Nigeria should implement zero tax, zero VAT to attract PayGo solar energy foreign investors

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Yuri Tsitrinbaum, CEO Lumos Nigeria, offering paygo solar solutions reaching over 200,000 households, tells BusinessDay’s ISAAC ANYAOGU and TELIAT SULE how Lumos is deepening PayGo Solar adoption in Nigeria and what can be done to diversify the country’s energy mix, Business day reports

Tell us a little about your Nigerian operations, and why you decided to come to here.

Looking globally, Africa is a big market and Nigeria is by far the biggest market in sub Saharan Africa. This problem of power is not only in Africa. Asian countries like Pakistan and India, are struggling with high population growth and infrastructure gap, which leaves many people in the dark.

We put together an electricity service through a mobile operator (MTN) that is affordable and reliable. This enables scalability, reach to the customers and flexibility of payment for the service.

There is a huge need for power in Nigeria. Today, people use mainly generators to solve the problem of access to electricity. We put a more affordable solution to the table. For the cost of an hour and half of small generator, (power ratings below 2KVA), you can enjoy 24 hour electricity.

What is the size of your market?

We launched officially in February 2016 after the pilot was started in 2015. Today we have a customer base of over 40,000 subscribers, which means that we have over 200,000 Nigerians benefiting from the service, if you consider the size of an average household in Nigeria.

Customers can join the service in over 300 outlets around Nigeria at an MTN store. We have over 500 employees and beside the core staff, there is an ecosystem of installers that we train and set up, there are close to 1000 of such.

Nigeria’s energy mix is 85% gas-fired plants, the rest is from hydro and an insignificant portion from solar, can this drive the economy?

Clearly everyone feels this gap (power), and it shows there is need to improve. There are two ways to improve – on the grid, and offgrid. Ongrid solutions that will feed the grid including traditional power plants and renewables, but we still have to factor in generation, transmission and distribution. Today there seems to be more problems with transmission and distribution than generation. It is relatively easy to plan a field that will generate electricity; the challenge is to manage the electricity via the existing infrastructure.

The second solution is through offgrid, which is where we come I, to play. Our system is in essence generation, transmission and distribution, all in one pack. It takes about 9 years from the moment you start thinking about building a power station until it generates electricity that is besides transmission and distribution challenges. With our solution, it takes days. The fact that it relies on solar gives you peace of mind. So for energy mix, I suggest two layers of discussion, traditional or ongrid and offgrid solutions.

Nigeria is looking to grow small businesses because it is a driver for employment, how does your solution fit into the plan?

We actually didn’t think of small businesses initially when we came into the market. Today, micro businesses are a key segment. If you speak to any person that runs a business, like a barber shop, a provision store, a boutique, a phone charging station booth, or a small office, they will mention power as a heavy cost before rent.

NOI polls show that over 60% of small businesses spend over N500 a day for fuel for generators. It may sound small but when you think about it in terms of a month or year in comparison with the revenue from the business, it can actually make the difference between keeping the business going and closing it.

We have a strong proposition. What many small businesses need is to charge a laptop, a fan and light and that is enough to maintain continuity. So instead of using their generators for 5 or more hours they can use our system and making savings when they spend N150 instead of up to N1000 using small generators.

Speaking about capacity, can I use your system to run a frozen food shop for example?

We ensure that product capacity is communicated clearly to our customers because it is a five-year relationship with full warranty and repair services. The system can deliver 6 hours of 4 bulbs to your businesses, 3 to 4 hours of fan, 3 to 4 hours of television, charge your phone, hair clipper, these are the key things it can do. Refrigeration is not included.

Can a customer request for increased capacity?

Our key message is affordability. We are a mass market product so we focus on the most common need and the bigger piece of the market. If we give a capacity that will cost N20,000 a month, how many of our potential consumers would actually buy into that? So at this price and this capacity, we believe we have close to 7million potential customers in Nigeria. If we increase the price, the number drops dramatically. We are focusing on the most essential needs of households and the business.

There are concerns about periods of high rainfall and little sunshine, how effective is your system under this condition?

Solar energy of course depends on the sun. The panel ratio to battery is designed such that you need 4hours of light in a day to make a full battery charge. We often have more than that. If the sunlight is not very efficient, it will still charge the battery because what it needs is the radiation.

Naturally if it is a very cloudy day, it will not recharge itself as it should but that is what our customers have learnt to manage. When it is cloudy they use less battery to preserve it for the next day.

What is the outlook for PayGo solar in Nigeria?

I think there is a huge opportunity in Nigeria. Unlike East African countries like Kenya, Rwanda and Tanzania where there are millions of systems in use, Nigeria is just adopting the systems.

Financing is a potential bottleneck for this business, we pay upfront the full cost of the product and it is only as customers join the service and pay for the service that we get money back, pay our debt and get money for our investors so there is a huge opportunity for scalability.

What are your biggest challenges operating in the Nigerian market?

It will be better if we have a NHS code that will make it easy to bring in the systems. Also things like zero tax, zero VAT, will encourage the market. We want to be recognised as solar players so that the solutions can be more affordable.

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Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.

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