FEATURE: New study sheds light on the Nigerian off-grid solar market
On 25 June, the World Bank and International Finance Corporation (IFC) hosted a workshop in Lagos to discuss the preliminary findings of their market intelligence research for the Nigerian off-grid solar sector. The findings reveal unique opportunities and challenges for distributors and manufacturers, including a large under-electrified market, aspirational consumers, and competition from small generators.
With donor support from CDKN, the research conducted by two firms, IT Power and Market Trends International, surveyed approximately 4500 individuals across 19 of Nigeria’s 36 states for the Lighting Africa programme. The final report will offer nuanced insights into consumer behaviour for specific geographies (different states, urban and rural) as well as preferences and willingness to pay for different product categories, but preliminary findings already sparked vibrant discussion amongst attendees.
Many stakeholder believed that the research would provide structure and direction to an industry that currently lacks adequate understanding of their market. “There were many mistakes we were going to make, that this research will help us mitigate,” noted a local manufacturer and distributor. “It opened my eyes to the opportunities across Nigeria. Before now we have not had a lot of data to tell us where to go, how to go,” said another.
Three topics that attracted the most attention were the potential size of the under-electrified market, the aspirational nature of the Nigerian consumer, and the market penetration of small generators.
Although 60% of the Nigerian population is connected to the grid, current generation capacity only supplies about 10% of demand, resulting in regular and protracted blackouts across the country. The potential market therefore not only includes the un-electrified rural but the under-electrified who may require additional off-grid light, in spite of a grid connection. Preliminary findings puts this number at 9 million households.
Another challenge peculiar to Nigeria is the deep penetration of small generators throughout the country. In Lagos it is near impossible to go anywhere without hearing or seeing their employment. Although their running costs make several solar products more economic alternatives in the long-term, they offer major competition in being able to power a range of services, like television and fridges. Furthermore, small generators are highly socialized technologies, as captured by their local nickname, “I better pass my neighbour.”
The Nigerian consumer also displayed a more aspirational approach to their spending than consumers from other Lighting Africa countries. Lifestyle is a prominent consideration in purchasing light and other electric services. The aspirational nature of power consumption is aptly captured in the nickname for small generators notes Dr Jo Ebhomenye from Market Intelligence International.
Since its inception in 2007, Lighting Africa has provided access to clean lighting for 6.9 million people. It has offset 138 600 tons of GHG emissions. The aim of the initial research phase is to demonstrate the viability of the Nigerian market to companies and investors by providing market intelligence on market size, consumer preference and behaviour, and business models and distribution channels. Further components of the programme include development of quality assurance, consumer education, financing mechanisms, and capacity building for SME’s. There will also be a component focusing on involving women in the supply chain and other energy access issues.
The final market intelligence report for Nigeria will be published in August, 2013.