Petrol Subsidy Removal: An Opportunity for the Growth of Nigeria’s Renewable Energy Market

Mr. MUSA Dasauki | 1 month ago

 

Energy is the lifeblood of every economy. It powers industries, supports services, drives innovation, and sustains households. In Nigeria, however, access to affordable and reliable energy has remained a challenge—one made more complex by the decades-long petrol (PMS) subsidy regime.

Under the subsidy regime, petrol was artificially cheap. This meant that generating electricity through petrol-powered generators was far more affordable than investing in alternative sources like solar energy. For most Nigerians, especially in urban and peri-urban areas, it made more economic sense to buy PMS from the nearest fuel station than to install costly solar panels and batteries. The high initial cost of renewable energy infrastructure discouraged adoption, despite the long-term cost-saving benefits. This is a form of barrier and slowed the adoption rate of renewable energy in Nigeria.

But things are changing.

The recent removal of petrol subsidy has significantly increased the pump price of PMS. This has pushed up the cost of doing business and made energy generation through petrol-powered generators much more expensive. According to basic economic theory, rational consumers adjust their consumption in response to price changes in order to maximize their utility—comfort, happiness, or profit. This shift creates an opening for cheaper, more sustainable alternatives like solar power. Renewable energy—particularly solar technology—is growing rapidly. More homes now have solar panels installed on their rooftops, and there's a noticeable increase in the use of solar-powered security lights in both residential and commercial buildings. These solutions are helping reduce energy costs while boosting long-term savings.

Globally, the cost of solar panels has been falling, thanks in large part to mass production led by China. Compared to a decade ago, solar technology is now more affordable and efficient. Although still out of reach for many average-income Nigerians, more households are beginning to make the shift to solar, especially as the price of PMS continues to rise. The long-term savings of solar energy are beginning to outweigh the upfront costs.

With this trend, we can expect a growing market for solar installations. Competitive businesses will continue to develop and improve existing technologies, making solar and other renewable energy solutions even more accessible. Over time, economies of scale and market competition will drive down costs further, enabling more households—including lower-income families—to adopt these solutions.

In the long run, this transition could significantly boost Nigeria’s energy access and reliability. We could even envision a future where individual households generate enough solar power to meet their own needs and sell the excess to neighbors or back to the grid. This would mark a major shift toward decentralized energy systems and community-powered electrification.

The removal of petrol subsidy, while painful in the short term, may prove to be a catalytic moment for Nigeria’s renewable energy sector. It presents an opportunity to drive innovation, attract investment, improve access, and move closer to achieving energy independence and sustainability.

There is a strong need for more deliberate and strategic government action to shape and accelerate the development and adoption of renewable energy in Nigeria. One effective step would be the introduction of targeted financing schemes to make solar energy more accessible. For example, the government could launch affordable credit facilities that allow civil servants, private sector employees, and other income earners to acquire solar systems and pay in convenient installments through salary deductions or structured repayment plans.

In addition, policies should encourage the decentralization of electricity generation, enabling individuals and communities to produce their own power and sell excess energy to others—either within their neighborhoods or back to the national grid. This kind of peer-to-peer energy model can significantly enhance energy access, especially in underserved and off-grid areas.

Let us encourage and support policies and initiatives that will make solar and other renewable technologies more affordable and widespread. If we get it right, more homes will soon have solar panels on their rooftops—not just for the rich, but for everyone.