The Road Map to Solving Nigeria’s Energy Crisis


By Harry Okoruwa

Christiane Amanpour, the widely acclaimed television host, once remarked in an interview with former President Goodluck Jonathan in 2013, “What should I tell the people (Nigerians) who keep contacting us (CNN) and saying they hope they have electricity just to be able to watch this interview on their televisions? Clearly, power is still a big problem in Nigeria”.

Amanpour made this remark after President Jonathan had implied during the interview that Nigerians knew that there was a significant improvement in electricity supply in the country, but little did he know that majority of Nigerians who had reacted to his claim on the social media page of CNN debunked the President’s overly sunny view of the state of the power sector.

What followed was Mr. President labouring to justify the investment that his administration had made to improve electricity generation and distribution in the country. Nevertheless, Nigerians had already given their verdict on the issue.

Sadly, this has been the tale of successive governments in Nigeria, publishing “facts” of investment in the power sector while the citizens continue to experience prolonged blackouts and are left wondering what happened to the billions of dollars claimed to have been spent on delivering electricity to Nigerians.

Nigeria today is witnessing perhaps the worst power generation and distribution crisis in many years. To redress this situation, experts in the field of green energy have since lent their views in support of pursuing renewable energy in delivering power and as well as powering even the remotest parts which are without grid infrastructure. Indeed, the need for alternative energy sources is even more compelling as Nigeria is currently predominantly dependent on electricity generating plants which rely on gas-fired thermal energy. Unfortunately, with the resurgence of militancy in the Niger Delta, gas supplies to the plants have been severely compromised with attendant negative impact on electricity generated nationwide.

One of such views is succinctly captured in a report, commissioned by IHS Towers and written by a panel of analysts at the Economist Intelligence Unit (EIU) titled, POWER UP: Delivering Renewable Energy in Africa. Nigeria, along with other African countries, has what it takes to successfully harness the benefits of renewable energy. However, renewable energy programmes need committed governments championing the accelerated delivery of renewable energy benefits, the report highlighted.

Africa’s green energy is capable of replicating the success of mobile communications in the early 2000s wherein there was pent-up demand for telecommunications services and that demand was quickly met over a short period of time.

In Nigeria, shortly before the auction of GSM licenses, only 400,000 telephone lines were operational. There was a large pool of consumers but the government-owned Nigerian Telecommunications Limited (NITEL) could not meet the pent-up demand. With the emergence of mobile telecommunications, which required a more nimble infrastructure outlay as opposed to fixed line operations, the telecommunications industry in the country grew astronomically, exceeding forecasts by industry analysts.

Similarly, renewable energy can alleviate the challenges associated with inadequate or non-existent power supply as we have in many urban and virtually most rural areas many of which are not connected to the electricity grid. The report says that strategies are emerging for rural areas to deliver electricity without heavy and clunky infrastructure as it is in the case of grid electricity. With simple and handy solar photovoltaic consumer products like the popular Pico-Solar units, rural areas can be lit up off grid power generation.

It is also important to note that Nigeria has solar energy potential in abundance especially in rural areas. This can be exploited freely in generating alternative power supply in these areas. Also, the cost of Solar Photovoltaic units have fallen by 80% since 2008. The significant public support for renewable energy is also encouraging. Power Africa led by USAID and the African Renewable Energy Initiative that aims to deploy 10GW of renewable energy by 2020, reaching 300GW by 2030, should serve as an impetus to prod governments and other institutions to pursue renewable energy, according to the Power Up report.

By the foregoing, it is expected that manufacturing firms would begin in earnest to pursue alternative source of power as they grapple with the monetary, logistic and other challenges of fuelling generators. Many manufacturing companies rely on diesel generators during production as power outages are too rampant, leading to disruptions and the attendant damage to equipment, goods and personnel. A World Bank data states that manufacturing firms in Nigeria experience an average of 32.8 power outages a month, resulting in the loss of 10%-15% in annual sales.

With the lowered cost of technology in renewable energy, and the economic hardship currently experienced in the country as a consequence of near absence of public power supply, manufacturing companies, homes and other businesses must seek ways to minimize cost of providing their energy needs. One of the leading alcoholic beverage companies in Nigeria recently revealed that its dwindling profits were occasioned by consumers patronizing their value brands rather than the premium brands, which generates higher profit margins but a bit more expensive for the average consumer. Putting in place a green energy alternative like solar, for instance, will minimize the cost of producing the ‘value’ alcoholic brands and the cost saving can then be ploughed back into the business for greater productivity.

Another sector renewable energy would benefit immensely is health. Most public hospitals are finding it difficult to fuel generators as their alternative source of power. Primary health care centres in rural areas need adequate power to store vaccines in cooling units. Not long ago, a disheartening picture of doctors performing a surgery with light produced from mobile phones went viral on social media. Stories abound of patients who are due for surgeries and are compelled to pay for diesel to power generators used for the duration of these surgeries.

These sad tales are common in Nigeria and can be addressed by installing solar panels in health facilities. Such initiatives are already being slowly implemented. Ita –Elewa Primary Health Centre is one of 11 primary healthcare beneficiaries since the Lagos Solar Project kicked off last year with assistance from the UK Department for International Development. The clinic no longer source for funds to fuel its two generators to keep the fans whirring over patients’ heads or to support nine cooling units for vaccines when power goes out. More of such projects are needed across Nigeria, especially in far-flung rural areas. Solar energy must be aggressively deployed in public health centres in order help health facilities meet the needs of Nigerians.

The Power Up report suggests four important measures that must be in place to attract increased investment in renewable projects while also ensuring its success. Firstly, government must avoid implementing artificial low tariffs because it would put off investors. To attract infrastructure investment, government must allow power tariffs to reflect the cost of investments made. Subsidies should be targeted at the poor only to protect them and enable them benefit from the programme. This way, private investors will not be deterred from making investments.

Secondly, government’s transparency and harmonization are essential for investors to commit to investments of this nature. Government should endeavour to publish key planning documents, like Integrated Resource Plans, Power Purchasing Agreements, Government Support Agreements and Connection Agreements. Doing this will provide structure, investor certainty and policy signal, which will support not only private sector decision making but also boost their confidence in the operating environment. South Africa’s Renewable Energy Power Producer Procurement Programme (REIPPP) is a case study in this regard which is now being replicated by Uganda and Zambia. The report notes that South Africa became very successful through the ability of the PPP Unit of the country’s National Treasury to attract investment because of its track record of delivering infrastructure projects.

Similarly, Lagos state, in the past five years, has become a jurisdiction of some sort for PPP with project finance expertise. If Nigeria can piggyback on this at the federal level, it would realise the same sort of success the National Treasury did for Department of Energy in South Africa. Thankfully, Babatunde Fashola the Minister of Power, handled most of the PPP projects in Lagos as Governor and that should count for something in no distant time.

Thirdly, Customs efficiency must be improved upon to reduce costs and improve construction maintenance times by making it easier to move technology and equipment in and out of the country. Lastly, focus on renewable energy strategy and initiatives must be government led and it should be a comprehensive renewable procurement programmes, not one-off investments that are not expansive enough to cater for the energy shortfall in the country.

Mohamad Darwish Co-Founder of IHS, the largest base transceiver stations provider for telecommunications industry in Nigeria believes the country has the raw ingredients for a vibrant renewable energy market. Nigeria has abundant resources further buoyed by falling costs of solar panels, wind turbines, smart innovations in end-user equipment and a committed government and international donors.

Darwish says IHS has witnessed the energy and operational efficiency benefits that come from investing in renewable power solutions, having invested $500 million in new green energy power systems across its business portfolio. This investment, he says, would enable the company become almost diesel-neutral in Zambia in a few years while it also assesses solar farm opportunities in Rwanda that could potentially supply power to the national grid of the country.

Clearly, renewable energy offers a substantial leeway to meeting the energy needs of homes and businesses in Nigeria. The availability and reliability of the natural assets especially solar and wind are positive signals that should be exploited. What Nigeria needs right now is a clear and implementable roadmap for renewable energy development along with robust guarantees that will attract private investors.

  • Okoruwa works for XLR8, a Lagos-headquartered communications consultancy