RENWEABLE ENERGY TO ADDRESS THE GENERATION AND SUPPLY OF CONSTANT ELECTRICITY IN NIGERIA: A DEVELOPMENT PROJECT

1. RENWEABLEENERGYTO ADDRESSTHEGENERATIONANDSUPPLY
OF CONSTANT ELECTRICITY IN NIGERIA: A DEVELOPMENT PROJECT
FINAL PROJECT:
WBG’S FINANCING FOR DEVELOPMENT: UNLOCKING INVESTMENT OPPORTUNITIES’ by
Cynthia Onyinyechi Igodo
March 2017

2. INTRODUCTION
• The energy sector in Nigeria is of strategic importance.
• It plays an important part in:
• Reducing poverty;
• Improving productivity;
• Enhancing the quality of life.
• Thus, Goal 7 of the United Nations Sustainable Development Goals ensures access to
affordable, reliable, sustainable and modern energy for all.

3. ENERGY PROBLEM IN NIGERIA
• Nigeria has a population of approx. 180 million and a growing population.
• However only about 47% of population have access to electricity which is at most erratic.
• Also, only 40% of households are connected to the National Grid.
• Currently energy supply depends mostly on fossil fuel (petroleum) and firewood;
• Nigeria is currently in recession and trying to diversity her economy via Agriculture, Manufacturing, ICT etc..

4. Energy Problems Contd.
• Erratic and sometimes non-existent electricity makes this difficult and expensive-
• For example
• To store and process agricultural products;
• For the manufacturing sector to run its machinery
• For the ICT sector.
• Thus, the energy problems have hampered the development of the Nigeria
economy and will affect the sustainable development of Nigeria.
• Also, the constant gas-flaring, destruction of gas-pipeline in the Niger Delta and
activities of the Niger Delta Militia have hampered distribution

5. Energy Problems Contd.
• Also, this has resulted in:
• Businesses to shut down;
• Erisco Foods Limited shut down its tomato manufacturing company in 2016;
• Approx. 272 firms shut down in 2016;
• Poverty
• Affected access to essential services such as healthcare, education,;
• Contributed to the effects of climate change
e.g. Most Nigerians cook with Kerosene stove and/or firewood;
• Lack of development of the rural areas and urbanization
• Increased consumption of fuel
• Death resulting from generator fumes or burning houses from candles

6. Strategy for Solving the Energy Problem in Nigeria
• Renewable energy has a huge potential in Nigeria and could bridge the
major energy gaps in rural areas and SMEs.
• Present levels of power generation of 5000MW meet only a fraction of
demand.
• Recent studies put concentrated solar thermal power potential in Nigeria at
over 427,000MW (The SUNGAS project-Executive Summary)
• A huge gap indeed.

7. Strategy for Solving the Energy Problem in Nigeria contd.
• The Renewable Energy Master Plan (REMP) in its second draft of November 2012-prepared by the Energy Commission of Nigeria- seeks
• To increase the supply of renewable electricity from 13% of total electricity generation in 2015 to 23% in 2015 and 36% by 2030.
• Expect it to account for 10% of Nigerian total energy consumption by 2025 (ECA, November 2012)
• This is not something new.
• Renewable energy from hydropower has been at the core of Nigeria’s grid electricity production;
• Until recently, the Kanji and Jebba Dams (130MW) accounted for around 50% of Nigeria’s stable power source before being overtaken by gas power stations.
• Thus, renewable energy is an alternative, more stable and cleaner source of electricity energy which will not result in the constant drain of cash associated with
the high cost of power from the alternative of ‘stand-by’ generators which has really become the main source of electricity in Nigeria.

8. REASONS FOR GOVERNMENT, OFFICIAL AID PROVIDERS AND PRIVATE SECTOR WOULD
WANT TO PARTICIPATE IN SOLVING THE ENERGY PROBLEM IN NIGERIA
• The SDGs and consequently sustainable development can only be achieved if everybody-
international, national and private sector collaborate in achieving the goals of the SDGs.
• Thus, the Government, the Official Aid Provider and the Private sector need to partner and
collaborate to solve the energy problem in Nigeria.
• We cannot do it alone. We need help.
• We need the expert advise from MDBs.
• We need the financial assistance from MDBs and the Private Sector.
• We need the experience of the private sector.
• We need the political will of the Government.

9. REASONS FOR GOVERNMENT TO PARTICIPATE IN SOLVING THE
ENERGY PROBLEM IN NIGERIA
• Government has an interest in solving the energy problem for the following:
• Domestic Revenue Mobilization- through taxation;
• Build strong institutions to foster investor confidence;
• Play the role of regulator and promoter;
• Design contracts in such a way that risks and returns are distributed in an incentive-compatible way;
• Develop a vibrant capital market;
• Result in economic development;
• Reduce poverty;
• Reduce urbanization;
• Provide rural-electrification;
• Result in energy efficiency.

10. REASONS FOR OFFICIAL AID PROVIDERS TO PARTICIPATE IN
SOLVING THIS PROBLEM
• Official Aid Providers and MDGs should participate in solving the energy problem:
• Provide policy advice to the government and access to technical capacity and advisory services:
• For example, the WBG’s Scaling Solar through simplified government processes and low pricing, allows government to procure privately-funded solar power station
quickly, transparently and at lowest tariff-----this creates a new source of affordable, renewable energy without subsidies and without public outlays. (Unlocking
Private Investment in Emerging Market Solar Power)
• To alleviate poverty and bridge the gender gap;
• Provide access to rural electrification;
• Access to essential services such as healthcare; clean water; education etc.;
• Working with the private sector via project finance provide infrastructural development;
• Access to technical capacity and advisory services;
• Provide access to risk mitigation instruments such as insurance, guarantee;
• Contribute in resolving climate change issues and increasing energy efficiency;

11. REASONS FOR OFFICIAL AID PROVIDERS TO PARTICIPATE IN
SOLVING THIS PROBLEM contd.
• Assist governments in create an enabling environment for investments
• Support development of domestic capital and instruments suitable to institutional investors to mobilize
domestic resources ad foreign investments
For example:
The Azito Power Plant Project in Cote d’ Ivoire- the IFC invested $125 million and arranged a $345
million package funded by the five European Development finance institutions and the West African
Development Bank. The WBG helped the government put in place a robust regulatory framework while
MIGA provided political risk insurance. (Unlocking investment opportunities in fragile markets-
submitted by Joaquim Levy on Mon, 05/16/2016 at http://blogs.worldbank.org/voices )

12. REASONS FOR THE PRIVATE SECTOR TO PARTICIPATE
• The Private Sector would:
• Receive risk-adjusted return on its Investment- through tax exemptions;
• Also, the Nigerian Bulk Electricity Trading Company purchases electricity generated on competitive basis through a PPA;
• To manage political risk of investing, economic and social risk
• Either through MIGA or other Guarantee and Insurance
• Achieve diversification of its portfolio;
• Contribute to economic growth through job creation, research and development and technology transfer;
• Huge consumer sector;
• Contribute in solving climate change issues and increasing energy efficiency.

13. OBSTACLES TO UNLOCKING FINANCIAL OPPORTUNITES
• In Nigeria the obstacles to unlocking financial opportunities include:
• Corruption
• Illicit Financial Flows;
• Difficulty in doing business in Nigeria-
• With regards to obtaining licenses; property right issues; setting us a business etc..
• Uncertain legal and regulatory landscape-
• Particularly with regards to contract enforcement and Rule of law;
• Tax Maladministration;
• Lack of Transparency.

14. SOLUTIONS TO UNLOCKING FINANCIAL
OPPORTUNITIES;
• To encourage investors, Nigeria must:
• Address the issues of corruption to wit-
• End impunity-by creating an effective court system;
• Reform public administration and finance management;
• Promote transparency and access to information;
• Empower citizens to hold government accountable;
• Close International Loopholes to prevent corrupt officials from laundering and hiding the proceeds of looted
funds;

15. SOLUTIONS TO UNLOCKING FINANCIAL OPPORTUNITIES
contd.
• Plug Illicit Financial Flows
• Public Expenditure Efficiency through the 3 Cs-
• Capacity-through technical assistance and provision of advise and knowledge such as the Public Expenditure and Financial
Accountability assessment;
• Capture- preventing narrow interests from capturing state resources;
• Corruption.
• Create enabling environment for foreign investment participation including ease of starting and exiting a business, effective
and efficient public procurement laws, inclusive property right laws, gender-equality laws;
• Working with the MDBs to create a better energy regulation that will allow private equity firms invest in the economy.

16. SOLUTIONS TO UNLOCKING FINANCIAL OPPORTUNITIES
contd.
• Create a ‘Smart’ Tax Policy which should be inclusive and-
• Facilitate compliance;
• Enforce compliance;
• Improve governance;
• Effective tax administration and policy would facilitate compliance by
ensuring that individuals obligated to pay tax are doing so and reduce tax
evasion, improve governance to keep tax official honest.

17. SOLUTIONS TO UNLOCKING FINANCIAL OPPORTUNITIES
contd.
• Create legal and regulatory frameworks-
• Respect Rule of Law
• Regulations around ability to contract or period of contract are codified, laid out and broadly accepted
• Stable, legal and regulatory environment
• Leads to investor confidence
• Court must be final and equal adjudicator between investor and government and lender;
• Government cannot intervene or disregard judgments;
• Law must provide ability to convert local currency into foreign currency and repatriation of profits;
• Economy must be transparent, fair and both foreign and local investors are treated equally.

18. SOURCES
• Joaquim Levy, ‘Unlocking Investment Opportunities in Fragile Markets-submitted by Joaquim
Levy on Mon, 05/16/2016 at http://blogs.worldbank.org/voices;
• Renewable Energy Potential in Nigeria –Low-Carbon Approaches to Tackling Nigeria’s Energy
Poverty- The SUNGAS project (assessed via http://pubs.iied.org/pdfs/G03512.pdf);
• Unlocking Private Investment in Emerging Solar Power-Scaling Solar (resource material)
• Richard Bird, ‘Smart Tax Administration’, (resource material)