Agricultural activities are the pillars of most rural economies needed to boost economic development. In Nigeria, agriculture employs two-thirds of the workforce and nearly a quarter of the national GDP stems from agricultural products. However, a vast majority of farmers in rural communities lack access to electricity and so rely on diesel to carry out their operations. Provision of electricity to such communities is a means to boost economic development, income generation, and reduce the country’s dependence on foreign imports (Learn more).
One of the major factors, while previous rural electrification has not been backed by a surge in income generation capacity, is because commercial electricity providers lack the thorough understanding and financial resources required to support productive uses, hence agriculture and electricity sector players hardly coordinate to understand how both parties can work together to yield a profitable solution for their respective sectors.
Comprehensive research was conducted by the USAID Power Africa Nigeria Power Sector Program to investigate the opportunities available for productive use of mini-grid electricity in agriculture, viable business models, and tools stakeholders require to withstand challenges to deployment.
How can revenue be increased and cost reduced through agricultural electrification?
The study revealed that the lack of consistent electricity is the major challenge preventing smooth business operations. The research was streamlined to twelve (12) prominent agricultural value chains in two states in Nigeria – Cross river and Kaduna states using several crops that are ubiquitous in rural Nigerian communities appropriate for mini-grid and the potential for steps in their value chain to be electrified. The agricultural materials were classified into three tiers on the basis of their readiness for electrification and implementation namely; Tier 1, instantly ready for deployment. Tier 2, strong-medium-term potential but requires support in offtake and developing suitable appliances, and Tier 3, long term potential with additional barriers.
The top agricultural products that are set for immediate deployment (tier1) include cassava, maize, and rice. Electrification of cassava graters will significantly decrease operations and maintenance costs as the product is nearly always mechanically processed before sale or consumption. In addition, locally produced rice is growing in popularity although, most farmers make use of outdated diesel rice mills. An introduction of a modern electric rice mill can greatly improve rice yields.
How would mini-grids benefit from this collaboration?
The productive load from tier 1 activities can improve mini-grid economics by consuming solar power with the abundance of the sun’s radiation and also enable lower cost-reflective tariffs for customers. An analysis using the products for immediate deployment showed that the increased electricity sales volume decreased the electricity price required to recoup the mini-grid investment by 19 per cent which in turn generates more revenue.
In conclusion, as a strategy for stakeholders, there should be a cross-sectoral collaboration between agriculture and energy stakeholders and also business models must connect the appliance buyer to affordable credit and reliable power.