Lack of reliable energy burdens businesses and public services in Nigeria

Dimly lit and stuffy classrooms stir with life every morning as children file in. Rays of sunlight stream through wooden windows, the only source of light. Pupils squint at their books and intermittently at the blackboard as teachers try to hold their attention.

It is a reality for many schoolchildren across Nigeria, where many buildings don’t have access to the national electricity grid. In Excellent Moral School in Olodo Okin in Ibadan, “the entire community is not connected, including the school,” said school founder Muyideen Raji. It acutely affects pupils, he said, who can’t learn how to use computers or the Internet and can’t study in the evenings.

About half of Nigeria’s more than 200 million people are hooked up to a national electricity grid that can’t provide sufficient daily electricity to most of those connected. Many poor, rural communities like Olodo Okin are entirely off the grid.

In a country with abundant sunshine, many are looking to solar energy to help fill the gaps, but getting risk-averse investors to finance major solar projects that would give Nigeria enough reliable energy is an uphill struggle. It means that millions in the country are finding ways to live with little to no electricity.

Studies have shown that Nigeria could generate much more electricity than it needs from solar energy thanks to its powerful sunshine. But 14 grid-scale solar projects in the northern and central parts of the country that could generate 1,125 megawatts of electricity have stalled since contracts were signed in 2016.

Those trying to develop solar projects in the country blame interest rates for borrowing which can be as high as 15%, two to three times higher than in advanced economies and China, according to the International Energy Agency.

That means it is more costly for solar companies to work in Nigeria or other developing nations than in rich countries. Africa only has one-fifth the solar power capacity of Germany, and just 2% of global clean energy investments go to the continent.

“The same project put up in Nigeria and Denmark; the Danish project will get funding for around 3%” interest rate, said Najim Animashaun, director of Nova Power, one of the stalled solar projects. Meanwhile he struggles to get loans even with interest rates of 10% or higher, “even though my solar project can produce two and half times more power,” than a Danish one.

Nigeria also does not set so-called cost-reflective tariffs, meaning the price consumers pay for electricity does not cover the costs to produce and distribute it. This means distribution companies cannot fully pay producers and the industry relies on government interventions to stay afloat, scaring off lenders from investing in the solar industry.

Currently, power producers say they are owed up to 3.7 trillion Naira by the government, making it difficult to meet obligations to their lenders and contractors.

Also, with the long-running petroleum subsidies now removed, many households, schools, hospitals and businesses struggle with the cost of the fuel for their backup generators.