Bridging Nigeria’s Electricity Gap: Subnationals Leveraging Decentralized Renewables for Development

Written by Kolade Kolawole

Introduction/Context

With an annual growth rate of about 2.1%, Nigeria’s population grew from 174 million to 218 million between 2014 and 2023, with 54.9% living in urban areas and 45.1% residing in rural areas. As a result, a 25% increase (from 32.28TW to 40.65TW) in electricity demand was recorded within this period with a potential to rise as population and economic activities increase. According to the World Bank in 2022, about 60.5% of Nigeria’s population have access to electricity with a significant distribution gap — 89% of residents in urban areas and about 26% of rural dwellers having access to electricity.

This gap has led to most rural dwellers and businesses exploring traditional (fossil fuels) energy sources (kerosene, diesel/petrol powered generators, and firewood) to generate power, which contributes to carbon emissions and health issues, especially in women. The limited access to electricity in rural communities has also affected the delivery of social services — the suboptimal performance of primary healthcare centres to residents in these communities has contributed to maternal (576 deaths per 100,000 live births) and infant mortality rate (69 deaths per 1000 live births). For SMEs, the cost of running businesses in these areas keeps rising due to the leaping costs of petrol and diesel resulting in reduced productivity and closure in extreme cases. Business owners expend an estimated $14 billion annually to generate power for their businesses. This has contributed to unemployment and subsequently increased rural-urban migration while mounting pressure on limited resources in urban centers.

The government, through the Rural Electrification Agency (REA) under The Federal Ministry of Power, over time, has worked to accelerate the electrification of unserved and underserved rural communities through decentralized renewable energy (DRE) solutions, mainly solar mini-grids. However, these efforts have not been able to address the significant deficit in electricity access with about 72 million of the rural population yet to have access to electricity. The sustained status quo over time has compounded socioeconomic challenges and affected the delivery of essential public services to these areas.

Fig. 1: Rural Access to Electricity in Nigeria (2017–2022): Trends and Percentage of Rural Population Connected

Fig. 2: Nigeria’s Off-Grid and Under-Grid Electricity Market: Current Expenditures and Opportunities for Renewable Alternatives

In a bid to address the sustained suboptimal performance of Nigeria’s power sector, the Electricity Act 2023 was enacted to improve electricity supply, encourage private sector investment, and promote the exploration of renewable energy thereby enabling States to generate, transmit, distribute, and regulate electricity. This development created a unique opportunity to bridge the gap in the electrification of urban and rural regions and contribute to sustainable development in Nigeria.

Way out of the woods

As part of the interventions by the central government to reform the electricity sector in Nigeria, the Nigerian Electricity Regulatory Commission (NERC) pursuant to the power conferred on it by section 230 of the Electricity Act 2023 initiated the transfer of regulatory oversight of the electricity market to ten states including Enugu, Ekiti, Ondo, Imo, Oyo, Edo, Kogi, Lagos, Ogun, and Niger out of which Ekiti, Enugu, Imo, Kogi, Ondo and Oyo have been granted full regulatory authority through their State Electricity Regulatory Commission (SERC). While the provision of the Electricity Act 2023 potentially provides a strategic opportunity for States to generate, transmit, distribute and regulate electricity, it also creates a unique opportunity to accelerate the integration of clean off-grid electricity solutions through state-owned or state-led power generation projects while exploring renewable sources (mini-grids) to address existing electricity deficits especially in unserved and underserved communities. This approach will potentially improve socioeconomic conditions — reduce unemployment through the scaling and creation of green businesses, and improve efficiency of healthcare facilities and public services in marginalized communities.

Achieving these objectives would require significant funding through local and international investments and technical expertise from private developers coupled with robust policies and regulatory frameworks to catalyze the implementation of major power projects across these states. Additionally, securing the buy-in of critical stakeholders — the civil society and communities through Rural Electricity Users Cooperative Societies (REUCS) where these power infrastructures will be located to encourage inclusive participation in the implementation processes will be pivotal. An understudy of India’s integration model in implementing clean off-grid power projects, while synergizing all the stakeholders to electrify rural regions, would provide ample information to guide these states in replicating the successes and mitigating against the failures. As with most large-scale, technical and capital-intensive projects in Nigeria, they are short-lived, unable to achieve the projected targets of which they were initiated due to a chain of challenges including weak policies and regulatory frameworks, technical capacity gap, inadequate financing mechanisms and poor implementation of inclusive governance practices. If these barriers are not addressed, they can potentially depress the operationalization of this legislation and the acceleration of rural electrification.

Addressing these identified barriers is critical to achieving the set targets by the government in achieving sustainable development, improving the socioeconomy and electrifying the majority of the rural population through clean off-grid alternatives. Leveraging this opportunity to propel the expansion of off-grid alternatives will create market opportunities of over $9.2B/year for minigrids and solar home systems while saving costs of over $4.4B/year for Nigerian homes and businesses.

Recommendations

1. Review and Enhancement of State Electricity Policies: State electricity policies should be reviewed/improved to capture clear regulations, power generation projections, finance/investment roadmap, stakeholder mapping, and research and development components. This will provide intricate details regarding the electricity sector of these states.
2. Establishment of a Dedicated Regulatory Body: A dedicated Ministry or Agency should be created and mandated by the law to implement the state electricity policy and regulate the electricity sector.
3. Public-Private Partnerships and Investment Incentives: The subnational governments should commit to building public-private partnerships with private developers, local and international investors — this can be done by granting tax holidays and incentives. Additionally, the government can also promote local content by ensuring indigenous labour (skilled and unskilled services) are employed.
4. Capacity Building and Technical Expertise Development: Consolidated upskill programs should be conducted to improve the technical expertise of government officials in relevant government MDAs. This can be effectively administered through joint capacity-building initiatives by the government, civil society, and industry experts to conduct technical research to generate data-driven insights regarding the electricity value chain in these states and inform decision-making.
5. Integrating and Empowering REUCS: The States should collaborate with the REA to integrate existing REUCS and accommodate new ones at the state level while developing collaborative frameworks and models to govern them. Additionally, the REUCS should be empowered through capacity-building programs to enhance their participation in the governance of the electricity sector of the states — this in the long run would foster accountability and participatory governance.

*Kolade Kolawole is the Assistant Manager, Energy Access, at Clean Technology Hub