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February 11, 2023
Electrifying Nigerian Agriculture with Clean Minigrids to Improve Livelihoods
Note: This article first appeared on USAID’s Facebook Page, and is also available at RMI.org.
A 2020 Power Africa study found immediate opportunity to initiate and scale the productive use of energy from Nigerian minigrids by electrifying three prevalent agricultural processing activities: rice milling, grain flour milling, and cassava grating.
Andrew Allee, James Sherwood, Falaq Tidjani, Ayodeji Ojo
For the hundreds of millions of people living without electricity access or poor grid supply, the ultimate goal of electrification is seamless integration of reliable power and income-generating activities that propel communities forward. Solar hybrid minigrids can provide cost-competitive and reliable service with plenty of power to run productivity-enhancing machinery to do just that.
In theory, these “productive use” activities can ensure steady sales for the minigrid company, allowing them to pay off their investment and then reinvest in bringing power to still more customers. In practice, most electrification efforts have focused on ensuring electricity supply, leaving electricity demand to grow organically. Today, minigrid loads throughout sub-Saharan Africa remain low, challenging companies, consumers, and development partners to stimulate the productive use of electricity.
In Nigeria, agriculture is the bedrock of the non-oil economy, employing two-thirds of workers and accounting for nearly a quarter of national GDP. While a sizeable portion of economic activity, agriculture contributed to just 2.4 percent of Nigeria’s total foreign earnings in 2019. Strengthening agricultural exports could pay macroeconomic dividends by reducing Nigerian dependence on foreign exchange from exporting oil to fickle international markets. But energy poverty applies friction across the entire agricultural value chain, increasing costs and decreasing quality of agricultural products and hampering export potential.
Overcoming Agricultural Energy Challenges
In our experiences with small- and medium-sized agribusinesses, the lack of consistent electricity is cited as one of the foremost challenges to smooth business operations. The World Bank reports that getting access to electricity ranks as one of the major constraints for the private sector in Nigeria. Innovation to increase energy efficiency, supply reliable power, and maximize income is required to improve the livelihoods of agribusiness entrepreneurs.
For Habibu Lawal, a rice miller in Kaduna State, the status quo is costly. He spends $12/day on diesel alone to operate his old, inefficient rice mill. He estimates that the aging motor takes another $12/month to service and repair. Worse still, the outdated one-stage mill shatters a significant portion of the rice grains as the bran and husk are removed, reducing the amount of salable milled rice for every kilogram of raw paddy rice he feeds into the machine.
A new two-stage electric rice mill could cut operating costs by roughly 10% at a $0.60/kWh tariff while increasing the yield of milled rice by 20%–30% and improving the quality of his final product. But without access to financing or reliable electricity in his community, the noisy, unreliable, and expensive diesel-powered machine is Mr. Lawal’s only option.
Despite the clear opportunity, rural electrification and agricultural activities are not tightly integrated. Why? One reason is that agricultural value chains are complex, and there are myriad ways that electricity can be used in them. Should minigrid electricity heat dryers or turn flour mills or chill freezers? Which of these options is the best place to start?
A new study by the USAID Power Africa Nigeria Power Sector Program, led by RMI and conducted in partnership with Sahel Consulting, answers these questions by identifying:
- the most promising agricultural productive uses to electrify,
- how these opportunities can be sustained through commercial business models, and
- the strategies stakeholders can use to overcome barriers to deployment.
The Most Promising Agricultural Productive Uses to Electrify
We analyzed 12 crop value chains across Nigeria’s Kaduna and Cross River states, using more than 250 field interviews with farmers, processors, and traders in over 40 rural communities. We also conducted an extensive literature review and discussions with sector experts. Activities with the most potential for immediate electrification demonstrated local capacity to conduct the processing, existing markets for the product, availability of electric processing equipment in Nigeria, and scalability. Considering these factors, prospective activities were classified into three tiers:
- Tier 1, immediately ready for deployment
- Tier 2, strong medium-term potential with support to overcome one or more barriers
- Tier 3, longer-term potential if additional barriers are addressed
The figure below rates each activity on each criterion, summarizing detailed analysis of each value chain and evaluating the viability of electrifying processing activities from farm gate to final consumer.
Cassava grating, grain flour milling, and rice milling are three clear Tier 1 activities primed for immediate electrification and deployment in Nigerian minigrids. Each of these can be electrified at scale in existing minigrids today, with little to no market development support. For example, most minigrid-suitable communities in rural Nigeria already host small grain flour millers who convert maize, sorghum, cowpea, soybean, and other local crops into flours and meals used to make staple foods. These mills are fossil-fuel powered, typically utilizing antiquated combustion engines as the prime mover. For example, multi-crop electric flour mills could be operated using the skills that local millers already have, to serve a preexisting local offtake market, using domestically manufactured electrical appliances, at countrywide scale.
The Business Case for Investment
Further, there is a clear business case for investment by processors in electric equipment for Tier 1 activities, all of which can be paid back within two years. Our analysis shows that these productive loads also significantly improve minigrid economics by consuming surplus solar power during Nigeria’s sunny afternoon hours. In the scenario with the most productive use adoption (nine cassava graters, 12 flour mills, and five rice mills), the increased electricity sales volume decreased the electricity price required to recoup the minigrid investment by 19%.
Synchronizing agricultural processing with minigrid electricity can improve livelihoods, enhance the financial viability of rural electrification, and reduce electricity prices for consumers. And these opportunities are not limited to Nigeria, as RMI’s ongoing work in Ethiopia, A2EI’s recent research in Tanzania, and Power For All‘ s #PoweringAg campaign clearly show. But breaking the status quo of asynchronous agricultural development and electrification will require significant changes.
Strategies for Stakeholders
First, cross-sectoral collaboration between agriculture and energy stakeholders will be indispensable. Today, there is little coordination between actors and projects, leaving most minigrid developers to figure out agricultural productive use on their own, with very little connection to the experts leading the agricultural development efforts occurring in parallel throughout Nigeria. Collaboration can scale and deepen impact. For instance, livestock nutrition programs that increase cow milk productivity will be more successful if paired with cold chain infrastructure that ensures excess dairy makes it to market. This collaboration can be expanded across national borders to replicate best practices.
Second, commercial business models must connect the appliance buyer to affordable credit and reliable power. Our report proposes three different business models that can be used to deploy and scale Tier 1 and Tier 2 productive use activities by addressing financing gaps.
Third, we must learn by doing, and by listening. The history of development spending is rife with well-intentioned interventions that failed to benefit the people they aimed to serve. Pilot projects in advance of widespread deployment can test whether electrical appliances are functional and meet processor and customer needs. Pilots can also provide data on the compatibility of equipment with minigrid hardware, and on the electricity consumption patterns of productive use customers. This data can further demonstrate the financial viability of these investments to inform prospective lenders’ risk perception.
Nigeria’s federal government understands this need. The Rural Electrification Agency is now launching productive use pilots through the Nigerian Electrification Project with the African Development Bank and World Bank. Further, as SEforALL advocates, there is an opportunity to incorporate direct links between electrification and small-holder agriculture in COVID-19 recovery efforts.
The opportunities for electrification in Nigeria have never been brighter. Energy access technologies are poised to deploy at breakneck speed with dramatic cost reductions in sight, and are receiving attention from government, development partners, and the private sector. However, it is essential that distributed energy resources are coupled with business models that boost local livelihoods by using electricity to address pressing unmet needs in agricultural value chains. Pairing productive use and rural electrification with an effective deployment strategy will unlock local economic development and can serve as a springboard toward realizing the mission of rural electrification.
Announcements
March 31, 2022
REA Launches New Program to Boost GDP, Accelerate Renewable Energy and Unlock Agricultural Productivity in Nigeria
The Nigerian Rural Electrification Agency, in collaboration with RMI and supported by the GEAPP, launches the Energizing Agriculture Program to catalyze economic development and improve rural livelihoods in Nigeria through linking minigrids and agricultural productivity
Abuja, Nigeria—March 31, 2022
Today, the Nigerian Rural Electrification Agency (REA) and RMI, an independent nonprofit focused on transforming the global energy system to secure a clean, prosperous, zero-carbon future for all, officially launched the Energizing Agriculture Program (EAP). The EAP is a three-year initiative with the Global Energy Alliance for People and Planet (GEAPP), with funding from The Rockefeller Foundation, that aims to stimulate the use of minigrid electricity in agricultural productive uses (i.e., those that drive local economic growth). The EAP focus is on enabling market-led solutions and breaking the silos separating electrification and agricultural development.
Over the next three years, the EAP initiative will foster a pipeline of agriculture-energy projects that demonstrate the impact of collaborative development efforts across the energy and agriculture sectors. Across these activities, the EAP is designed to ensure local ownership of solutions and scaling by partnering widely and sharing insights broadly.
As part of the GEAPP’s broader efforts to bring reliable electricity to 1 billion people by decade’s end, avert 4 billion tons of greenhouse gases and enable 150 million green jobs that generate inclusive economic growth, the EAP will build on existing agriculture and electrification initiatives in Nigeria and then accelerate the deployment and adoption of the most effective solutions for rural communities across the country. The EAP will achieve this by bringing together teams of local partners to validate commercially led business models, demonstrate agricultural appliances and scale proven solutions.
Agriculture is the economic backbone of rural Nigerian communities, where minigrids, small-scale electricity grids that can power a community independently, are often the least-cost electrification option. Experts estimate that Nigeria’s agricultural sector, which provides nearly one-quarter of the country’s GDP and employs two-thirds of the labor force, has the potential to generate $40 billion in exports. Using electricity to power opportunities like these can drive a virtuous cycle for rural development by increasing incomes and community resilience and improving the financial performance of the minigrid utility.
“The Federal Government of Nigeria has been very deliberate about leveraging strategic partnerships for optimum impact in off-grid communities across Nigeria. I am confident that the EAP is deliberately designed to open a whole new world of possibilities to farmers and artisans in the agricultural sector,” said Goddy Jedy-Agba, OFR, Minister of State, Nigerian Federal Ministry of Power. “As the renewable energy space improves yearly, we have continued to keep a keen eye on the deployment of programs and solutions geared toward socioeconomic impact in unserved and underserved communities across Nigeria. The EAP is one of those programs.”
“This program encourages the productive use of energy to deepen our objective of organizing and managing the agricultural sector in Nigeria. Leveraging renewable energy technologies for productive use in off-grid communities greatly helps to strengthen production capacity of the average Nigerian farmer in rural communities. The EAP is in line with our mandate at the Federal Ministry of Agriculture and Rural Development toward strengthening agriculture and rural development across the country,” said Dr. Mohammed Mahmoud Abubakar, Nigeria’s Minister of Agriculture and Rural Development.
“Catalyzing the productive use appliance market is a critical priority on the current REA strategy roadmap, designed to increase economic opportunities in off-grid communities. Beyond providing electricity to the unserved and the underserved, the ultimate goal for the REA is to make sure that the electricity impacts the communities both socially and economically, and agriculture is the chief activity that supports livelihoods in almost all rural communities. That is why we are going beyond powering residential communities to also focus on energizing their agricultural clusters as well,” said Engr. Ahmad Salihijo Ahmad, managing director/CEO of REA.
“Addressing the energy deficit challenge in sub-Saharan Africa is fundamental to unlocking agricultural productivity, new income-generating activities and acceleration of global decarbonization efforts,” said Justin Locke, managing director of RMI’s Global South Program. “The EAP’s potential to electrify agricultural loads can catalyze scaling the adoption of decentralized renewable energy systems and spur local community development.”
Supporting demand, jobs and small and medium enterprise growth by increasing agricultural productive use at minigrid sites is critical to uplifting low-income communities in Nigeria. The EAP will directly contribute to these efforts by deploying productive use appliances in rural communities and proving out business models to scale similar interventions at minigrid sites throughout Nigeria. Equipment like electric grain mills and cold storage can plug directly into existing agricultural value chains once electricity is available.
“Despite incredible advances in renewable energy technologies, we haven’t seen these innovations spread at the speed and scale needed to reach the communities most in need, especially in the agricultural sector,” said Joseph Nganga, executive director for Africa at the GEAPP. “The EAP will bring together farmer organizations, private agricultural companies, donors, equipment manufacturers and governments to surface innovations and embed them within existing value chains. If we are successful, some of these solutions will have wide uptake, helping to catalyze more equitable and sustainable economic development.”
Media Inquiries Please Contact:
RMI: Benson Kibiti, Strategic Communications Manager
T: +254720-658-597
E: [email protected]
REA: Ogbe Ayang, Director, Promotions, Information and Outreach (DPIO)
T: +2348033351512
E: [email protected]
The Rockefeller Foundation: Ashley Chang, Head of Media Relations
T: +1 212-852-0000
E: [email protected]
About REA
The Nigerian Rural Electrification Agency (REA) is the Implementing Agency of the Federal Government of Nigeria (FGN) under the Federal Ministry of Power tasked with the electrification of unserved and underserved communities to catalyze economic growth and improve quality of life for Nigerians. The Agency is responsible for creating an enabling environment for private sector-led projects which includes conducting pre-feasibility assessments, energy audits, enumeration, data analysis, identification of qualified private sector developers, and project stakeholder engagements.
About RMI
RMI is an independent nonprofit founded in 1982 that transforms global energy systems through market-driven solutions to align with a 1.5°C future and secure a clean, prosperous, zero-carbon future for all. We work in the world’s most critical geographies and engage businesses, policymakers, communities, and NGOs to identify and scale energy system interventions that will cut greenhouse gas emissions at least 50 percent by 2030. RMI has offices in Basalt and Boulder, Colorado; New York City; Oakland, California; Washington, D.C.; and Beijing.
More information on RMI can be found at www.rmi.org or follow us on Twitter @RockyMtnInst.
About the Global Energy Alliance for People and Planet (GEAPP)
The Global Energy Alliance for People and Planet (GEAPP) launched at COP26 with USD10 billion of committed capital to accelerate investment in green energy transitions and renewable energy solutions in developing and emerging economies. This historic partnership leverages catalytic grant funding to unlock investment capital with the aim of mobilizing public and private capital in order to reach one billion people with reliable, renewable power, avoid and avert 4 billion tons of carbon emissions, and create more than 150 million direct jobs and drive economic growth over the next decade. GEAPP provides grant funding, a range of financing options, and technical assistance and serves as a platform for collaborative action. For more information, please visit www.globalenergyalliance.org
Email: [email protected].
About The Rockefeller Foundation
The Rockefeller Foundation is a pioneering philanthropy built on collaborative partnerships at the frontiers of science, technology, and innovation to enable individuals, families, and communities to flourish. We work to promote the well-being of humanity and make opportunity universal. Our focus is on scaling renewable energy for all, stimulating economic mobility, and ensuring equitable access to healthy and nutritious food. For more information, sign up for our newsletter at rockefellerfoundation.org and follow us on Twitter @RockefellerFdn.