Energy
25 million Nigerians to pay N4,000 monthly for solar power system
25 million Nigerians will be expected to pay about N4,000 monthly over a 3-year period to benefit from the FG’s Solar Power Naija project.
The Presidency has disclosed that an estimated 25 million Nigerians that will benefit from the Federal Government’s Solar Home Systems which is expected to commence this week will be expected to pay about N4,000 monthly over a 3-year period.
According to a report by the News Agency of Nigeria (NAN), this disclosure was made by the Senior Special Assistant to the Vice President on Media and Publicity, Laolu Akande, through a statement on Sunday titled “25m Nigerians to own 5m solar systems at N4, 000 monthly.”
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While giving further insight into earlier reports that the Federal Government will from next week commence the process of installation of 5 million solar-home systems in underserved and off-grid communities across the country, Akande said the solar programme nicknamed Solar Power Naija, whose installations would start in December, is being implemented by the Rural Electrification Agency.
The Presidential media aide who pointed out that the programme was designed to boost ongoing efforts to fix Nigeria’s energy supply challenge, also said that priority would be given to Nigerians residing in rural areas and urban settlements either under-served or cut off the national grid.
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He said an important aspect of this scheme is the option of outright ownership by beneficiaries at a cost ranging from N1, 500 per week to N4, 000 per month depending on the capacities for the 3 years.
He noted that that the arrangement allows as many as 25 million Nigerians to own personal solar systems in their homes.
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He added that, as indicated in the Economic Sustainability Plan, the 5 million connections initiative is a private sector-led electricity access acceleration scheme to be facilitated by a low-cost loan facility from the Central Bank of Nigeria and implemented by REA.
Akande said, “The programme will include the assembly or manufacturing of components of off-grid solutions to facilitate the growth of the local manufacturing industry. In view of the scale of materials required, solar equipment manufacturers/assemblers will be incentivised to set up facilities in Nigeria, thereby offering additional job opportunities to Nigerians.’’
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“In addition, installation, servicing, and payment collections are expected to provide thousands of other jobs. In all, at least 250, 000 jobs will be created.”
Optics: If religiously implemented, this will help provide affordable energy to the under-served Nigerians in rural areas with the objective of improving social, economic, and environmental welfare of 25 million Nigerians while generating jobs, increasing revenues, and import substitution.
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However, the fear is whether this will go the same way as other government’s programmes or initiatives in the past.
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Energy
NCDMB’s Oil and Gas Parks and their many adversaries
New businesses within the NOGAPS will face intense competition from foreign OEMs that do not have to battle with tariffs, a harsh business terrain and different tax treatment.
In 2018 the Nigerian Content Development and Monitoring Board (NCDMB), the body saddled with driving the development of Nigerian content in the Nigerian oil and gas sector, did a groundbreaking of the Nigerian Oil and Gas Park Scheme (NOGAPS), a scheme that involves the construction of sprawling oil and gas parks in Bayelsa, Imo and Cross Rivers State.
In a visit last week to one of the parks currently under construction in Emeya 1, Ogbia, Bayelsa State, the Minister of Petroleum for State, Chief Timipre Sylva, expressed delight at how the project was quickly progressing and was now at 70% completion. Mr Simbi Wabote, Executive Secretary of the NCDMB, during the visit also noted that the Oil and Gas Park project “is in line with the Federal Government’s mandate to develop indigenous capacities for the oil and gas industry.”
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While this is highly commendable, as the project will indeed reduce Nigeria’s dependence on import of oil and gas equipment and provide jobs for local indigenes -which would likely reduce restiveness in the area-, there exist significant challenges to this project achieving its goals.
Perhaps one of the biggest of them is the African Continental Free Trade Area (AfCFTA) regime which is expected to open Nigeria’s borders to an influx of imports from other countries within Africa. Beyond opening the borders, however, the tax treatment given to domestically produced items will be no different from similar products imported, and the typical tariffs for imported items will be removed.
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This essentially means that large and established original equipment manufacturers (OEMs) from other African countries may on the basis of their economies of scale be able to supply the same products produced in the oil and gas parks at lower rates. A report by Dun & Bradstreet reveals that in Africa, countries like Guinea, Gabon, Burkina Faso and Ghana that flank Nigeria play host to various oil and gas OEMs.
With the large oil and gas market Nigeria has, these companies will seek to make inroads into Nigeria under the AfCFTA regime. This will mean that the new businesses within the NOGAPS will face intense competition from foreign players that do not have to battle with tariffs and different tax treatment. Additionally, the Nigerian culture of preferring imported products over domestically manufactured ones might play a role in this, particularly if the prices of the imported ones even up with domestically produced ones or only have a slim margin.
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If the patronage for Innoson vehicles is anything to go by, in a market where there is no real difference in price between that and the domestically produced ones, we will see a preference for imported products.
All of this will be further aggravated by Nigeria’s doing business difficulties. Things like delays in obtaining permits, approvals and licenses, the corruption that accompanies these processes, weak currency and dual exchange rates, poor infrastructure and lack of power supply abound. While the Nigerian businesses struggle with this, their foreign counterparts get to produce under more convenient conditions and are thus able to deliver within time and without the additional costs passed to consumers through these poor doing business practices.
While Mr Wabote has promised that the park in Ogbia will have dedicated power supply, it is hard to imagine that this power will not significantly cost the businesses if they are served at maximum capacity. At number 131 on the World Bank’s Ease of Doing Business Ranking, a park would not solve Nigeria’s problems, only a positive commitment to fix these doing business issues will.
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The christening of a park as an “oil and gas park” in the 21st century, where countries of the world –and indeed private companies- are working towards achieving increased use of cleaner energy sources, is counterintuitive. The park should be an energy park that integrates significant research and development in its function as well as innovation and production of renewable energy equipment, both adapted to benefit from local conditions and standardized for export purposes.
It seems too, that not much consideration has been given to export of these equipment, as the parks earmarked so far are in landlocked Imo, port-less Bayelsa and Cross River that feeds into Cameroon, which is not a very prime market, although the DRC on the other end could attempt to compensate for this. It might be worth considering, the setting up of a park in Lagos – perhaps in the same vicinity as the Dangote refinery.
The park would benefit from being able to supply equipment to the refinery (especially as the refinery starts production in early 2023). It will also be able to tap into the global market through export via the Lekki port. This might also be a good time for the Agge deep sea port mulled by the Bayelsa State government to come onstream to open up the Ogbia park to a global market.
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