Solar Energy Struggles to Fill Electricity Gaps in Nigeria

Access to reliable electricity remains a significant challenge for many schoolchildren in Nigeria, particularly in rural communities like Olodo Okin in Ibadan. Excellent Moral School, located in Olodo Okin, lacks access to the national electricity grid, hindering students’ ability to use computers, the internet, and study in the evenings. Nigeria, with over 200 million people, has only about half of its population connected to an electricity grid that fails to provide sufficient daily electricity. Solar energy has emerged as a potential solution, given Nigeria’s abundant sunshine, but attracting risk-averse investors to finance major solar projects has proven difficult.

Interest rates for borrowing in Nigeria, which can reach as high as 15 percent, pose a significant challenge for solar companies. This rate is two to three times higher than in advanced economies and China, making it more costly for solar companies to operate in Nigeria. Lack of cost-reflective tariffs, where the price consumers pay for electricity doesn’t cover production and distribution costs, further discourages investment in the solar industry. The Nigerian government’s outstanding debt to power producers, amounting to 3.7 trillion Naira ($2.7 billion), also hampers the industry’s growth.

To address these challenges, solar projects in Nigeria require World Bank guarantees to attract investors. However, the government is cautious about signing agreements that could result in significant payments, even if electricity from the projects doesn’t reach consumers due to inadequate transmission and distribution infrastructure. The government’s push for consumers to pay the true costs of electricity consumption has faced resistance, including labor union strikes in June. Despite the challenges, business owners like Ebunola Akinwale recognize the benefits of grid electricity, even without subsidies, as it remains cheaper and cleaner than diesel generators.

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