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Can renewables light up Nigeria’s economic growth?
There are as many Nigerians living in the dark as there are Germans living in Germany. Green, decentralised power is part of the solution.
Each night, as the world rushes home and busy streets become deserted, a young girl in Ondo State, Nigeria, ventures out to do her homework under the lights of an ATM machine.
Despite the dangers she faces out alone on the streets, night after night she leaves home to pursue an education that will light her path towards a better future.
Unfortunately, this young girl’s story echoes across villages and cities in Africa.
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Reports show that more than 740m people – more than half of the sub-Saharan population – are living in the dark.
Nigeria, Africa’s largest economy, has the world’s second-largest absolute electrification deficit with about 43% of Nigerians (88m people and roughly Germany’s entire population), living off-grid.
As the next frontier of technological and economic development advances, Africa’s disheartening reality suggests that unless unprecedented action soon takes place, Africa’s full potential – including that of its children – will remain untapped.
Over the years, increasing energy deficits have severely impacted the economic growth of many African countries. In Nigeria, the COVID-19 pandemic exacerbated the misery already imposed by frequent blackouts.
Many farmers were forced to sell produce they could not preserve at giveaway prices, small-businesses were decimated as lockdowns were imposed, pregnant women were and still are giving birth by torchlight due to lack of electricity, and many children’s education came to a halt as lack of power meant they could not participate in online learning.
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Among these challenges, Nigeria has embraced and accelerated investment in renewable energy, with a case more compelling than the adverse effects of climate change – the economic bottom-line.
Now more than ever, adopting clean sources of energy is not just a sustainable choice, but a robust and reliable decision that will ensure the economy is kept running long after the pandemic is over.
Renewable energy can provide the reliable power that is needed for economic growth
Although about 57% of Nigerians are connected to the grid, 99% of these grid users experience many power outages, forcing them to spend over $6.93 a week buying fuel to power fossil fuel generators. To catapult Nigeria’s economic growth and match it to the growing population, the country needs to adopt a faster, cheaper and more sustainable electrification expansion strategy.
Renewable energy offers this ideal – faster, cheaper and reliable access to electricity.
Abundant sunlight and technological developments have improved the cost-competitiveness of solar power generation. Solar Home Systems (SHS) and PV lanterns have become considerably cheaper than key baseline fuels, such as kerosene, making renewable energy affordable for millions.
Additionally, unlike traditional grid expansion, the modular and fast deployment of SHS and PV lanterns enables access to a considerably larger market of people living in rural areas.
But for renewable energy to become the mainstream, a paradigm shift is required
Although many initiatives are proposed, such as the recently launched plan to install 5 million Solar Home Systems to serve 25 million people, there are many challenges towards making renewable energy the mainstream.
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Most of the early adopters of renewable energy have university degrees and bank accounts. Yet, many of those who will benefit the most are unbanked and may have low literacy levels.
More education is needed to shift the paradigm and empower more Nigerians to play a role in building the country’s sustainable future.
Beyond empowering more businesses to thrive, renewable energy will also aid social development.
The burden of getting fuel and cooking in unlit environments often falls on women. In addition, having a lit environment enables communities to create safer spaces for women and young children.
Reliable power will allow more female participation in economic, political and social life.
This sector’s reformation cannot be driven by one player. It requires a wholesale effort for the inclusion of the underserved and often sidelined stakeholders.
Financial inclusion and targeted incentives can catalyse growth
Financial inclusion remains a big barrier towards the adoption of renewable energy. Payment mechanisms that factor in the larger percentage of Nigerians who are off grid or unbanked will drive faster uptake, enabling users to take advantage of the ability to pay “small small”.
Lumos, Nigeria’s largest provider of Solar Home Systems, offers a 48 month payment plan for just over $14 a month. As more players enter this sector, the Government will need to do more to create an enabling environment, for example, encourage innovative payment platforms and introduce incentives for local panel assembly.
Nigeria can chase both economic growth and environmental good
Nigeria doesn’t have the luxury of slowly adopting renewable energy. In a recent report on the impact of the energy deficit on entrepreneurs, “57% of Nigerian technology start-ups reported that a lack of reliable electricity was a “major” or “severe” obstacle to their business”.
According to the World Bank, the economic cost of power shortages in Nigeria is $28 bn, equivalent to 2% of GDP and getting access to electricity ranks as one of the major constraints to the private sector.
Unfortunately there is no magic wand for large-scale renewable energy adoption across Nigeria and it will likely only remain a part of a Power Sector Recovery plan, but accelerating adoption can only aid recovery, enabling Nigeria to achieve economic growth faster while addressing climate and health crises.