By Yange Ikyaa
A $20 billion renewable energy project for Africa is currently in the pipeline with the intended purpose of ending energy poverty in a continent where about 600 million people are said to be living without any form of access to electricity.
The Desert-to-Power project, as this huge solar energy facility is called, is to cut across territories in 11 African nations which fall within the climatic influence of the Sahel. It is expected that when the Desert-to-Power project is completed, it will hold the record of being the largest solar power zone in the whole world.
In Africa, the countries that fall within the Sahel include Sudan, Nigeria, Burkina Faso, Cameroon, Chad, The Gambia, Guinea Mauritania, Mali, Niger, Eritrea and Senegal. But who are the corporate entities behind this massive renewable energy undertaking that will cost up to $20 billion to be built and also cover the entire Sahel region of Africa?
According to Valuechain findings, The African Development Bank (AfDB) is the corporate entity that is pushing for developing this massive renewable energy infrastructure, in collaboration with some of its partners.
Only recently, during the Africa Investment Forum that held in the Moroccan city of Marrakech, the President of AfDB, Dr. Akinwumi Adesina, made reference to the Desert-to-Power project, saying that Africa is blessed with the most abundant renewable energy resources in the world, both hydro and solar.
His words: “The African Development Bank and partners are developing the $20 billion Desert-to-Power project across 11 countries that share the Sahel Zone, which when completed will be the largest solar zone in the world.
“So, whether it is in oil and gas, minerals and metals, renewable energy, agriculture, or the labour force that will drive the global growth, Africa is where to be.”
Currently, the world’s second largest continent hosts the largest solar power installation on the planet, which is the Noor Ouarzazate in Morocco.
Since its inception in 2018, the Africa Investment Forum has attracted over 16,500 attendees and also secured investment commitments of about $143 billion for various infrastructure projects across economic sectors.
The Abidjan-Lagos Highway corridor, for example, secured $15.5 billion of investment interests during last year’s Africa Investment Forum Market Days. Known as a critical road network that links multiple economic hubs in West Africa, this road corridor is expected to transform the entire West African sub-region and speed up regional integration and trade volumes among Africans.
Also in 2022, the East Africa Railway Corridor received investment interests worth $3.6 billion for its construction, which is to link Tanzania, the Democratic Republic of Congo, and Burundi.
While investment commitments of about $143 billion have been made so far at the instance of the Africa Investment Forum right from when it was initiated, Dr. Adesina said the Forum has so far sealed deals, locked in capital and closed investment gaps worth $11 billion. This figure, the AfDB President said, has covered investments in sectors ranging from liquefied natural gas, renewable energy, agribusiness, industrial manufacturing, creative industry, as well as housing and transport.
Making a case in defense of why investing in Africa makes good business sense; Adesina cited Moody’s reports on global infrastructure financing default rates over the past 14 years, which puts Africa’s default rate just at 2.1%, making it the lowest figure in the world. This is against Eastern Europe’s over 10% default rate and Asia’s over 8% default rate.
This means that Africa may not be an investment destination that is actually as risky as perceived in many quarters. The S&P Global Report released in February this year stated that African private equity activity surged to a 5-year high in 2022, and that private equity and venture capital in Africa soared year-on-year to $7.70 billion.
In the words of the AfDB President, “the number of deals increased from 211 in 2018 to 404 in 2022, an increase of 91%. The total transaction value expanded from $4.65 billion in 2018 to $7.70 billion in 2022, an increase of 66%.”
Such regional integration efforts in energy terms may hold business opportunities for a number of countries on the continent, including Nigeria, which can strategically export electricity to the whole West Africa and beyond.
According to industry reports, Nigeria has untapped solar energy potential of 5,000 trillion kilowatt-hours (KWh), which is an exportable service with the potential to create more jobs, grow tax revenue and expand regional market influence.
Looking at the success of energy-exporting nations, such as Germany and Russia, Nigeria looks bright also in this area, considering the AfDB-backed sub-regional solar power project in the making. It has been argued by some analysts that, in order to mitigate possible risks associated with oil dependency and create a more stable economic base, Nigeria must diversify its export portfolio.
While one of the paths for Nigeria to achieving this diversification lies in the realm of energy, particularly power generation, the country’s abundant energy resources, including coal, oil and gas reserves, as well as heat, hydroelectricity, solar, and wind continue to provide opportunities not only to meet domestic energy needs but also to export electricity to neighboring countries.
However, the cost of infrastructure for ensuring steady power supply is prohibitively high for the region, particularly for some nations with very low GDPs in the region. This means that importing electricity from other countries with surplus grid load will become a cost-effective energy solution for such nations.
Nigeria, with its vast energy resources and significant export capacity is uniquely positioned to electrify the entire Western African region and has already been exporting electricity to Togo, Ghana, Benin Republic and Niger.
An estimate of electricity demand by some of the countries in West Africa is as follows: Senegal (1,350 MW), Benin (500 MW), Ghana (425 MW), Liberia (300 MW), Guinea (2,373 MW), and Guinea-Bissau (63 MW).
And this regional electricity demand could be met by Nigeria, if the country learns the lesson of Russia, which remains an inspiring case study for energy export successes by leveraging a diverse mix of energy sources, such as natural gas, oil, coal, nuclear, and hydropower to meet domestic needs and actively engage in energy trade with neighboring countries, regions or territories.
The Eastern European energy powerhouse also uses energy export as a diplomatic tool for gaining geopolitical advantage over neighboring countries. For instance, in 2021, Russia supplied 40% of Europe’s entire gas needs and exported electricity to neighboring countries.
The revenue that comes from these exports significantly and historically impacts the nation’s economic stability and development, as these proceeds are used in financing infrastructural projects, social programs, technological advancements, military programmes, and generally fortifying Russia’s economy and regional influence.
Expanding electricity exports in Nigeria offers several significant advantages, as it makes possible a more reliable and predictable revenue source as compared to oil, due to the long-term contracts involved in electricity supply deals.
Another advantage is that such long-term contracts can maintain a steady inflow of foreign exchange earnings, with reserves from these transactions channeled into stabilizing the Naira, as well as facilitating the essential imports, servicing foreign debt, and generally creating macroeconomic stability for the country.