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The dimly lit classroom bursts with life every morning when the children enter. Sunlight through the wooden window, the only source of light. The students were hunched over their books and the blackboard as the teacher tried to pay attention.
This is the reality for many school children in Nigeria, where many buildings do not have access to the national electricity grid. At Olodo Okin’s Superior Moral School in Ibadan, “the whole community is disconnected, including the school,” said school founder Muyideen Raji. This affects students, he said, who cannot learn to use computers or the Internet and cannot study in the evening.
About half of the more than 200 million people in Nigeria are connected to the national electricity grid which cannot provide enough daily electricity for most of those connected. Many poor rural communities like Olodo Okin are off the grid.
In a country with abundant sunshine, many are looking to solar energy to fill the gap, but getting risk-averse investors to finance a major solar project that will give Nigeria reliable energy is an uphill struggle. That means millions in the country are finding ways to live with little or no electricity.
A lot of sun, a few funds
Studies have shown that Nigeria can generate more electricity than it needs from solar energy because of the strong sunlight. But 14 grid-scale solar projects in the north and center of the country capable of producing 1,125 megawatts of electricity have been shut down since contracts were signed in 2016.
Those trying to develop solar projects in the country blame interest rates on loans that can reach 15 percent, two to three times higher than in advanced economies and China, according to the International Energy Agency.
That means it is more expensive for solar companies to operate in Nigeria or other developing countries than in rich countries. Africa has only one fifth of Germany’s solar power capacity, and only 2% of global clean energy investment goes to the continent.
“The same project is installed in Nigeria and Denmark; the Danish project will ask for funding for 2 to 3 percent “interest rate, said Najim Animashaun, director of Nova Power, one of the solar projects stuck. Meanwhile, it is a struggle to get a loan even with an interest rate of 10 percent or more, “even though my solar project can produce two and a half times more power,” from Denmark.
Nigeria also does not set so-called cost-reflective tariffs, meaning the price consumers pay for electricity does not cover the cost of generating and distributing it. This means that distribution companies cannot pay producers in full and the industry is dependent on government intervention to stay afloat, scaring creditors away from investing in the solar industry.
Now, the power producer says it is owed up to 3.7 trillion Naira ($2.7 billion) by the government, making it difficult to meet its obligations to lenders and contractors.
One option would be to get a World Bank guarantee that would put investors at ease and make them more willing to put money into solar projects – but the government is wary of registering anything that would force them to pay a lot even for electricity from the project. not getting consumers due to inadequate transmission and distribution infrastructure.
But without the World Bank guarantee “no one will develop or finance projects with government subsidies, because they could dry up,” said Edu Okeke, managing director of Azura Power. Azura Power has a stake in the currently stalled 100 megawatt Nova solar project in northern Nigeria’s Katsina state.
A stop-gap solution
With a capacity of less than 8,000 megawatts and an average supply of less than 4,000 megawatts – less than half of what Singapore provides for just 5.6 million people – power outages are a daily occurrence in Nigeria.
Communities like Excellent Moral School in Ibadan that do not have access to electricity are often surrounded by those who are more fortunate to be connected to the grid but often experience outages and have to use private generators of petrol and diesel.
With petroleum subsidies long since removed, many households, schools, hospitals and businesses are struggling with fuel costs for backup generators.
“We have stopped using diesel generators as an alternative because of the cost,” said Abdulhakeem Adedoja, head of Lorat Nursery and Primary School in Ibadan. He added that even though the school is in the Ibadan area that is connected to the grid, they could run for two weeks without electricity supply.
The problem is not only the lack of electricity for computer-assisted learning, proper lighting, and fans to make classes less stressful for students and teachers, but also that students are unable to complete schoolwork at home, Adedoja said.
For energy-hungry small businesses like restaurants, they close shop or continue with alternative power plants, with high costs that lead to capacity expansion.
Ebunola Akinwale, the owner of Nature’s Treat Cafe in Ibadan, said he pays 2.5 million Naira ($1,700) a month to generate back-up generators in his four branches.
“If nothing changes, I will probably have to close one or two branches,” he said, although he plans to use solar power, which will help reduce “pollution from the diesel (generator). He is talking to banks for a specially designed low-cost loan package for young women entrepreneurs to finance solar alternatives.
However, not every business and household has access to it or can afford the upfront capital for a personal solar system. Principals Raji and Adedoja said the charges were rare.
Find a way forward
Stalled solar projects are not happening because finances are not improving, but even for other sources of electricity, Nigeria is struggling to attract much-needed private financing.
The minister of power, Adebayo Adelabu, said in May that to overcome the financial crisis affecting the electricity sector, prices must reflect the true cost of services because “the broken government cannot afford the 3 trillion Naira ($2.4 billion) subsidy.”
The government also asserted that Nigerians paying in full for the electricity they consume will encourage investment in the sector.
There was some pushback to that, as labor unions went on strike in early June to protest rising electricity rates.
But entrepreneurs like Akinwale understand the government’s position because it regularly supplies grid electricity, even without subsidies, “still cheaper and cleaner” than diesel for generators, he said.
If financing for grid-scale solar projects does not improve, the government should provide incentives such as tax relief and payment plans to encourage private solar adoption, Akinwale said. “There’s a lot of sunshine,” he said.
Former regulatory chief Sam Amadi doubts that consumers in Nigeria – where the minimum wage is 30,000 Naira ($20) per month – “today can pay for the energy they consume without subsidies.” They also want policies that make it more affordable to own small-scale solar projects located in communities, businesses and homes.
So far, there have been consequences from frequent blackouts, he said.
“I have a story about someone who died in the hospital because the electricity went out during surgery,” he said. “Every day, we see the real effects of electricity shortages.”
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