As the energy transition draws nearer each day, rural electrification, coupled with productive energy use, has the potential to spark an Industrial Revolution in Nigeria
Decentralised productive systems can prove to be extremely crucial as Nigeria opens a new chapter in its history because they can serve the role of being a cushion for subsidy removal through the use of clean energy sources, which will become cheaper than other sources of energy that might experience a hike in price, post-oil subsidy. Progress has already been made in expanding the number of SMEs transitioning into this new industrial era in Nigeria.
In the coming days, as Nigeria undergoes a transition of leadership, it becomes necessary to reevaluate the potential for rural electrification and productive energy to drive social transformation and an industrial revolution in the country. Affordable energy provided to small and medium-sized enterprises (SMEs) in rural areas can become the tipping point.
Nigeria needs to stimulate an Industrial Revolution, leading to economic growth, job creation, and overall industrial development. According to The Guardian, more than 95% of Nigeria's businesses are micro, small and medium enterprises (MSMEs) and they contributed about 46% to the country's Gross Domestic Product (GDP) in 2022. However, despite this significant contribution, SMEs accounted for just 6.21% of gross exports. Fortunately, the Rural Electrification Agency (REA) is strategically positioned to ensure better efficiency for SMEs in rural areas through the provision of decentralised productive systems, such as irrigation pumps or solar home systems, which increased the profit margin of more than 3,000 businesses by 30%.
Decentralised productive systems can prove to be extremely crucial as Nigeria opens a new chapter in its history because they can serve the role of being a cushion for subsidy removal through the use of clean energy sources, which will become cheaper than other sources of energy that might experience a hike in price, post-oil subsidy. Progress has already been made in expanding the number of SMEs transitioning into this new industrial era in Nigeria.
The REA, on behalf of the Federal Government, has implemented over 2,000 projects in the past decade, impacting the lives of approximately five million Nigerians. These projects, as listed in the Programmatic Budgeting Report, have resulted in a total installed capacity of over 600MW, supporting more than one million connections. In addition, the evidence of a 30% increase in profit margins when SMEs are connected to cleaner energy sources further emphasises REA's impact and potential for an industrial revolution in Nigeria by the transitioning of energy sources of rural SMEs.
To scale this industrialisation further, a comprehensive assessment of energy demand in rural areas is crucial to the expansion of energy access for SMEs. The REA and the Federal Government needs to conduct relevant assessments of rural areas to prioritise the most efficient decentralised energy systems, such as mini-grids and standalone renewable energy systems, to cater to the energy needs of SMEs and productive users in rural areas. The REA's targeted programmes, which leverage the Federal Government's Economic Sustainability Plans (ESP), have already started addressing baseline conditions and challenges faced by beneficiaries, leading to the establishment of local industrial clusters and business associations that play vital roles in driving industrialisation.
Embracing rural electrification and productive energy use will pave the way for a prosperous and sustainable future for Nigeria, whilst showcasing international leadership in the energy transition and advocating for climate finance commitments from developed nations.
The National Poverty Reduction with Growth Strategy (NPRGS) is also a Federal Government strategic plan aimed at boosting industrialisation and fostering economic growth and transformation. As part of this strategy, the REA has implemented the deployment of Solar Home Systems (SHS) to address the needs of Nigerians affected by flood disasters, support impoverished individuals without access to electricity, and empower small and medium enterprises (SMEs) in rural areas to enhance their businesses. Access to affordable financing options is also an important driver of this industrialisation.
By catalysing private capital through public funding and partnering with financial institutions, government agencies, and development organisations, Nigeria can ensure the survival of its economic activities and lower costs for SMEs during the subsidy removal.
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
As the energy transition draws nearer each day, rural electrification, coupled with productive energy use, has the potential to spark an Industrial Revolution in Nigeria. The progress achieved in expanding (energy) access, improving livelihoods, and fostering economic development is evident. By leveraging the accomplishments of the REA, under the guidance of the Executive Management and Board, Nigeria can continue to build on its success through comprehensive assessments, decentralised energy systems, productive energy use, local entrepreneurship, access to finance, capacity building, supportive policies, and monitoring mechanisms.
Embracing rural electrification and productive energy use will pave the way for a prosperous and sustainable future for Nigeria, whilst showcasing international leadership in the energy transition and advocating for climate finance commitments from developed nations.
Barka Sajou, the executive director, Technical Services, Rural Electrification Agency, Abuja, writes from Abuja.
