All On Nigeria Off Grid Energy Report

Nigeria, the most populous country in Africa and the seventh most populous country globally, is home to over 200 million people and spans approximately 924,000 square kilometers. Nigeria is one of the largest economies in sub-Saharan Africa, yet the country faces significant energy poverty, which hinders economic growth. Current power generation levels hover around 3,000 MW, which is significantly less than the installed electricity generating capacity of about 14000 MW, consequently meeting only a fraction of the nation's energy demand. The off-grid space has emerged as the potential catalyst, offering an improved and reliable power supply, and providing decentralized and sustainable solutions to the country's electricity crisis.

Rapid technological advancements have highlighted sustainable mini-grids as a practical solution to Nigeria's electrification challenges. Section 3 of the Mini-Grid Regulations, 2023, defines Mini-Grid as any electricity supply system with its generation capacity, supplying electricity to more than one customer, and which can either operate in isolation from a Distribution Licensee's network or be connected to the network. Mini-grids provide improved and reliable power supply, offering decentralized and sustainable solutions to the country's electricity crisis. As Nigeria strives to close its energy gaps, the government has directed numerous efforts toward attracting investments in the renewable energy and energy efficiency (RE/EE) sectors. These efforts are evident in various stages of Nigeria's electrification policies and actions. One notable initiative is the Rural Electrification Agency’s (REA) deployment of 103 mini-grids under the Performance Based Grant (PBG) subcomponent of the Nigeria Electrification Project (NEP). This initiative has significantly enhanced electricity access for households, micro, small, and medium enterprises (MSMEs), and public facilities in rural and underserved regions. Over 80 mini-grids have been completed and commissioned, connecting about 32,000 households, MSMEs, and public facilities with clean and reliable electricity.

In addition, international development agencies, donors, investors, and impact investment organizations have invested substantially in the off-grid market to bridge the energy access gap and promote sustainable development. As a result, the Nigerian off-grid sector has seen significant growth in recent years. By the fourth quarter of 2023, the Nigeria Sustainable Energy for All initiative, a partnership between the Federal Ministry of Power (FMP) and the Nigerian Energy Support Programme (NESP), reported the existence of 113 mini-grids in the country. Nigeria also has two interconnected mini-grids in operation: the Mokoloki mini-grid in Ogun State and the Toto mini-grid in Nasarawa State.

However, despite the market's upward growth trend, a significant factor affecting the penetration of off-grid energy is market uncertainty and the unavailability of market intelligence or adequate data in the sector. The high risk of investment for off-grid energy companies is often an offshoot of market uncertainties related to commercial viability, financing, security of investments, and technical viability of the projects. Therefore, promoting RE investments in Nigeria requires an in-depth understanding of the niche market's potential, challenges, and barriers by the relevant stakeholders and investors. 

In light of this, All On, an impact investment firm, selected Nextier, a multi-competency consulting firm that specializes in using evidence-based research and policy to develop and build knowledge and skills for governing society. Nextier had gone through a competitive bidding process and emerged as the preferred consultant to carry out this research to understand the factors militating against the penetration of renewable energy in the off-grid market in Nigeria and provide market intelligence in the sector. Through the report, All On aimed to stimulate interest and enable investments, which could potentially lead to the acceleration of off-grid and clean energy solutions in Nigeria.

Nextier, with a team of over 60 professionals based in Nigeria, Accra, Monrovia, London, Atlanta, and Washington DC, has a strong track record of delivering high-quality consulting services in a range of sectors, including power, climate, oil and gas governance, security, peacebuilding, and development. Nextier employed a mixed-method model of both qualitative and quantitative data collection methodology to provide intelligence on the off-grid clean energy landscape in Nigeria. This report contains the outcome of the field visit study that was conducted across 21 Communities covering 11 States in Nigeria- Federal Capital Territory, Plateau State, Gombe State, Ogun State, Rivers State, Lagos State, Niger State, Ebonyi State, Akwa Ibom State, Cross River State, and Ondo State. This comprehensive analysis provides an in-depth look at the current state, challenges, and opportunities within Nigeria's off-grid energy sector. Some of the recommendations include:

1. Targeted incentives and support mechanisms be developed to encourage DisCos and private investors to invest in rural electrification through mini-grids: The study shows that the electricity demand from rural communities is low. Many communities where mini-grids are installed and are needed are in rural areas, located at varying distances from the main grid and often in clusters, thus making it economically unattractive for DisCos to prioritize investments in these communities.
2. Scaling up mini-grid penetration: The interventions and investments made thus far to achieve the current level of mini-grid penetration in Nigeria by different actors are in the right direction and should be shored up. However, some aspects of the investment in these markets must be spent to obtain an in-depth understanding and address the identified obstacles militating against the smooth operations and sustainability of these mini-grids today.
3. The recommended strategy to electrify these communities will remain via Decentralized Energy Systems (DES). Another option is via the provision of a combination of Solar Home Systems (SHS), Solar Street Lights (SSL), and specific innovative energy solutions for productive usage to be used by the community on a pay-as-you-go basis, such as solar boreholes, solar refrigerator, solar dryers, etc.

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