In Nigeria, the challenges associated with electricity access from the national grid have given rise to innovative ways of structuring reliable power supply. Apart from the challenge of inadequate supply, there is also the nagging problem of low revenue collection by the distribution companies (DisCos). Alternatively, off-grid electricity solutions fueled by renewable energy (RE) have become more attractive to customers given the features of reliability, accessibility and affordability. Recently, certain institutions have obtained licenses to operate as Super-Agents in the financial services sector. This report analyzes the impact of the Super-Agent framework on the “Pay-As-You-Go” off-grid solar business in Nigeria.

The Solar Business Model – Pay-As-You-Go

The Pay-As-You-Go (PAYG) solar for renewable energy-sourced electricity which is employed by off-grid developers has served to address the availability and affordability challenge by facilitating the purchase of available power via mobile recharge. The company installs the solar panels and the customer pays for the supply via mobile money banking. An initial one-time fee is paid by the customer upon installation and subsequent payments for usage are made electronically through mobile money operations whereby a text code or message is sent to the relevant bank, prompting a top-up of the customer’s electricity units. The electronic, real-time application used by the electricity retail providers to monitor usage ensures that electricity supply is cut off once the customer’s electricity units run out. The model therefore entails that there is a quadripartite connection between the customers, the electricity retail provider, the mobile service provider (Telcos) and the bank.

The Super-Agent Network

The Super-Agent Licensing Framework released by the Central Bank of Nigeria (CBN) in 2015 generally states that a Super-Agent is a corporate entity responsible for the supervision of the activities of agents of banking service providers within a network. The agents provide basic banking services to the unbanked population located in the rural areas.

Super-Agents do not hold electronic money value and operate in tandem with financial institutions which provide and operate mobile money platforms and hold electronic money value. A company involved in the Financial Technology (FinTech) space may operate both as a Super-Agent, managing the activities of agents; and a mobile money operator, employing mobile technology to provide financial services. The services provided by agents are typically linked to a financial institution and such services include account opening, instant card issuance, cash deposit, cash withdrawal, funds transfer, airtime recharge, bills payment, Bank Verification Number (BVN) enrolment and pin change. An agent network serves to build brand awareness, increase customer education, meet liquidity demands and where properly executed, build confidence in the service among customers.

Recent developments reveal that Telecoms Companies (Telcos) are beginning to explore FinTech opportunities for increasing financial inclusion of customers in underserved and unserved communities in Nigeria through the use of their existing telecoms infrastructure. As a first step, a subsidiary of MTN Nigeria, has obtained a Super-Agent license from the CBN to accelerate financial inclusion across the country through an agent network. The license will enable Telcos to convert their existing airtime agents and possibly, other small businesses to provide financial services to unserved and underserved communities.

In East Africa, models exist that connect increase in electricity access through off-grid RE solutions to financial inclusion in rural areas. In Kenya, M-Kopa Solar operates the PAYG model which has been a major catalyst for the financial inclusion of millions of locals. For Nigeria, the Super-Agent framework comprising Banks, Telcos and other institutions, presents an ideal opportunity for RE developers to take advantage of the financial inclusion drive to provide PAYG solar solutions to rural areas.

Impact on PAYG Solar Business

In the Nigerian off-grid space, the provision of solar electricity solutions with the PAYG model usually involves a Renewable Energy developer (RE Company) which provides electricity retail services, and a mobile telecommunications company which provides its telecommunications infrastructure for the customers, to enable mobile payments of their electricity tariffs. With a leverage on the vast number of existing agents, wide telecommunications infrastructure and the large network of mobile telecoms customers, Telcos are expected to gain easy penetration into the financial services market.

The PAYG model operates as a last-mile service and this development is expected to increase the penetration of RE developers operating in conjunction with Telcos into far-end rural areas. With the promise of accessing direct banking services with the Telcos’ agents present within such communities, low-income electricity customers are more likely to participate in the PAYG solar.

The combination of electricity supply services, financial services and telecommunications services within rural communities is a guarantee for rapid economic and social development. Given that the PAYG model has payments by customers in small, affordable instalments as its catch-on, RE developers which operate the model can expect to record a boom with the recent developments. This is because the customers would easily rely on the quick, physical and accessible financial services provided by Telcos’ agents to access electricity services through PAYG solar systems. The ease of payment for services facilitated by this method, in addition to the mobile money services in operation by customers of PAYG solar would also be an advantage to the customer.

In addition, it is expected that this development will drive the market for RE developers involved in the PAYG model, particularly companies in collaboration with Telcos. The accessibility of both financial and electricity solutions locally will count for increased patronage within the local areas. Particularly, the functions of electricity bill payments through mobile money platforms and direct banking platforms could be fused and the variety of available payment platforms will be a good catch particularly for the aged, non-mobile friendly customers.

Despite these apparent advantages, the immediate profitability of the development may be delayed for certain reasons including stable electricity supply for the agents, a wider, stable, secure banking and telecommunications infrastructure as well as security for the agents. More so, there may be challenges with managing the agent network leading to decreased confidence in the system and reduced patronage by customers.

At this time, the services to be rendered by the agents would be wired through designated financial institutions, however, this development is said to be a first step towards the planned procurement of a Payment Service Bank (PSB) License by MTN. The PSB license would afford MTN the opportunity of undertaking a broad spectrum of financial services including accounts services (current and savings), payments and remittance services, issuance of debit and prepaid cards, deployment of ATMs and other technology-enabled banking services.

Since the major aim of the Super-Agent network and the PAYG solar business is targeted at providing financial inclusion and electricity supply services to rural areas, progress made by such service providers into such areas will guarantee priority business advantages when backed by a considered business decision.

To this end, RE developers may consider collaboration with Telcos that are looking to operate in the FinTech space to accelerate the rate of electricity access in unserved/underserved areas and tap into a budding business opportunity. Such collaboration could be driven by strategic advertising, marketing and aggregation of potential purchasers of the PAYG solar kits through top-management coordination by the Super-Agent. The extensive reach of the agent network across Nigeria would be a veritable tool for investment in off-grid PAYG solar business by RE developers.

It is also suggested that a strategic government collaboration between relevant regulatory authorities including CBN, Rural Electrification Agency (REA) and Nigerian Electricity Regulatory Commission (NERC) be formed to create appropriate incentives for investors in order to achieve the dual aim of financial inclusion and energy access in the rural communities.