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Nigeria has largest worldwide energy deficit

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By Abraham Adekunle

Effect of fuel subsidy removal on businesses and households will be enormous.

Africa’s most populous black nation was once the poverty capital of the world. In the last few years, it has fluctuated between Nigeria and India. According to the World Data Lab 2022, 32 percent of the more-than-200 million Nigerians live in extreme poverty. Of this extremely poor demography, more than 50 percent live in rural areas where they lack access to basic social infrastructure such as access to reliable electricity in communities, public institutions, schools, hospitals, agro-processing, etc.

Additionally, the World Bank said only 57 percent of Nigeria’s population in 2021 has access to grid electricity. This means that 43 percent of Nigerians do not have access to the power grid. Most of these people live in rural areas. With these figures, Nigeria has the largest energy access deficit in the world. The lack of reliable power costs households and businesses an annual economic loss estimated at $26.2 billion. Public services and utilities such as health services, water, education and agriculture depend on access to steady power to function properly.

Current grid generation less than 40% of capacity.

Access to power supplies has the potential to remove households from poverty as it has a beneficial and considerable impact on household consumption per capita, and increasing energy consumption leads to a decline in the poverty level. Notwithstanding, connection to the grid does not automatically mean access to electricity, especially in a reliable way. The 57 percent of Nigerians connected usually have poor, unreliable supply. This is because the current grid generation capacity is about 4,500 megawatts instead of the installed capacity of 12,000 megawatts.

Much sadly, the total demand of Nigerians stands at between 35,000 to 40,000 megawatts. In other words, the generation capacity is less than 40 percent of the installed capacity, whereas Nigerians’ demand is three times more than the installed capacity. So, citizens resort to using expensive diesel and petrol-fueled backup generators. Due to the poor grid access, over 22 million small gasoline generators are being used to power households and small businesses in Nigeria. This costs households and business owners an estimated expense of $14 billion every year

Fuel subsidy removal will particularly affect women and youth.

Presently, Nigeria’s informal sector classified as Micro, Small and Medium Enterprises (MSMEs), makes up 65 per cent of the country’s GDP and 80.4 percent of employment come from the sector. Most of the MSMEs identify unreliable electricity as a major challenge to their businesses and are willing to pay for a switch to renewable energy with the right incentive and product guarantee. In the same vein, the Manufacturers Association of Nigeria (MAN) also claimed that 40 percent of the cost of conducting business in the country is power-related and the costs are doubling up daily.

The reason is that independent retailers across the country have adjusted their pump prices (of PMS) to between N185 and N300 per liter. Because of this, the planned removal of fuel subsidy will have enormous effects on businesses and the general populace, especially women and youth who already bear the largest burden of the energy deficit. Apart from the economic cost of keeping these generators running, they are harmful to the health of the users. They cause approximately 1,500 deaths per year from smoke and carbon monoxide inhalation. They also increase the chances of lung cancer by 70 percent.

There is a need for investment in alternative energy sources.

To reduce the burden and consequences caused by a combination of the poor electricity supply in Nigeria, dependence on fossil fuel and the need to create more jobs to curb rising unemployment, and insecurity and boost productivity across sectors, households, businesses, investors and the government (at all levels) need to invest in other alternative sustainable energy sources that guarantee business optimization, reduce production costs, ensure healthy and clean environment like solar energy. The government also needs to invest in grid generation capacity and optimal performance so that the needs are met with grid supply and alternative sources.

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