Nigeria key to affordable energy for 300m Africans – Presidency

Nigeria has a key role to play if the World Bank and Africa Development Bank (ADB) led initiative to provide access to affordable energy for 300 million Africans by 2030 will succeed.

Mrs Olu Verheijen, Special Adviser to the President on Energy, said this to State House correspondents on the sidelines of the Mission 300 Africa Energy Summit, in Dar es Salaam, Tanzania.

The News Agency of Nigeria (NAN) reports that Africans who lack access to electricity are estimated to be 600 million, with Nigeria accounting for 86 million.

Verheijen said Nigeria had achieved about a 61 per cent electrification rate, and had developed an energy compact, a renewed commitment by African countries to catalyse investments, particularly from the private sector, to close electricity access gap.

She said the idea of the compact was to define certain strategic pillars that would drive the closure of that gap.

“For us in Nigeria, our energy compact is going to be driven by the desired outcome that we have, which is to go to a one trillion dollar economy by 2030.

“It means that we also want the level of energy sufficiency that allows us to move millions of Nigerians out of poverty, create jobs, grow incomes and industrialise.

“It is our target to close that gap and make sure that all Nigerians have affordable, reliable, clean abundant energy to power their prosperity,” said the presidential aide.

She admitted that it was an ambitious target to close the gap in five years, but that it was the only way to deliver the living standards, the prosperity that every Nigerian deserved.

“So, in particular, Nigerians will say can it be done? But have they looked at us in the last 18 months, and the things that we’ve managed to pull off?

“We’ve removed a petroleum subsidy that had been there for decades and freed up those resources to start redirecting it into much-needed investment for infrastructure in our social sector.

“We’ve removed the implicit subsidies that you had in our foreign exchange as well. We’ve started moving towards cost reflectivity as well in the electricity sector,” said Verheijen.

She said cost reflectivity was necessary to improve the financial viability of utilities: “We commenced that and as painful as that has been we’ve done it because we know that it’s the only credible path to creating prosperity for Nigerians.

“So, we’ve done it and we should challenge ourselves to do it over the next five years.”

Verheijen said Nigeria’s off-grid electricity was a success story as the Federal Government had been able to deploy distributed renewable energy solutions in rural and unconnected areas to fast-track access.

“That means that over the last few years, we’ve been able to electrify or give access to over seven million Nigerians.

“With the new investments coming in from development partners under the Rural Electrification Agency (REA) programme as well, we’re looking to accelerate and scale that up to 17.5 million,” she said.

She added that the on-grid electricity, which is critical to the country’s one trillion dollar economy target, had constraints in the areas of transmission and distribution.

According to her, to be able to deliver reliable, affordable, abundant energy on-grid, there was need to address the constraints over the last five to ten years.

“So, for us to address that, the main challenges around the distribution, particularly is how to improve the financial viability of the entire value chain.

“We know that most customers on-grid need to be metered. So, we have the Presidential Metering Initiative that aims to close the metering gap by deploying seven million meters by 2027.

“By closing that metering gap, we ensure that whatever tariff we charge and end-users pay, we have improved the ability to collect that revenue,” she said.

She said improved ability to collect revenue meant additional cash flows to invest in improved reliability and improved access on-grid.

“The second element that we’re going to be dealing with is resolving the legacy debt.

“Most of the challenges that we’ve had has been because we didn’t move to a cost-reflective tariff. We started that journey last year by moving to band A into a cost-reflective tariff.

“So, cost-reflective tariff is making sure that the cost of electricity can be charged to those who have the capacity to pay,” she said.

The Special Adviser explained that moving to cost-reflective tariff was also to ensure that the country continued to implement targeted subsidies to the poor and vulnerable.

“Our intention is to make sure that the poor and vulnerable who have limited capacity to pay continue to enjoy support from the government.

“But we need to improve the targeting of that, but move the rest of the market who have capacity to pay into a cost-reflective tariff.

“We need to drive efficiencies in those distribution companies, generation companies and the transmission end of the segment to make sure that those cost-reflective tariffs are also cost-efficient,” she said.

She said another issue the Federal Government had to deal with to ensure improvement in electricity supply was that of debt overhang in the sector.

She said that required another presidential initiative to clear a lot of the legacy debts because the distribution companies had huge technical, commercial and collection losses.

“Because we didn’t let the market move to a cost-reflective tariff, the entire sector has been illiquid and heavily indebted, and we need to clear out those debts to boost investor confidence.

“You do the combination of those three things by 2027, and we’re very confident that we’ll improve the attractiveness of private sector capital to the electricity value chain,” said Verheijen.