On the sidelines at the Future Energy Nigeria event, Ujunwa Ojemeni, senior investment associate at All-On Nigeria, an impact investor in Nigerian energy companies spoke to business a.m. on the investment deficit in the Nigerian clean energy space and how the company’s presence is drawing other institutions in the industry. she also talked about the major challenges facing these companies apart from funding and what the future looks like for clean energy in Nigeria-.
Financing is the most important barrier affecting the energy industry. In your view, what is the most effective way to scale up on investment in the industry and how much investment deficit are we looking at as a country?
As you already said, the biggest challenge to energy in Nigeria is one, financing of energy companies and, two, operational or maybe technological skills that are lacking. But in terms of financing, we are just one company and we believe that the energy gap is up to 175,000 megawatts because on the average it is assumed that for every one million people, you need one megawatts, so assuming we are a population of 180 million people, we need 180,000 megawatts, so you can imagine how huge the gap is and that is how huge the financing gap also is, if you are trying to finance this huge deficit.
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So basically we are just one investor like you said but our job in the market is to catalyse and draw in other investors into the sector. We run various programmes where we go with partners. For example, with United States African Investment Development Fund (USAID), we are running a three year program where they provide grants and we provide returnable capital and we are hoping to fund up to thirty (30) companies within this three-year programme.
We are also partnering with other investors like the African Development Bank (AfDB) where we launched the $58 million fund in August with other partners like Nordic Government Fund and Calvert Impact Capital. So we see that once other people see us in the sector participating, they are coming in and trying to provide funding, World Bank is trying to provide funding and other institutions.
There are some institutions once they see that one investor is trying to cataylse the sector, they feel comfortable especially when you are an investor that understands the sector. And I think the banks would come around, they are starting to understand the sector better and hoping soon, they would start investing in the sector.
Also, you are a projects manager, drawing from your experience and expertise, what are the major challenges facing these clean energy players?
I think there are various problems, and one you already mentioned is finance, which we are trying to solve and are hoping other people are trying to solve. But I think another thing is the skills gap, the acute skills that you actually need to develop a project, I mean you need technical, commercial, and financial acumen amongst other skills to help your project be successful, so lot of these companies sometimes are very fresh, some are fresh from school and might not necessarily have the skills required and sometimes it is expensive to employ the people with the skills required.
However, there are various programmes that are running at the moment to help provide the skills necessary; so I think those two challenges are quite huge. But in terms of operational challenges and just even doing business in Nigeria is generally more difficult than other countries you typically see, sometimes, the environment is not always very friendly. Access to energy is a challenge these businesses face and that is also the challenge they are trying to solve. so infrastructure, like transportation, logistics are some of the challenges that businesses face here.
I also think in terms of, for instance, regulations like the import duties imposed on some of the solar assets, that is another challenge faced because if your solution is expensive, it would be difficult for you to sell it to customers and it just drives up your cost in generally. So I think these are some of the challenges companies are facing.
You just mentioned skill gap as a problem facing clean energy companies, is it a deal breaker for an investor like you because you finance these companies, is it part of the criteria that determines whether you would finance or not?
You are spot on with that question. To be honest, the management team of any company is one of the most important thing that we look out for if we are going to invest in that company because if you don’t trust the company that are actually going to run that business, then your money is already at risk. So the management team is very key and sometimes, you might have to recruit some key positions.
For any investor, that is one of the things to look out for, who are these people, what skills do they have, what have they done, for new companies, it might be what did they study? So I think it is very important.
You wrote an article on how anyone can get into the clean energy business and that would actually drive more entrepreneurs into the energy industry because the country needs to scale up rapidly due to our growing population, what in your view would drive ordinary people into this and also looking at the skill gap problem, how can we navigate around this to achieve quick scalability?
Although I think everyone can have the skills required, I don’t think it is necessary for each individual to be the project developer. You live in a community and you know communities, you have various villages in low income areas, what you can do is to act like a bridge, bringing people together. So if you know a community that is willing and able to pay, you can find a developer or talk to people that know developers and before you know it, people have deployed solutions that are impacting lots of lives. So I think even if you are not a developer, investor or regulator or if you are not really involved in the everyday part of the sector, you have a part to play, by knowing the various communities that are lacking energy but willing to pay.
Also how close is your company to achieving its targets?
We are working on it, it is a work in progress, because some of the companies we are just investing in have to actually deploy their solutions and those solutions impact people. So it is going to be a long time before we can actually measure the impact that we have had on the sector. But I think we are making progress and hopefully, if more companies come into the sector and are able to deploy on a bigger and larger scale, we would be closer to meeting the overall targets of Nigeria of hopefully lighting up every household.
It would take time, we have to see how they actually use the fund and see them putting those systems in place before we can measure the impact to see how many lives have been touched. It would take time to see where the numbers are.
Can you mention some companies that have benefitted from your financing?
In general, we have provided various types of funding, some early benefactors are Green Village Energy (GVE) – they provide mini grids to communities, and they have deployed the highest number of minigrids in Nigeria and they are doing more. Another one is Lumos- they do cold storage for market areas and agricultural produce, and a host of others. Creed Solar which we just invested in as part of the USAID program, Auxano Solar-they actually assembly solar panels, so those are some of the companies.
Lastly, how do you see the future for clean energy in Nigeria?
I think the future is definitely very bright and that we are at a turning point, a phase where things would only get better because the opportunities are there and there are players that are serious about solving the problem, the government is coming around trying to make the enabling environment for people to scale, so I think with all of these, and investors looking into the market, the sky is our limit.