CROWDFUNDING AND OPPORTUNITIES IN FUNDING RENEWABLE

ENERGY PROJECTS IN NIGERIA

Name: ALABI Ayotomiwa1, ALABI Olumide2
Affiliation: 1 Centre for Petroleum Energy Economics and Law, University of Ibadan, Nigeria; 2 Aspen Energy Limited, Lekki Phase 1, Lagos, Nigeria

Introduction

Table 2: Number of Population with Access to Mobile and Internet

Crowdfunding is an alternative form of finance which has emerged outside of the

traditional systems of financing a business or project. Some of the traditional systems of
funding can be through banks, private equity, venture capital, government and financial
markets. A lot of businesses, entrepreneurs and innovators face difficulties in raising
finance at start-up; the lack of access to credit and other financial services is recognized as
one of the biggest obstacles to socio-economic development and poverty development
(Ciara C,. 2015).
Crowdfunding began to spread, mainly in USA and Europe, around 2008 as a response to
the economic crisis. The recession pushed entrepreneurs to become creative by utilizing
the growing internet population to raise funds to finance their businesses or projects.
According to Massolution a research firm, crowdfunding industries, helped companies raise
$16.2 billion from the public in 2014 and an estimated forecast of $95 billion in 2025
(Figure 1). Table 1 shows that $232.8 million (162.6 million) has been raised to date to
fund renewable energy project.

Country

Figure 1: Estimated growth in volume of funds raised by crowdfunding platforms

worldwide

Population

Number of mobile phone

Number of Internet users

United Kingdom
64,596,800
83,100,000
56,954,584
Netherland
16,715,489
20,000,000
15,789,408
France
65,821,885
72,180,000
54,027,428
Denmark
5,707,251
5,593,105
5,258,054
Portugal
10,555,853
13,400,000
6,705,872
United States
322,583,006
327,577,529
279,834,232
Nigeria
183,523,432
151,018,624
65,675,984
Source: Nigerian Communication Commission, Nigerian Population Commission and Internet Live Stats

Table 3: Forecast of likely amount to be raised using Monte Carlos simulation model
Parameters

Low Case

Mid Case

High Case

Population Figure

2,000,000

65,675,984

151,018,624

Per cent of Population (%)

10

50

90

Amount Donated per Person ()

50

1000

5,000

Results and Discussions

Table 3 shows the assumptions used as input parameter for the analysis. The un-risked
Monte Carlo simulation show the possible range of amount that can be raised to be between
600 million and 416 billion to fund renewable energy projects (Table 4).
The significance of this study is that it shows that significant energy projects could be
financed in a more innovative way thereby contributing to the development of renewable
energy projects in Nigeria.
Table 4: Percentile distribution of amount to be raised
Percentile

Sources: Crowdsourcing.org, Massolution, World Bank

Table 1: Top Countries Involved In Crowdfunding Energy Projects and

Amount Raised
Amount Raised on * Amount Raised
No of funded
Crowdfunding
on Crowdfunding
projects 2009Country
Platforms (
Platforms (
date
million)
billion) 420=1
United
123.1
51.7
120
Kingdom
Netherland
21.4
9.0
40
France
1.2
0.5
20
Denmark
11.1
4.7
80
Portugal
0.3
0.1
7
United States 5.5
2.3
46
TOTAL
162.6
68.3
313
Source: Solarplaza, 2014

Objectives
The study aim to highlight the opportunities in crowdfunding and impacts it could have in
driving Nigerias renewable energy innovation.

Methodology
Population data was used to estimate the amount that could be raised from crowdfunding.
Data used for this analysis were from SolarPlaza, Nigerian Communication Commission,
Nigerian Population Commission and Internet Live Stats (Table 2).
To achieve the aim of this study, Monte Carlo simulation method was used. Using a
triangular distribution for the parameters in Table 3, Monte Carlo simulation method of risk
analysis is applied to assess possible outcomes and impact of risk allowing for decision
making under uncertainty, it furnishes the decision-maker with a range of possible
outcomes and the probabilities that will occur for any choice of action (V.Platon, 2014).

0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%

Amount Raised Forecast

Values ()
595,611,631
20,592,456,012
31,684,791,591
42,093,517,404
53,237,116,743
64,635,178,485
79,025,665,818
96,148,609,150
119,866,035,450
157,422,880,150
415,726,566,447

Conclusion and Future Work

In 2012, interest in crowdfunding increased after President Obama signed the Jumpstart Our
Business Startups (JOBS) act to legalize equity crowdfunding. Existing securities regulations
have to be strengthened to secure investors fund.
Government, policy makers , private sector, NGOs and experts should consider the possible
impacts of crowdfunding investment and try to develop new regulations that will suit the
Nigerian market.
Entrepreneurs need to be equipped with sufficient information to decide if crowdfunding is
a viable funding, investment opportunity or vehicle for financing renewable energy projects
especially low cost, off-grid solar solutions for Nigerias rural communities. The rate of
growth of crowdfunding, its emergence in developed economies suggests that it can
become a tool in Nigerias renewable energy innovation. For this innovative form of finance
to be embraced, possible risk factors such as failure risk, fraud risk, regulatory and
compliance risk, infrastructure risk, market rejection risk, liquidity risk, inherent risk and
subsequent funding risk must be properly hedged.
As the world is heading towards a 100% renewable energy target by 2050 and Nigerias
target of 13GW Off-grid solar PV by 2030, innovative financing like crowdfunding could be a
good driver in developing renewable energy innovations in Nigeria

References
1) Chiara C. Crowdfunding and the Energy Sector. CEDRO. Exchange Issue 18. August 2015
2) Massolution 2015. 2015CF. the Crowdfunding industry report. Massolution report. 2015. Available
at: www.massolution.com
3) V.Planton, A. Constantinescu. Monte Carlo Method in risk analysis for investment projects,
Procedia Economics and Finance 15 (2014) 393 400
4) Belleflamme, P., Lambert Th., Schwienbacher A., 2010. Crodfunding: An Industrial Organization
Perspective
5) Raymond J.M.M. M. 2013. Contribution of crowdfunding to renewable energy projects in the
Netherlands. Thesis. Energy systems. Delft University of Technology. 108.
6) Mullin R. 1995. Foundations for fundraising, ICSA Publishing Ltd, London
7) Crowdfundings potential for the developing world. 2013. infoDev,Finance and Private Sector
Development Department. Washington, DC: WorldBank.
8) Issue brief: Investment geared crowdfunding. 2014. CFA Institute.
9) Crowdfunding in Belgium. 2014. KPMG, Belgium.

Acknowledgements
CPEEL, University of Ibadan.

Nigeria Energy Forum, Oriental Hotel Lagos, 12th 13th 2016