Article Summary
- Nigerian SMEs face challenges accessing affordable energy, with rising costs and insufficient supply.
- Removal of petrol subsidy may increase energy costs but presents an opportunity for businesses to transition to clean energy.
- Transitioning to clean energy offers cost-effectiveness, and energy independence, and aligns with global sustainability goals and government incentives.
Small and medium-scale enterprises (SMEs) in Nigeria face several challenges. Among these is their inability to access affordable energy to run their operations.
Power from the national grid remains insufficient while the cost of alternative energy sources like diesel and petrol has gone up significantly in recent years.
Background story
Earlier in the week, the Federal Government confirmed the removal of the subsidy on petrol, a move that – though well-intentioned – could lead to a significant increase in energy costs in the country and further undermine the ability of SMEs therein to access affordable power.
Estimates from some petroleum marketers suggest that the pump price of petrol could triple or even quadruple following this removal. Many gas stations are already dispensing the product at more than N500 per litre.
This may seem all gloom and doom and could further add to the challenges faced by vulnerable Nigerian businesses in an already difficult business environment. However, it also presents an opportunity for these businesses to think and invest in the long term.
Amidst the global push towards sustainability, this may be the best time for businesses in the country to explore and transition to clean energy.
Benefits of clean energy
Transitioning to clean energy will not only help them to reduce their operating costs in the long-term, but it will also help them to align with the global quest for sustainability and even position them for incentives from the government, multilateral development institutions and donor agencies.
One of the key benefits that clean energy solutions present is their cost-effectiveness. Though the initial outlay on clean energy solutions such as solar panels, inverters and batteries may be high, they can lead to significant cost savings over time. This is largely due to their durability.
A typical solar panel can last for up to 25 years and an inverter can last for 10 – 15 years, while lithium-ion batteries can last for more than 10 years.
They also do not require constant refuelling as with diesel and petrol generators. With solar power, for instance, its major fuel – sunlight – is a gift of nature and it comes at no cost.
Similarly, some financial institutions have rolled out financing options aimed at cushioning the impact of the initial investment on clean energy solutions like solar home systems and solar mini-grids. Cost-savings from reduced energy spending occasioned by the clean energy transition can ultimately be channelled by businesses into other activities such as production, product innovation, sales, and customer service.
Another key advantage of transitioning to clean alternative sources of energy for SMEs is energy independence. Power from the national grid remains unstable. Clean energy sources like solar power present businesses with an opportunity to generate their electricity and reduce their reliance on the national grid, ensuring a consistent energy supply.
What you should know
The global drive towards sustainability cannot be overemphasized. Fossil fuels emit several billion metric tons of carbon dioxide (CO2) per year, which are deleterious to the environment, society and, by extension, the economy in the long run.
SMEs, being the engines of the Nigerian economy, can play a leading role in Nigeria’s quest to achieve the United Nations’ Sustainable Development Goals (SDGs) by 2030.
Transitioning from fossil fuels to clean energy solutions is one of those ways.
It will go a long way in keeping Nigeria on course in not only meeting the SDGs and the Paris Climate Agreement but also in actualizing some of the ambitious targets it has set for itself in the recently launched Nigeria Energy Transition Plan.
By Chinedu George Nnawetanma
Chinedu Nnawetanma is a sustainable finance professional and SME development specialist. He is passionate about unlocking the ability of the private sector to drive the accelerated, inclusive, and sustainable economic growth and development of Nigeria and Africa through sustainable finance. He can be reached via mediachinedu@gmail.com.
