Nigeria as a country is more populous than the entire economic bloc of East African Community – EAC. (180 million & 169 million respectively). Relatedly, Nigeria’s GDP is 250% of EAC’s GDP (405 USD & 159 USD [2016 values]). This data paints a nice portrait of the sheer size of the Nigerian market from a sector-agnostic perspective.
But there is a consensus that Nigeria’s major hurdle to economic development is its very poor level of energy access. Nigeria was recently ranked as one of the countries with the worst electricity supply in the world, according to a 2017 report by Spectator Index. These statistics clearly outline the enormous potential and necessity of the energy investment opportunities in Nigeria. Especially off grid solar investment which has proved to be relatively easy, affordable and efficiently scalable. Consequently, Nigeria’s promising off grid solar market has attracted - and continues to attract - investments, although real hurdles remain. Macroeconomic problems, regulatory constraints and the typical challenges of a nascent market are still visible. However, in spite of the hurdles, market players are making significant progress.
Off grid solar developments will be one of the highlighted topics in this year's edition of The Solar Future Nigeria, the largest solar PV focused industry event in Nigeria, which is hosted by global PV knowledge platform Solarplaza in Abuja on the 15th and 16th of May.
Around the world, the off grid solar space is continuously being buoyed by adjacent developments in technology and consumer preferences. From the role of innovative Fintech solutions, to the progress witnessed in mobile penetration; market enablers are emerging in Nigeria, which continuously redefines its frontiers.
“Nigeria is a ready market for solar energy. On-grid energy by itself cannot produce and is not robust enough to support the population growth”.
One of the most bullish off grid solar brands in the Nigerian market is Azuri Technologies. Their market footprint perfectly juxtaposes the opportunities and challenges inherent in the Nigerian off grid solar market. Vera Nwanze, General Manager Azuri Technologies West Africa says that “Nigeria is a ready market for solar energy. On-grid energy by itself cannot produce and is not robust enough to support the population growth”.
Nigeria’s population is projected to reach 400 million by 2050 which directly increases the potential size of the market. Vera explains that “Government focus is to improve grid capacity, while supporting off-grid energy initiatives.With a population of about 180 million and over 50% living without electricity, Nigeria is the biggest market in Africa for off-grid solutions. As a result, the renewable energy policy was drafted with an emphasis on diversifying the energy mix. This has seen increased interest in the sector, thereby precipitating increased investment and interest”
With evident enablers and numerous risks as well, how are market players and current investors navigating the path towards profitability? Nigeria as a country is somewhat remarkable with policy ambivalence and even insensitivity in some cases. Some economic and non-economic incentives that off grid investors vie for (and which are already given in other African markets) appear elusive. For example, market operators are presently confronting the Nigerian authorities on a recent increase in import duty and Value Added Tax (VAT) on imported solar components and accessories. Proponents of the new policy argue that it is geared towards encouraging local manufacturing of solar equipment while investors believe it’s a major distortion to current market prices and existing cost structures; given the heavy reliance on imported components by most off grid solar companies.
"Since solar off grid operators began to leverage Fintech for reaching previously inaccessible communities – mainly rural – a new category of customers has opened up."
On the key challenges in the Nigerian market, Azuri technologies listed “Mobile money challenges (as payment option); Lack of financial support from the banks; Lack of awareness; Non-clarity on duty charges and poor ease of doing business” as operator constraints. This is apparent. Since solar off grid operators began to leverage Fintech for reaching previously inaccessible communities – mainly rural – a new category of customers has opened up. But, in spite of the inherent promise of technologies such as mobile money, Nigeria is yet to attain universal access to mobile money and its usefulness is further constrained by limited user awareness, which in turn lowers their relevance and utility for scaling off grid solar operations.
Innovation seems to be the key answer, and companies like Azuri are moving forward with that. The company says it’s addressing constraints “with an innovative product, [such as] an individual solar home plant via PayGo as an “instant relief”, with no need for infrastructure or centralised planning” Rightly said: a growing mobile penetration, aided by Fintech and Pay As You Go solutions, typically combine to solve major challenges for operators. Specifically problems of revenue collection and the operator’s ability to better structure payments (that are related to acquisition/usage of solar products).
Proud of their footprints in Nigeria, Vera says “With about one year in Nigeria, in a strategic partnership with REA/NDPHC and ASPNL as our distributor, we can proudly say that we have recorded a transformative presence in 12 Nigerian states, with deployment of 20,000 individual solar home systems and entrenching PayGo as an alternative which has impacted about 100,000 people and created over 500 job opportunities, especially in the rural communities.”
On the medium term Azuri hopes to leverage market enablers “to reach over 1 million households that the grid can not, or will not, reach and as such compliment the grid gaps” and “On the long term; have a local presence in Nigeria with a manufacturing plant for export into the other West Africa countries.”
"With more than 80 million Nigerians living without electricity, according to a World Bank report, the opportunity for off grid solar investment is great."
With more than 80 million Nigerians living without electricity, according to a World Bank report, the opportunity for off grid solar investment is great. The market will surely gain greater traction if the government strives to improve the overall market conditions. It’s imperative that the progress made so far will be sustained through more friendly regulations that increase the ease of doing solar business in Nigeria. It’s also evident that consumer awareness will continue to expand as operators consistently apply innovative solutions for transforming market hurdles to key enablers.