Nigeria and South Africa have many things in common, including being the economic giants of Africa. Each country always has a thing to learn from another; and now, it’s South Africa offering a blueprint on how to revolutionise a country’s energy sector.
Last year, Nigeria recorded 12 national grid collapses, marking the 110th in a decade, a problem that costs the economy approximately $26 billion annually. On the contrary, South Africa celebrated 272 days of uninterrupted electricity supply in December last year, a landslide achievement that saved the country about $870 million during the period.
Experts attribute South Africa’s transformative success to private sector investment in renewable energy. An initiative linked to its Renewable Energy Independent Power Producer Procurement Program (REIPPPP).
According to Kgosientso Ramokgopa, South Africa’s minister of electricity and energy, the country’s Energy Availability Factor (EAF)—a metric that gauges the maximum power a plant can deliver to the grid—is currently at 62.5 percent, an increase from 55.4 percent recorded in 2023. This improvement means that more power plants are operational and delivering electricity consistently. The country’s total available capacity currently stands at 30,725 megawatts (MW), supported by a mix of energy sources, including coal and renewable energy.
In comparison, Nigeria’s electricity availability factor remained low at 33 percent in June 2024, meaning that only a third of its installed capacity was available for use. This poor performance is tied to its total available capacity of just 4,391 MW, which is distributed across 28 grid-connected power plants, no thanks to the aging infrastructure and under-investment, experts says.
Solar energy, a long-awaited solution
Despite its poor current status, Nigeria could imitate South Africa and revive its power sector by attracting private investments. In fact, by geographical location, Nigeria’s one-third tropic area gives the country an opportunity to explore off-grid solar energy solutions.
Nigeria receives an annual solar energy intensity of over 1,900 kWh per square meter, translating to over 6 million petajoules (PJ) of solar energy each year. This immense energy potential, if harnessed effectively, could power the country’s large population, reduce energy poverty and significantly transform its socio-economic landscape.
Environmental specialists emphasise solar energy as an environmentally friendly and sustainable solution. Unlike fossil fuels, solar power is clean and green, producing no greenhouse gas emissions or air pollution.
However, the promising renewable energy source remains widely untapped due to underinvestment. As of 2023, the solar energy capacity in Nigeria amounted to 112 megawatts, an increase from 1.5 in 2014. In contrast, up from 262 MW in 2013, as of 2023, South Africa’s solar energy capacity grew to 6,164 megawatts (MW), making it the country with the largest solar energy capacity in Africa.
South Africa’s total renewable energy capacity grew to 10,623 MW in 2023, with the Renewable Energy Independent Power Producer Program contributing more than 6,000. The country’s transformational energy landscape shows the essentiality of private entities in building a successful energy sector. The International Trade Administration considers the REIPPP strategy as a model for other African nations.
Nigeria’s Hinderance to Energy Prosperity
One problem deterring investment in the energy sector is Nigeria’s attitude to businesses. For instance, the country’s corporate income tax stands at 30 percent, a bit higher than South Africa’s 27 percent. Though a new tax reform Bill proposes a reduction to 25 percent in 2026, this is still significantly high compared to business-friendly countries like Singapore’s 17 percent.
According to the World Bank, tax burdens stifle economic growth and by extension, foreign investments.
South Africa’s success in the energy sector could be traced to its tax incentives, including minimal import tariffs, and tax reductions. For instance, infrastructure goods acquired for research and development expenditures are qualified for a tax reduction up to 20 percent, down from the initial 150 percent.
According to the World Trade Centre, Nigeria can eliminate its investment hurdles by streamlining its regulatory and bureaucratic processes. Removing investment hurdles would propel foreign companies to explore developing Nigeria’s solar farms. One commending initiative in this direction is the duty-free and VAT-free policy on solar panels, an initiative implemented under the ECOWAS Common External Tariff.
While solar farms could be Nigeria’s long-awaited solution to its electricity crisis, South Africa’s renewable energy success teaches how this opportunity could be harnessed. It is by inviting private investors and giving fiscal incentives to operate without bureaucratic hurdles.
