Can Off-Grid Solar Cure Nigeria’s Kerosene Dependence?

chrisblog

by Chris Merriman

 

In 2016, the Nigerian government spent over $1.5 billion subsidizing kerosene, which two-thirds of the population use for both lighting and cooking. However, rich Nigerians benefit from subsidies just as much as the poor, and most Nigerians do not receive subsidized prices due to middlemen inflating prices for their own profit. Subsidized prices are only available at Nigerian National Petroleum Commission (NNPC) gas stations, which suffer from long queues. Why then, do Nigerians strongly oppose the removal of kerosene subsidies? How can subsidies in Nigeria be improved to increase energy access?

 

My study investigated if off-grid solar, which has provided millions of people with access to electricity in countries like Kenya, could be a viable alternative to kerosene for lighting in Nigeria from a purely cost standpoint. Ignoring off-grid solar power’s environmental and health advantages over kerosene, I guessed that removing kerosene subsidies and promoting off-grid solar would only be politically feasible if the average yearly cost of off-grid solar were comparable to that of kerosene. As problematic as kerosene subsidies in Nigeria are, it seems that they do benefit those who are willing to wait in long queues to receive the subsidized price. Many Nigerians also do not trust the government to spend subsidy money in a better way.

 

Using data on average expenditure on kerosene for lighting in Nigeria based on a 2010 survey, I found that the average Nigerian family spends about $11 per year on kerosene (in current prices). If subsidies were removed, Nigerians would spend at most $18 per year on kerosene for lighting. These totals were both significantly lower than the yearly cost of a Nigerian Lumos 80W solar home system ($31), even assuming a generous 25-year life cycle. A Kenyan M-Kopa 8W solar home system was cheaper than unsubsidized but not subsidized kerosene, but only over a 25-year period. A Greenlight Planet Sun King Pro solar lantern had a similar yearly cost to subsidized kerosene of $11, and was $7 cheaper than unsubsidized kerosene.

 

Improving kerosene subsidies in Nigeria is a complicated task due to the vested interests of those who profit from leakages. Corruption in Nigeria expands well beyond the oil industry – Nigeria ranked 148 out of 180 countries in Transparency International’s 2017 Corruption Perception Index – and thus represents a major barrier to kerosene subsidy regulation. The Nigerian government could adopt the following two policy recommendations to begin tackling the problem:

 

1. The Nigerian government could transfer an initial 10% of subsidies to pay for most of the up-front cost of 10 million solar lanterns. Solar lanterns provide higher quality lighting than kerosene, allow users to save money that they would otherwise spend charging cell phones or other small devices and would present fewer opportunities for leakages, as they would only be sold once. If the solar lanterns sold well during their first year, the Nigerian government could further transfer subsidies from kerosene to solar lanterns. However, the complete removal of subsidies remains politically unrealistic due to kerosene’s use in cooking in Nigeria.

 

2. Even without the transfer of subsidies to solar lanterns, it’s clear that kerosene subsidy regulation is necessary in Nigeria. A 2012 probe by the Nigerian National Assembly found that Nigeria’s national oil corporation, the NNPC, was “mired in corruption” and “astronomically inflated subsidy claims.” The probe required the NNPC to refund the government over 300 billion nairas (almost $1 billion). The 2012 probe of the NNPC proved that when the Nigerian government chooses to, it can hold the kerosene industry accountable.

 

3. Willingness to pay for higher quality light and potential savings from not needing to pay to charge cell phones and other devices are two topics that warrant additional research. Nigerian consumers might be willing to pay more for off-grid solar if they greatly value higher quality light. Money saved by not needing to pay to charge cell phones and other devices could also offset the increased cost of off-grid solar. Finally, if the cost of Nigerian solar home systems could fall in the coming years and approach the level of Kenyan prices, they too could provide a realistic alternative to kerosene for lighting in Nigeria.

 

***

Chris Merriman is a first-year African Studies concentrator at the Johns Hopkins School of Advanced International Studies (SAIS).

Photo: Wikipedia