Willingness to Pay for an Electricity Connection: A Choice Experiment Among Rural Households and Enterprises in Nigeria

TL;DR

This study investigates the preferences and willingness to pay for electricity connections among rural households and SMEs in Nigeria, providing insights to improve electrification strategies based on diverse user preferences.

Contribution

It offers novel empirical data on preferences and marginal willingness to pay for electricity connections in Nigeria's rural areas, using a large choice experiment dataset.

Findings

Households prioritize nighttime electricity access.

SMEs value high-capacity electricity more than medium capacity.

Preferences vary by household head age and gender.

Abstract

Rural electrification initiatives worldwide frequently encounter financial planning challenges due to a lack of reliable market insights. This research delves into the preferences and marginal willingness to pay (mWTP) for upfront electricity connections in rural and peri-urban areas of Nigeria. We investigate discrete choice experiment data gathered from 3,599 households and 1,122 Small to Medium-sized Enterprises (SMEs) across three geopolitical zones of Nigeria, collected during the 2021 PeopleSuN project survey phase. Employing conditional logit modeling, we analyze this data to explore preferences and marginal willingness to pay for electricity connection. Our findings show that households prioritize nighttime electricity access, while SMEs place a higher value on daytime electricity. When comparing improvements in electricity capacity to medium or high-capacity, SMEs exhibit a sharp increase in willingness to pay for high-capacity, while households value the two options more evenly. Preferences for the electricity source vary among SMEs, but households display a reluctance towards diesel generators and a preference for the grid or solar solutions. Moreover, households with older heads express greater aversion to connection fees, and male-headed households show a stronger preference for nighttime electricity compared to their female-headed counterparts. The outcomes of this study yield pivotal insights to tailor electrification strategies for rural Nigeria, emphasizing the importance of considering the diverse preferences of households and SMEs.