Nigeria: Energy Crisis – Cost of Solar Systems Rises 120 Percent to N550,000 As Forex, Inflation Worsen

The average cost of installing solar systems in the country has risen by 120 per cent to N550,000 in 2023, from N250,000 in 2022, due mainly to inflation and the depreciating value of the naira/dollar.

The naira exchanged for more than N800/$, weekend, a development that put additional pressure on local investors interested in importing solar solutions and other items from the global market.

However, the development has scuttled operations, especially new investments, supply, demand and impact on households, businesses and institutions economy-wide.

Situation requires new measures – Operators

In an interview with Vanguard, weekend, President, Renewable Energy and Energy Efficiency Associations Alliance, REEEAA, Prof. Magnus Onuoha, confirmed the current situation, adding that the naira should be used for all transactions in the sector.

He said: “This is why we are imploring de-risking investment institutions in the sector to ensure that these products are purchased with naira, against dollar, to guard against inflationary shocks. Infra-credit, for instance, has taken the lead.

“The average cost of installing solar systems has increased by over 100 per cent over the last 24 months because of the free fall of the naira and inflation.

“The costs of importation and logistics have also increased. For instance, a 1kva in 2022 would have been cheap at N250,000, but in today’s markets, 1kva costs between N450,000 and N550,000.”

Total, banks, others adopt solar

Despite the challenges, many consumers said they have already found a good option in solar, thus enabling them to power their households, plants and other infrastructure.

The Deputy General Manager, External Communications, Total Energies, Dr. Charles Ebereonwu, said: “We have been able to cut the cost of operations by 4.8 per cent because of increased adoption of solar.

“Our first solar station which is located at Onigbagbo, Ikeja, Lagos, was inaugurated in June 2014 and every year, we have continued to equip more stations with solar solutions.

“The 256 stations are well spread across the country and we hope to add more before the end of the year.”

Checks by Vanguard indicated that many banks, including UBA, Access bank, GTCO, Zenith Bank, FCMB, First Bank, Union Bank, Fidelity Bank, EcoBank and Sterling Bank, have all switched over to solar energy.

Providing details, a source in Access Bank disclosed that all the branches use a combination of solar energy and other sources, except the branch located at Ogunlana drive, Surulere, Lagos, which operates strictly on solar energy.

At GTCO, a source stated that solar solutions were being used in some of the branches and the head office, while majority of the bank branches use as others are still linked to the national grid.

At Zenith Bank, a source noted that the bank uses a combination ofn solar, diesel and national grid, adding that solar energy was being used to power most of their ATMs.

Also, the Group Chief Executive, FCMB, Mr Ladi Balogun, disclosed at a recent annual general meeting of the bank that 75 per cent of the bank’s branch had been removed from the national grid and diesel generators.

Diesel, petrol prices remain high

However, with the high cost of solar, many consumers have now been forced to continue to generate their independent electricity at even higher costs as diesel and petrol currently stand at over N700 and N600 per litre respectively.

The National Operations Controller, Independent Petroleum Marketers Association of Nigeria, IPMAN, Mike Osatuyi, who confirmed the high prices, said: “The price of diesel is high because it had since been deregulated.

“The price of petrol is currently driven by inflation and depreciation of the naira. As a result of the problems, it has been difficult for marketers to import petrol from the global market, thus delaying the expected competition and low prices after deregulation.”

Similarly, checks by Vanguard indicated that with a monthly subsidy of about N50 billion, the government had not completely abandoned its planned tariff review due mainly to the deregulation of the downstream sector and floatation of the naira.

The foreign exchange rate used in determining the 2015 tariff was N198.97/$; N383.80/$ in 2020; while N441.78/$ was used in 2022.

The inflation used in the 2015 MYTO was 8.3 per cent; 12 per cent in 2020; and 16.97 per cent in 2022.

Currently, the inflation rate is 22.41 per cent and some experts have projected that it would hit 30 per cent by the end of June, given the floating of the naira and subsidy removal on PMS.

Reacting to the current development, President of Nigeria Consumer Protection Network, Kunle Olubiyo, stated: “It will affect the tariff template and result in an upward review of electricity tariff.

“As important as this may be, two things are quite imperative to help in achieving a win-win for the demand and supply side of the coin.”

Leave a Reply