Connectivity

Lighting up Nigeria through pay-as-you-go solar electricity

Energy is a vital ingredient for the economic development of Nigeria

In May 1999, when Olusegun Obasanjo returned as a civilian president, he had many promises to fulfill to the masses who were thrilled at the return of democracy after several years of military rule. One of them was to generate 10,000MW of electricity by December 2007. Over a decade and three successive presidents later, sub-Saharan Africa’s largest economy, with a GDP of $405 billion, is nowhere close to that target.

Calls from within and beyond the country’s shores for a national decentralised grid have intensified over the years. In the meantime, individuals and the private sector are stepping up to the plate to offer off-grid solutions to their compatriots. 

Enter Lumos, a renewable energy company with Dutch roots and global credentials. Four years ago, executives from the company met one of Nigeria’s brightest young minds - Uzodinma Iweala, doctor, filmmaker and author of Beasts of no Nation, the 2005 novel which became a motion picture with Idris Elba in a lead role. Together they began to develop one such solution.

Txlight, the Nigerian subsidiary of the company, was born to settle a pressing need. Currently, its national grid generates 5,000MW to serve its estimated population of 180 million. Also the average Nigerian consumes less than 140KWH annually, just 3% that of the average South African.

“Nigeria’s current grid capacity is able to generate about 12,000 megawatts and yet, only 5,000 megawatts is actually available to meet the needs of the country’s teeming population,”  Ifeoma Malo, energy policy expert and co-founder of the Clean Tech Hub, told the press in November 2016. “This means that about 60% of Nigerians lack access to the grid.” 

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A significant amount of the economy is powered largely by small-scale generators (10–15 GW), according to figures from the Rural Electrification Agency. As a result, Nigerians and their businesses spend almost $14 billion annually on inefficient generation that is expensive ($0.40/kWh or ~₦140/kWh or more). 

So in 2016, Lumos launched a product in partnership with the dominant telecommunication network in the country and secured $90 million in investment from a team of investors, including Overseas Private Investment Corporation (OPIC) and Pembani Remgro Infrastructure Fund (PRIF). This enabled it to announce a national roll-out in February of the next year.

“Together, we have the potential to bring mobile electricity through off grid solar to over a million homes in Nigeria over the next few years,” exclaimed Iweala at the time.

Its flagship product is a portable household solar unit that people can pay for conveniently from their phone – a pay-as-you-go solution in a country that remains one with the most mobile penetration in the world at over 70%. It is light in a box - literally. 

The kits comprise rooftop solar kits purchased by consumers in Nigeria through a 5-year lease to own agreements and a home system that comes in a box. However, it is not the solar installations that are truly innovative or convenient, but the electricity distribution formula itself. Some of the biggest challenges that come with alternative power generation in developing countries include cost, portability and reliability, amongst others. In a country where 67.1% of the people live below the poverty line, according to a 2016 National Bureau of Statistics report, Lumos’ kit appears to tick all the right boxes. 

Users pay for their electricity with a simple text - Lumos’s partner telco has the highest market share in the local telecom industry and its wide reach means that subscribers have it easy. By sending texts to a short code, they can pay for their electricity however they like: daily, weekly, monthly, or yearly. And this, for as low as ₦240 ($0.66) a day. 

The household kits aren’t powerful enough to power heavy-duty electronics like refrigerators and pressing irons, but essentials like television sets, laptops and phones can be used with them. In addition, they provide a decent, cleaner and cheaper alternative to the electricity generation systems that are popular among Nigerians, like generators which emit a lot of carbon dioxide.

Consequently, the new entrant into the market seems to be leading the charge on the off-grid power sector in Nigeria, warding off competition in the sector. By November 2017, nine months after its national roll-out, it had sold as much as 60,000 boxes.

The Big Picture

At 80W per unit, Lumos is currently providing up to 5.6MW of power to Nigerians. As it continues to expand and reach the most remote places beyond the reach of the national grid, there is a possibility of it eventually selling a million units. By then, its contribution to the electricity sector would be 80MW, significant for a country with only 5,000MW available on its grid.

For context, that is the capacity of a power plant deal signed by the government of the northwestern Nigerian state of Jigawa in 2016, to improve the fortunes of its 4.3 million people.

According to Lumos’ cofounder and president, Nir Marom, Nigeria is on the cusp of a second mobile revolution. “There’s no question that demand for our product is mammoth in Nigeria,” he says. “Beyond Nigeria, there are hundreds of millions of people who lack access to power and need solutions. Our goal is to reach them and provide affordable, reliable, clean electricity.”

Little wonder then that the company is exporting the template to the West African sub-region with Cote d’Ivoire as its first port of call.

Energy is a vital ingredient for the economic development of Nigeria - multinationals and rich individuals spend chunks of their running costs and earnings respectively on diesel. The majority of Nigerians are low-income earners or run small-scale businesses. Access to cheap electricity opens up new possibilities that reduce the cost of running their businesses.

Both categories of citizens have looked to their government for years, to light up Nigeria and propel the country to utilise its much-touted potentials. Right now and courtesy of Lumos, many are beginning to look up to the sun instead.

Data sources:

+1 Source Nigerian Electricity Regulatory Commission (NERC)

+2 Source US Energy Information Administration (EIA) 

+3 Source World Bank

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