IBADAN, Nigeria (AP) — Dimly lit and stuffy classrooms bustle with life every morning as children file in. Sunbeams stream through wooden windows, the only source of light. Students stare at their books and occasionally at the blackboard as teachers try to keep their attention.
It is a reality for many schoolchildren across Nigeria, where many buildings do not have access to the national electricity grid. At the Excellent Moral School in Olodo Okin, Ibadan, “the entire community is disconnected, including the school,” according to school founder Muyideen Raji. It acutely affects students, he said, who cannot learn how to use computers or the Internet and cannot study in the evenings.
About half of Nigeria’s more than 200 million residents are connected to a national electricity grid that cannot provide enough daily electricity to most of those connected. Many poor, rural communities like Olodo Okin are completely off-grid.
In a country with abundant sunshine, many are looking to solar energy to fill the gaps, but it is an uphill battle to find risk-averse investors to finance large solar projects that would give Nigeria enough reliable energy. It means millions of people in the country are finding ways to live with little to no electricity.
Lots of sun, little money
Studies have shown that Nigeria can generate much more electricity than it needs from solar energy thanks to its powerful sunshine. But 14 large-scale solar projects in the north and center of the country that could generate 1,125 megawatts of electricity have been stalled since the contracts were signed in 2016.
Those trying to develop solar projects in the country blame interest rates on loans that can be as high as 15 percent, two to three times higher than in advanced economies and China, according to the International Energy Agency.
That means it’s more expensive for solar companies to operate in Nigeria or other developing countries than in rich countries. Africa has only a fifth of Germany’s solar capacity, and only 2% of global clean energy investment goes to the continent.
“The same project has been set up in Nigeria and Denmark; the Danish project is getting financing at 2 to 3 percent interest,” says Najim Animashaun, CEO of Nova Power, one of the stalled solar projects. Meanwhile, he struggles to get loans, even at 10 percent or higher interest, “even though my solar project can produce two and a half times more power” than a Danish project.
Nigeria also does not set so-called cost-reflective tariffs, meaning that the price consumers pay for electricity does not cover the costs of producing and distributing it. This means that distribution companies cannot fully pay producers and the industry is dependent on government intervention to stay afloat, which deters lenders from investing in the solar industry.
Currently, energy producers say they are owed 3.7 trillion naira ($2.7 billion) by the government, making it difficult to meet their obligations to their lenders and contractors.
One option would be to obtain guarantees from the World Bank that would put investors at ease and make them more willing to put money into solar projects – but the government is wary of anything that would force them to pay large sums, even if electricity from the projects does not reach consumers due to inadequate transmission and distribution infrastructure.
But without guarantees from the World Bank, “no one will develop or finance a project with government subsidy because it could dry up,” said Edu Okeke, director of Azura Power. Azura Power has a stake in the now stalled 100-megawatt Nova solar project in Nigeria’s northern Katsina state.
Stop-gap solutions
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 supplies to just 5.6 million people – power outages are a common occurrence in Nigeria.
Communities like the Excellent Moral School in Ibadan, which do not have access to electricity, are often surrounded by more fortunate ones who are connected to the electricity grid but suffer frequent outages and have to use private generators running on petrol and diesel.
Now that long-term oil subsidies have been removed, many households, schools, hospitals and businesses are struggling with the cost of fuel for their backup generators.
“We have stopped using diesel generator as an alternative because of the cost,” said Abdulhakeem Adedoja, the principal of Lorat Nursery and Primary School in Ibadan. He added that although the school is located in an area of Ibadan that is connected to the grid, they can go without power for two weeks.
The problem is not only the lack of electricity for computer-based learning, proper lighting and fans to make classes less stuffy for students and teachers, but also that students cannot complete their school assignments at home, Adedoja said.
Smaller businesses that use a lot of energy, such as restaurants, can close their doors or continue with alternative energy generation. This entails high costs that limit their expansion options.
Ebunola Akinwale, owner of Nature’s Treat Cafe in Ibadan, says she pays 2.5 million naira ($1,700) monthly for power from emergency generators in her four branches.
“If nothing changes, I would probably have to close one or two locations,” she said, though she plans to go solar, which she says will help us “cut back on pollution from diesel generators.” She is in talks with her bank about a low-cost loan package designed specifically for young female entrepreneurs to finance the solar alternative.
However, not every business and household has such access or can afford the capital for a private solar system. School principals Raji and Adedoja say they find the cost prohibitive.
Finding a way forward
The stalled solar projects are not going ahead because the finances are not sufficient. But even for other sources of electricity generation, Nigeria is struggling to attract the much-needed private financing.
The Minister of Energy, Adebayo Adelabu, said in May that to address the financial crisis in the electricity sector, prices must reflect the real cost of service delivery because a bankrupt government “cannot afford to spend 3 trillion Naira ($2 .4 billion) in subsidies.”
The government is also convinced that it would boost investment in the sector if Nigerians paid in full for the electricity they consume.
There has been some resistance to this, as unions partly went on strike in early June to protest against the increase in electricity rates.
But businesspeople like Akinwale understand the government’s position because regularly supplied electricity from the grid, even without subsidy, is “still cheaper and cleaner” than diesel for generators, she said.
If the finances for grid-scale solar projects don’t work out, the government should offer incentives such as tax credits and payment plans to encourage private solar adoption, Akinwale said. “Sunlight is abundant,” she said.
Former regulator Sam Amadi doubts whether consumers in Nigeria – where the minimum wage is 30,000 naira ($20) a month – “can pay for the energy they consume today without subsidies.” He also wants policies that make it more affordable to have smaller-scale solar projects spread across communities, businesses and homes.
Until then, frequent power outages will have an impact, he said.
“I have the story of a person who died in the hospital because the electricity went out during the operation,” he said. “Every day we see the real consequences of the lack of electricity.”
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