By Martins Eke
Renewable energy refers to energy that is harnessed from sources that can be replenished on a human timescale. Renewable energy sources include solar, hydro, wind and biomass. Some sources of renewable energy like solar seem inexhaustible and will be available as long as there is life on planet earth. Generally, they are more environmentally friendly and sustainable and do not contribute so much to global warming.
The basic challenges facing renewable energy projects in Nigeria include high capital cost and higher tariff particularly for lead projects; high local interest rates which adversely affects small and medium scale project developers; pricing of the energy equipment in foreign currencies and dearth of local manufacturing capacity. The implication of the foregoing is that renewable energy projects in Nigeria are massively capital intensive.
The National Renewable Energy and Energy Efficiency Policy 2015 set a target for Nigeria to achieve 16% of its energy consumption from renewable sources by 2030. This compares to only 0.8% renewable energy consumption in 2012. What this policy did not expatiate is where the finance for this target will come from, especially now that the economy has gone into a recession with the threat of a depression looming.
One option open to Nigeria to finance its renewable energy transformation is international finance institutions/ international donors and aid. But should we continue to beg cap in hand for international assistance that has become subject to all manner of conditionalities from donor countries? Nigeria must look inwards for the necessary finance through enhanced domestic resource mobilization and the following are a few options to explore.
Remittances/bonds from Nigerians living in diaspora: According to the International Monetary Fund, estimates of diaspora remittances in Nigeria for 2012 was $21bn, which represents about 9% of the country’s Gross Domestic Product for that year. However, this huge amount of money just like in other years is usually not optimally utilized. Nigeria should consider the issuance of diaspora bonds as an official response to structure the remittances for the benefit of Nigerians. The bonds can be issued to Nigerians living in diaspora to tap into their resources in the destination country, as an alternative to borrowing from the international capital market, multilateral finance institutions or bilaterally from governments. The bonds can then be used to finance renewable energy transformation in Nigeria.
Contributory Pension Schemes: The Federal Government of Nigeria in late August 2016 announced that the pension deposit in Nigeria has reached N5.8trillion. At the World Pension Summit-Africa Special of October, 2015 in Abuja Nigeria, it was noted that the increasing size of the pension funds in the continent provides a rare opportunity for a multi-sectoral collaboration to bridging Africa’s infrastructure deficit.
The summit noted that with the global trend of steering retirement and social benefit managers towards channeling pension funds to investments that have socio-economic impact, the time has come for Africa to begin investing pension asset into productive uses.
A small fraction of the N5.8trillion in Nigeria’s pension fund will go a long way to advance the course of Nigeria’s renewable energy transformation. However, there is need to ensure that the culture of embezzlement that has become the norm in Nigeria is not extended to the management of this fund.
Royalties: Nigeria needs to tie some part of its hydrocarbon resources to the mainstreaming of renewable energy. The model on how our renewable energy transformation can benefit from this process can involve two windows: the responsive window and the strategic window. The Responsive Window finances demand-driven implementation of renewable energy projects. A range of stakeholders from the academia, civil societies, private sectors, local communities can submit proposals through this window but such proposal must demonstrate that it meets the objectives of the National Renewable Energy and Energy Efficiency Policy 2015 that set a target for Nigeria to achieve 16% of its energy consumption from renewable sources by 2030. The strategic window will finance sequential, tactical, longer term renewable energy projects as well as capacity building and institutionalization of the renewable energy transformation
Policy incentives: There are lots of policy incentives that the government can implement which will have the overall effect of accelerating our renewable energy transformation. They include: Tax incentives to manufacturers of renewable energy equipment and accessories; tax holidays on dividend income from renewable energy domestic investments; provision of soft loans with low interest, for instance, Central Bank of Nigeria dedicated funds; tariff measures such as free custom duties on renewable energy equipment importation and materials used for projects. Also, Federal Government and States can assist in allocation or grant of lands; provision of defined incentives for home owners to install renewable energy appliances and lightings; and grants to community-based renewable energy projects and processes
Eke writes from Abuja