances. In particular, they point at the lack of badly-needed subsidies to repay for the sector’s debts and renovate insufficient, let alone inadequate, infrastructures.
Within the Nigerian context, the promotion of off-grid generation and alternative sources of power is fundamental. In 2017, the Rural Electrification Agency (REA) implemented an off-grid electrification strategy which is part of the government-sponsored Power Sector Recovery Programme (PSRP) to overcome roadblocks and “restore the financial viability of Nigeria’s power sector” (REA). According to data analysed by Power Africa, an independent think tank, some 20 million households do not have access to on-grid electricity which means that at least 85 million people (one-third of the population) are “underserved and/or unconnected to the grid”. North-western communities, as well as many headquarters in Lagos, still rely on expensive and dirty small petrol and diesel gen-sets to fulfil their daily needs. It is estimated that about 14 GW is served by these appliances (PS Market Research, 2019) and demand keeps on rising. More recently, REA has gotten $200 mln from the Africa Development Bank (AfDB) to boost off-grid electrification and power some 105000 households with renewable energy (Addeh E., 2020).
The adoption of renewable sources of energy into the NESI, such as photovoltaic (PV) modules, off-grid wind farms in windy northern and coastal regions could reduce the growth of Nigerian diesel genset market and consequently be a valuable solution to electrification deficits. As, Mrs Lande Abudu, Executive Secretary of the Renewable Energy Association of Nigeria (REAN), points out, there is the “necessity to improve financial channels to accelerate the adoption of renewables”. According to the Nigerian Vision 30:30:30 spelt out in the Nigerian RE and Energy Efficiency Policy of 2005, about 30% of total available power generation shall be produced from renewable sources by 2030. Furthermore, Nigeria is expecting to be producing some 32000 MW, of which 9100 MW should be made up by renewable energy sources. Solar PV power generation should account for some 5000 MW, solar thermal for another 1000 MW while wind power generation should contribute to 800 MW. Besides, biomass generation is expected to produce some 1100 MW while small and medium scale hydroelectric making up the rest (about 1200 MW). However, as in 2015 the Federal Government of Nigeria had reviewed down its feed-in-tariffs policy for alternative on-grid power generation and withdrawn from some of the guarantees it had previously assured, confidence dropped off again. Due to the lack of governmental cooperation, only 2 IPPs agreed to the new policy framework demonstrating that scarce performances and barriers to energy transition must be primarily referred to the conduct of decision-makers within the value chain.
To conclude, Nigeria needs a more robust roadmap to support renewable energy development and cope with a growing population and power needs. The Federal Government of Nigeria is called upon to implement more transparent renewable procurement programmes which may restore investor confidence and outdo Nigerian power sector inhibitive loops. Also, the development of effective off-grid policy schemes will benefit rural communities and ease the impacts of underperforming distribution and transmission sectors.
REFERENCES
- Addeh E. (2020), FG Gets AfDB’s $200m for Off-grid Electricity, This Day. Available at https://www.thisdaylive.com/index.php/2020/03/11/fg-gets-afdbs-200m-for-off-grid-electricity/
- Adeniyi F. (2019), Overcoming the Market Constraints to On-Grid Renewable Energy Investments in Nigeria, The Oxford Institute for Energy Studies.
- Adeshokan O. (2020), Surgery by candlelight: hospitals in Nigeria suffer losing power – and staff, The Guardian. Available at https://www.theguardian.com/global-development/2020/jan/07/surgery-by-torchlight-hospitals-in-nigeria-suffer-losing-power-and-staff
- IndexMundi (2019). Available at https://www.indexmundi.com/nigeria/urbanization.html
- OPEC (2019), Nigeria Facts and Figures. Available at https://www.opec.org/opec_web/en/about_us/167.htm
- PS Market Research (2019), Nigeria Diesel Genset Market. Available at https://www.psmarketresearch.com/market-analysis/nigeria-diesel-genset-market
- REA Rural Electrification Agency (2020). Visit to https://rea.gov.ng/
- REAN Renewable Energy Agency of Nigeria (2020). Visit to http://rean.org.ng/
- The Economist Intelligence Unit (2016), Power Up: Delivering Renewable Energy in Africa. Downloadable at https://gridlessafrica.com/wp-content/uploads/2019/05/Power-Up.pdf
- The World Bank (2019). Available at https://data.worldbank.org/country/nigeria
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