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Nigeria: Stand-Alone Solar Market Study – Private Sector and Investor Insights

 

A rapidly growing market 

Nigeria’s population is estimated at 201 million,1 of which 77 million do not have access to any electricity
source, which is an essential driver of economic growth. Nigeria’s national grid will not provide universal coverage within the next decade based on current grid electrification rates, and hence a large part of the country will need off-grid solutions such as mini-grids and stand-alone solar  (SAS) systems to meet the country’s electrification target.

It is not only off-grid communities that need alternative solutions. Among the grid-connected population, just 25% of households and businesses receive four or more hours of power per day; an estimated 80% of them supplement unreliable electricity with costly, polluting alternatives such as kerosene, diesel or petrol generators. Nigerians spend an estimated $14 billion on these power sources annually.

The use of SAS in Nigeria has grown significantly in the last five years, as customers become more familiar with the technology and experience the benefits. In response to the growing demand, solar companies are increasing their product range, consumer financing options and expanding their distribution reach. Foreign and local investors are increasingly interested in the market opportunity which by one estimate can be up to USD 9.2 billion annually, and government and development partners have been ramping up their support.

The UK-funded Africa Clean Energy Technical Assistance Facility (ACE TAF) commissioned a nationwide study to assess the extent to which vulnerable communities have access to SAS. It looked at trade and consumer segments in rural, peri-urban, and urban areas across 10 states (Abia, Ado Ekiti, Bauchi, Cross Rivers, Ebonyi, Edo, Kano, Kogi, Oyo and Plateau) in the country’s six geo-political regions. This study was carried out between June and September 2020 during the covid-19 pandemic, and also assessed the impact of the pandemic on traders and end users of SAS products.

Key findings

  • There is a substantial untapped market opportunity for SAS companies to distribute through mainstream trade channels.
  • End user insights across Nigeria show SAS products are still predominantly a middle-income product
  • Cost remains a barrier for traders and customers alike. Credit constraints along the supply chain present a major limitation on the solar market in the country.
  • Deep retail networks and latent demand signal significant investment opportunity in trade.
  • A glut of poor product quality and minimal after-sales service offerings may undermine the customer experience
  • Trade channels offer an under-utilised, high-potential opportunity for the private sector to scale SAS product delivery
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