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What Nigerian states require to attract investors, close energy access gap

What Nigerian states require to attract investors, close energy access gap

Nigeria’s national constitution has empowered state governments to generate, transmit and distribute electric power, but as some states make progress, others have lagged.

Here are some conditions people familiar with the matter have suggested for states to attract the required investments at BusinessDay Energy Series 2020.

Habeeb Alebiosu, non-executive director at Viathan Engineering Limited said one of states’ role in setting up Independent Power Plants is revenue assurance. The other is contractural offtake, with the state as an anchor tenant. Other areas include licensing, Environmental Impact Analysis certificate and identifying load centres.

“For instance in Ogun State, the government has metered all government parastatals and agencies to ensure they are adequately billed. Lagos has guaranteed contractural offtake,” Alebiosu said.

In Kano, 10 megawatts (MW) solar project has been built on a 24-hectare parcel of land provided by the state government. This is a project that is happening as a result of the collaboration between the Nigeria Sovereign Investment Authority (NSIA) and the Kano state government.

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“COVID-19 has slowed down the progress of the project. However, we are getting all the necessary licences, working on the engineering, procurement and construction (EPC) contracts and by the fourth quarter of 2021, the solar project would be fully operational,” Aisha Abba Kyari, vice president, Renewables, NSIA said at BusinessDay Energy Series 2020. “Kano is the commercial hub of the north. This is why we are starting there. We are open to other states.”

The NSIA has an ambitious target of 500MW of renewable energy capacity but achieved incrementally. In addition to the enabling conditions investors expect from states as listed earlier, Kano solar project shows additional conditions such as the provision of land, resolution of land ownership disputes and compensations.

“States need to commit and be excited. They need to provide access to industrial clusters, this will in turn boost economic activity,” Abba Kyari said.

Joel Abrams, executive director Konexa, an integrated power company says there is a real case for an integrated distribution network, thanks to the growing liberalisation of the power sector.

A booming diesel-fired generation in Nigeria shows there is a latent large market of underserved and unserved customers. Diesel generation is many times costlier than on-grid electric power, yet the largest supplier of energy for Nigerians.

“Aware of the sensitivity of Nigerians to national grid tariffs, we decided to take a small batch of customers. Our goal is to understand them from the base of the pyramid to the top and develop an integrated funnel of projects,” Abrams said.

Koxena started operations in Kaduna in because of the state’s large industrial base and mass non-industrial customers. Both Kaduna and Kano have a large peri-urban population, which Koxena has a robust business case for.