A guide to investing in Nigeria’s renewable energy sector

Introduction

At the moment, Nigeria sits atop as the most populous country in Africa, and the 6th in the world. According to the International Monetary Fund World Economic Outlook, Nigeria currently stands as one of the largest economies in Africa with a GDP of $252 billion, evincing its huge economic and investment potential. It is also not news that Nigeria is a nation blessed with an abundance of renewable energy sources. Constant sunlight, adequate wind pressure, generation of significant bio-waste, tidal waves in coastal areas, among others. These renewable energy sources provides opportunities that could be utilized for power generation in the country. Furthermore, in view of the World Bank report which places the country as the world’s largest electricity access deficit, with 45% of the population lacking access to the electricity grid, investment in renewable energy will aid in bridging this energy gap.

This guide aims at providing adequate and sufficient information as well as a road map to foreign investors who intend to invest in Nigeria’s renewable energy sector.

Renewable Energy Policies in Nigeria

Nigeria has over the years developed several policies and frameworks in a bid to improve energy access and bridge the energy gap through renewable energy sources. These include:

1. The Renewable Energy Master Plan (2013) – This plan seeks to increase the share of renewable electricity in Nigeria from 13% of electricity generation in 2015, to 23% in 2025 and 36% by 2030. A main driver for such increase is the diversification of the national electricity mix. The plan further stipulates incentives such as a moratorium on import duties for renewable energy technologies and also the implementation of customs duty exemption for imported Renewable energy appliances, tax credits, capital incentives and preferential loan opportunities.
2. The National Renewable Energy and Energy Efficiency Policy (2015) – This policy aims to improve hydropower (small and large) capacity by about 12GW and solar capacity by 6GW by 2030.
3. The Energy Transition Plan (2022) – This plan provides a roadmap to achieving net-zero target by 2060. Its timeline cut across 5 key sectors; Power, Cooking, Oil and Gas, Transport and Industry.

Read also: Renewable energy in Nigeria – Projects, investments, and future Prospects

Opportunities and Incentives for Investment

Given the high level of energy poverty and access in Nigeria, renewable energy has emerged as a sustainable solution, providing a pathway to development and energy security. Thus, in recent years, Nigeria has made significant progress in the adoption of renewable energy technologies through the support of local and international investments as well as government policies and development.

The following are strategic investment opportunities in the Nigerian renewable energy sector:

1. Solar Energy
   Nigeria, being closer to the equator, has abundant solar resources. It receives an average daily solar radiation of about 5.5 kWh/m2 making solar energy one of the most promising renewable energy sources in the country. Thus, Lumos, Africa’s solar home system provider, in 2020 announced new financing from US International Development Finance Corporation (DFC) to expand its existing market for reliable, accessible and clean solar power in Nigeria.
2. Wind Energy
   Most viable locations for leveraging the wind energy are in the northern regions and along the coastline. The country’s first wind farm – the 10 MW Katsina Wind Farm illustrates the potential of this energy source. This wind farm became operational in 2020 and is a partnership between the Nigerian government, the French Development Agency and the Danish wind turbine manufacturer, Vestas.
3. Hydropower
   Nigeria has numerous rivers and potential sites for both large and small hydropower projects. Though hydropower is one of Nigeria’s most established renewable energy sources, there is still much investment going on in the sub-sector. The Mambilla hydroelectric project being developed in Taraba State, Nigeria is a very good example. It is financed by the Chinese Export Import Bank and the Federal Government of Nigeria.
4. Biomass Energy
   Given the amount of waste produced in the agricultural sector in the country, this could be harnessed for energy production. Since Nigeria relies more on agriculture to feed its population, it provides opportunity for foreign investors to invest in the conversion of these wastes to energy.

In addition to some of the incentives already mentioned above, investing in Nigeria’s renewable energy sector comes with quite a number of other benefits, including a five-year tax-free period, the guaranteed purchase of energy by the bult trader and its third-party collateral support that assures creditworthiness

Conclusion

Renewable energy is currently one of the most viable sectors for investment in Nigeria. This is majorly owing to the fact that Nigeria aims at achieving net-zero by 2060, and being that it lacks the financial capacity, the country has set policies in place to make it easier and favourable for investors to participate in the renewable energy market.