6 February 2016

Nigeria: Sustainable Rural Electricity for Nigeria - Way Forward


The Power Sector Reform Roadmap launched by Government of ex-President Goodluck Jonathan focused on setting-up the structures that will ensure sustainable electricity supply to urban and peri-urban areas of Nigeria. However, the Roadmap did not capture rural electricity. It is strongly recommended that the Government of President Muhammadu Buhari, deepens electricity supply to Nigerians by developing and operationalising a rural electricity framework, which will ensure sustainable, affordable and reliable electricity to the rural communities of Nigeria and by extension, electricity access to about 75% of all Nigerians by 2020, in line with Vision 2020. The Government of President Muhammadu Buhari should note that, failure to provide electricity services to the rural areas of Nigeria will continue to distort the development of Nigeria's economy.

The Federal Government's Rural Electrification Programme was initiated 24 years ago, in 1981, and has not been met with much success, since inception. This programme had the target of connecting all existing Local Government Headquarters and select neighboring towns and villages to the national grid. It was called the Nigerian Rural Electrification Programme (NREP). The programme was initiated by the Federal Ministry of Power and Steel (FMPS) and was executed by the defunct National Electric Power Authority (NEPA). The programme was plagued by inadequate funding, poor performance on the part of contractors and procurement difficulties. In the late 1980's, the programme was resuscitated, with the establishment and Implementation Committee and bulk procurement arrangement. Although these resulted in greater access to electricity by Local Government Headquarters and fortunate consumers in the immediate vicinity, majority of rural households did not see much improvement in the availability of electricity services. The Rural Electrification Agency (REA) was established in 2006, via section 88 (1) of the Electric Power Sector Reform (EPSR) Act-2005. The Act established the Rural Electrification Agency and the Rural Electrification fund. The Act stipulated that REA should have the following main modes of delivery: (i) Expansion of the main grid to rural areas (ii) Development of Isolated and Mini-grid systems and (ii) Renewable Energy power generation.

REA commenced operations in August 2006, with all its projects centered on grid expansion to rural areas, via funding from the Federal Government's annual budgetary allocations. The Rural Electrification Fund, stipulated in ESPR-2005, was never implemented for rural electrification projects. Approximately 2,000 grid-expansion projects at various level of completion were taken-over by the Agency, from the Federal Ministry of Power's National Rural Electrification Programme. New grid expansion projects were initiated by the REA between 2007 and 2009. Many of the inherited and new projects were not properly conceived and lacked proper planning, co-ordination and cohesion. Even if completed, most of these projects would not have made the desired socio-economic impact vis-à-vis, budgetary allocations for projects execution. In addition, there was no established criterion used in project selection and execution. In 2009, issues of fraud allegations led to the suspension of the management staff of the Agency. As a consequence, the operations of the Agency were crippled, leading to Federal Government decision to initiate the process of winding-down the Agency. This scenario left approximately 2,000 on-going projects at the mercy of vandals, with many rural communities continuing their stay in darkness. Some of the abandoned projects were transferred to interested State Governments, for completion.

In September 2012, the erstwhile comatose REA was resuscitated with a renewed mandate of increasing electricity penetration in Nigeria to 75% by 2020, in line with Nigeria's Vision 2020. Today, it is estimated that total access to electricity across Nigeria, is approximately 48%. This implies that approximately 35% of rural households have access to electricity, a percentage lower than when the NREP commenced. With an estimated population of 170 million people; approximately 50 million rural dwelling Nigerians still lack access to electricity. It is estimated that over N2 trillion naira will be required to close the rural electricity access gap, in line with Vision 2020. Obviously, the annual REA appropriation, which averages approximately N5bln since 2006 is a far cry from the financial outlay required. Obviously, the growth in rural demand for electricity has outpaced supply, and rural population growth has driven the rate of new household formation higher, than the rate of new connections. As a result, majority of rural households still rely on wood for cooking and candles, lanterns and self-generation- where it can be afforded, for their household use. Rural commercial and industrial enterprises must either go without electricity or pay high costs to run diesel generators. The performance of rural schools, hospitals and clinics also suffer.

Taking all the above into consideration; it is obvious that a paradigm shift will need to be effected by the Government of President Muhammadu Buhari; and the rural electrification strategy in Nigeria, over-hauled, if rural electrification is to be delivered in line with the aspirations and yearnings of Nigerians. The importance of rural electrification to the economic development of rural areas and ultimately to the development of Nigeria, cannot be underestimated. Additionally, rural electrification will need to be restructured to ensure that the program yield's economic benefits to rural dwellers, commensurate with their investment costs. A careful review of countries where rural electrification programmes have achieved substantial improved electricity access, indicate that a variety of institutional models have been used in different countries, for designing and implementing rural electrification programme's. While no single model can be lifted from one country and applied on a wholesale basis, to any country, the models that have been successfully deployed, all contain certain fundamental principles, which must be incorporated, if a country's rural electrification strategy is to be successful. It is these fundamental principles that must be applied to the Nigerian situation, if the rural electrification aspect of the Vision 2020, is to become reality.

Consequently, closing the gap currently prevalent in rural electricity in Nigeria will require an understanding of the major constraints that have contributed to the low electricity penetration within Nigeria. The main constraints include the following: insufficient incentives for private companies and investors to participate in the development and delivery of rural electricity; lack of creative public and private sector partnerships to develop market-based solutions for expansion of rural electricity access; cost disparities between grid connected and off-grid rural electricity applications, which are mostly renewable energy based; and inadequacy of regulatory functions applicable specifically to grid-expansion and off-grid systems, for rural areas. Others are low population densities and the resultant high operating costs of electricity in rural areas; with consumers have limited purchasing power and low electricity consumption; undefined and ill-targeted (where they exist) rural electrification subsidies, and an absence of mechanisms to remove rural electrification subsidies, once the programs become self-sustaining; and inadequate programs for consumer education, public participation and acceptance, and political acceptance, of the role of rural electrification in economic development. Additionally, the Nigerian private sector is faced with some glaring challenges, which typically obstruct financing of rural electrification projects. These challenges include lack of a traditional financing in the rural areas (no banks, no or little tradition of lending, no tradition of saving by the potential customer to make up front capital investments; e.g. for a home solar photovoltaic systems; government prohibitions against natural resource exploitation, e.g. Government policies which have Government as the sole owner of water-use rights (prohibiting the development of mini- and micro-hydro schemes by the private sector); and lack of functional feed-in tariffs or tariff subsidies for rural electricity, which mean that cost of electricity in rural areas will be more expensive than in urban areas. The Government of President Muhammadu Buhari if it intends to commence the process of supplying the remaining 50 million Nigerians, with sustainable electricity must recognize that the traditional approach of ad-hoc grid expansion by various levels of Government, which has been previously adopted, has not worked. Therefore, it is strongly recommended that rural electrification be further distinguished from urban electricity, and treated as a separate sector, given the complexities and challenges associated with financing and implementing rural electrification, enumerated above.

The operational framework detailed below, aimed at meeting the national goal of achieving affordable and reliable electricity access to 75% of Nigerians by 2020, and 100% electricity access by 2030, is recommended for consideration and implementation. This Framework will ensure a transparent oversight process and mechanism for progress monitoring, and ensuring accountability for results over the implementation period and beyond. One, a centralised planning for the expansion of electricity access in Nigeria will be warehoused in the Rural Electrification Agency. The centralized plan (Rural Electricity Access Expansion plan) will be based on a detailed least-cost geospatial planning study, which will be undertaken for the entire Nigeria. Additionally, the centralized plan will be underpinned by a technically sound and comprehensive implementation strategy, which will be driven by financial considerations. This centralized plan will identify the most cost-effective combination of delivery modalities and technology options to be deployed for each area. Two, the Rural Electricity Access Expansion plan will entail both a coordinated grid rollout, complemented by a coordinated off-grid access rollout program for locations that have been identified by the least-cost geospatial plan, where grid extensions will not be cost effective - or where the grid is unlikely to reach for some time - with a view to improving regional balance in access levels achieved progressively over time. For this purpose a variety of off-grid access delivery and supply systems utilizing cost effective renewable energy sources and products will be considered.

Three, to ensure sustainable rural electricity supply, the Rural Electrification Agency must ensure appropriate technology selection. In addition to grid extension, the following technological alternatives that support electricity utilisation for productive purposes should be considered and an appropriate fit selected for each locality: (i) Small gas-driven Power Generation via Gas line, Compressed Natural Gas, Liquefied Natural Gas or Liquefied Petroleum Gas) (ii) Small-Conventional Hydro Power Generation, (iii) Solar Photovoltaics (PV) Power Generation, (iv) Wind Powered Generation and (v) Bio-mass Electric Power Generation. During the centralized planning stage all options, both in approach and in terms of most suitable technology to be deployed, will be explored. Four, the Nigerian Government, with the Rural Electrification Agency serving as the focal point, will provide financial enablers for expansion of the rural electricity access. A framework will be developed to support schemes for interested investors to finance mini- and micro rural electrification projects; adapting norms and regulations which take into account sustainable renewal energy technologies. Five, the Rural Electricity Fund will be leveraged to ensure sustained programme funding. This fund will be capitalized by a combination of government budget allocations and bilateral and multilateral donor funds. In order to ensure transparency, equality, and accountability, in the administration of the Rural Electrification Fund, as well as to be able to attract donors' support and participation, the Fund will be setup, managed and operated along commercial lines, with full transparency and accountability. It is recommended that a sustainable and "bankable" financing rural electrification policy framework, coupled with a subsidy policy and financing mechanism be developed and deployed.

The established policy mechanisms of cross-subsidies in tariffs, coupled with public financing under the concept of the Public Service Obligation (PSO) mechanism, will ensure affordability of the access to the poor in a targeted manner, while also ensuring commercial viability of the access and energy service provider operations. Six, the Federal Government will work towards decentralizing the implementation and delivery of rural energy services, by empowering the local governments and creating an enabling environment to induce private sector, non-governmental orginisations, consumer groups, and local businesses, to take on a more direct role in the delivery of rural energy services. Seven, the Federal Government will need to develop local and national rural electrification markets by creating market and competition rules, as well as a transparent regulatory regime to guide the development of the markets; and supporting transparent institutional and regulatory frameworks.

Lastly, mobilisation of rural electrification stakeholders at the community level will be a fundamental requirement, as social trust is a key pillar in delivery and sustainability of electricity supply in rural areas. This trust is usually based on the fact that the needs of the stakeholders are met by the performance of the institution upon which they rely. The Rural Electrification Agency assisted by Non-Governmental Organisations will carry out community mobilisation, aimed at mobilising local resources and skills. However, it must be mentioned, that other barriers to rural development exist, which will have to be overcome to ensure a holistic rural development; these barriers include access to capital, access to markets and human capacity development. However, implementation of the above stated recommendations on rural electricity will ensure participation of non-governmental orginisations and private-sector, which will in-turn, increase efficiencies and alleviate Government financial burden, which combined, have been proven to dramatically enhance success and sustainability of rural electricity programs.

It is reported that President Muhammadu Buhari has a soft-spot for poor Nigerians; it should be noted that the steps outlined above are a sine qua non, for providing 50 million rural dwelling Nigerians with sustainable electricity access and thereby lifting majority of them out of poverty. I believe Government of President Muhammadu Buhari can do this, and even much more.


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