Improved cooking stoves

Improved cooking stoves
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Improved cooking stoves
SectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Consumer Goods
Consumer Goods Retail
Business Model Description

Manufacture and distribute energy efficient cooking stoves for low income earners and rural communities.

Expected Impact

Reduce fuel emissions from burning wood and contribute to air quality and health outcomes.

Indicative ReturnDescribes the rate of growth an investment is expected to generate within the IOA. The indicative return is identified for the IOA by establishing its Internal Rate of Return (IRR), Return of Investment (ROI) or Gross Profit Margin (GPM).
5% - 10% (in ROI)
Investment TimeframeDescribes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Short Term (0–5 years)
Market SizeDescribes the value of potential addressable market of the IOA. The market size is identified for the IOA by establishing the value in USD, identifying the Compound Annual Growth Rate (CAGR) or providing a numeric unit critical to the IOA.
94% of Nigerians have been using dirty fuels for cooking.
Average Ticket Size (USD)Describes the USD amount for a typical investment required in the IOA.
USD 500,000 - USD 1 million
Direct ImpactDescribes the primary SDG(s) the IOA addresses.
Affordable and Clean Energy (SDG 7) Decent Work and Economic Growth (SDG 8) Industry, Innovation and Infrastructure (SDG 9)
Indirect ImpactDescribes the secondary SDG(s) the IOA addresses.
No Poverty (SDG 1) Zero Hunger (SDG 2) Good health and well-being (SDG 3)
Country
Regions
  • Nigeria: North Central (Middle Belt)
  • Nigeria: South West
  • Nigeria: South South (Niger Delta)
SectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Consumer Goods
CG

Development need: The manufacturing sector accounted for 9.65% of real gross domestic product (GDP) in Q1, 2020. Between 2010 and 2015, the sector grew at an average annual growth rate of 13.3%.(1) However, the sector remains small compared with countries such as South Africa (13%), Morocco (18%), Mexico (18%) and Indonesia (21%).(2)

Policy priority: Nigeria is seeking to improve performance by developing Special Economic Zones (SEZs) to attract investment in manufacturing consumer goods. It aims to draw investment away from economies where the labor cost advantage is declining, and to re-energize industries in Nigeria.

Gender inequalities and marginalization issues: Micro, small and medium enterprises (MSMEs) play a critical role in the fast moving consumer good (FMCG) supply chain as distributors, ensuring products reach Nigeria’s growing consumer market. Women-owned and led businesses represent 13.2% of these MSMEs.(19)

Investment opportunities introduction: Population growth projections indicate Nigeria is set to reach 300 million people by 2030 and 400 million by 2050, coupled with an expanding middle class.(3) This suggests strong growth potential for consumer goods, and underscores the fundamental attractiveness of the Nigerian market.

Key bottlenecks introduction: Nigeria’s manufacturing sector has been challenged by stagnant economic conditions, insufficient infrastructure and a lack of access to raw materials, accompanied by important inefficiencies and low competitiveness.(4)

SubsectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Consumer Goods Retail
CG.3

Policy priority: To effectively address energy needs and attract relevant investors for low carbon development, Nigeria has developed a Clean Technology Fund (CTF) investment plan of USD250 million. This fund covers a range of projects across various sectors including energy efficiency, renewable energy and transport.(5)

Gender inequalities and marginalization issues: Cooking habits are generally uniform across the country. While urban households have adopted gas, rural households still rely on fuel wood and kerosene.

IndustriesMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Multiline and Specialty Retailers and Distributors
CG-MR
Investment Opportunity Area

Improved cooking stoves

Business Model

Manufacture and distribute energy efficient cooking stoves for low income earners and rural communities.

Critical IOA UnitDescribes a complementary market sizing measure exemplifying the opportunities with the IOA.
94% of Nigerians have been using dirty fuels for cooking.

The proportion of Nigeria's population who mainly use dirty fuels such as wood, charcoal, coal and kerosene for cooking is very high, reaching 94% in 2016.(7)

ROIDescribes an expected return from the IOA investment over its lifetime.
5% - 10%

The estimated return rate for investors is 9.6% - 11.6%. This rate is a benchmark calculated as a cost of equity, reflecting an average return required by investors active in the subsector.(8)

TimeframeDescribes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Short Term (0–5 years)

Based on studied benchmark projects, investing in large-scale energy efficient cook stoves takes 1 - 6 months. Cashflow should be generated within 2 years.

Average Ticket Size (USD)Describes the USD amount for a typical investment required in the IOA.
USD 500,000 - USD 1 million
Capital - Limited Investor Interest
Inadequate financing
Business - Supply Chain Constraints
Inadequate production capacity, inadequate information on market opportunities
Sustainable Development Need

Cooking accounts for 91% of total domestic energy consumption.(9) The proportion of Nigeria's population who mainly use dirty fuels such as wood, charcoal, coal and kerosene for cooking is very high, reaching 94% in 2016.(7)

Wood is the most widely used cooking fuel. An estimated 120 million Nigerians are at risk of illness and deaths from exposure to cooking smoke.(9) In 2017, the observed number of deaths attributable to household air pollution was 64,000.(10)

With modern fuel penetration in Nigeria less than 1%, wood and charcoal used in open fires are the main cause of indoor pollution, which imposes a significant health burden across the country. 3.8% of national burden of disease is attributed to solid fuel use.(11)

A business-as usual-scenario places enormous pressure on biomass reserves. Biomass consumption is expected to reach 437 million tons by 2030 based on current consumption trends.(12)

Gender & Marginalisation

Cooking habits are generally uniform across the country. While urban households have adopted gas, rural households still rely on fuel wood and kerosene.

Expected Development Outcome

Investments could reduce the use of fuel wood and indoor pollution, save time and resources, and increase health and wellbeing of households.

Gender & Marginalisation

By promoting healthy and sustainable cooking practices, investments may contribute to positive health outcomes especially for women living in rural areas who do most cooking.

Primary SDGs addressed
7 - Affordable and Clean Energy
Affordable and Clean Energy (SDG 7)

7.1.2 Proportion of population with primary reliance on clean fuels and technology

7.b.1 Installed renewable energy-generating capacity in developing countries (in watts per capita)

Current Level

28.2% in 2015. (16)

Foreign direct investment (FDI), official development assistance and South-South Cooperation as a proportion of total domestic budget has been growing since 2016. It rose from 6.9% in 2016 to 7.6% in 2017 and to 8.4% in 2018. Foreign direct investment (FDI) is 0.6% of gross domestic product (GDP).(16)

Target Level

Nigeria is committed to implement its Natural Gas Expansion Programme within 12 months through its Inter-Ministerial Committee on liquified petroleum gas (LPG). The aim is to create 1 million jobs by converting 30 million homes from dirty fuels (kerosene, charcoal and diesel) to LPG.(17)

N/A

8 - Decent Work and Economic Growth
Decent Work and Economic Growth (SDG 8)

8.2.1 Annual growth rate of real GDP per employed person

Current Level

4.68% in 2015.(17)

Target Level

Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7% gross domestic product (GDP) growth per year.(18)

9 - Industry, Innovation and Infrastructure
Industry, Innovation and Infrastructure (SDG 9)

9.2.1 Manufacturing value added as a proportion of GDP and per capita

9.2.2 Manufacturing employment as a proportion of total employment

Current Level

Manufacturing value added as a proportion of gross domestic product (GDP): 9.43 %. Manufacturing value added as a proportion of per capital: 0.03%.(16)

0.31% in 2015.(16)

Target Level

The Central Bank’s NGN 3.5 trillion stimulus package includes a credit line of NGN 1 trillion to boost manufacturing and import substitution.(18)

The Central Bank’s NGN 3.5 trillion stimulus package includes credit line of NGN 1 trillion to boost manufacturing and import substitution.(18)

Secondary SDGs addressed
1 - No Poverty
No Poverty (SDG 1)
2 - Zero Hunger
Zero Hunger (SDG 2)
3 - Good Health and Well-Being
Good health and well-being (SDG 3)
Directly impacted stakeholders
People
Low income households (rural and urban poor), small scale food vendors
Corporates
Large-scale food processors, institutions (e.g. boarding schools)
Indirectly impacted stakeholders
People
Entire population
Outcome Risks

Improper fuel loading and lack of maintenance can lead to efficiency losses.

Impact Risks

Alignment risk: Impact is not locked into the entity’s (i.e. the enterprise, fund, investee or issuer) business model given the high engagement of non-profit organizations in this area.

Drop-off risk: Positive impact does not endure or negative impact is no longer mitigated

Unexpected impact risk: Increased manufacturing may add to environmental pollution.

What

The outcome is likely to be positive because investments in clean energy solutions will ultimately reduce health risks associated with continued use of fuel wood.

Who

Local households and communities with lack of access to clean energy solutions.

Risk

Low consumer buy-in

Impact Thesis

Reduce fuel emissions from burning wood and contribute to air quality and health outcomes.

Policy Environment

The Nigerian Alliance for Clean Cookstove (an organization created by both the government and private sector) is supporting the transformation. The leading support programme aimed to install 10 million clean and efficient cookstoves by 2020.(12)

National Renewable Energy and Energy Efficiency Policy 2015: This policy promotes the adoption of energy saving appliances and devices through a nationwide energy campaign and training sessions.(13)

National Renewable Energy and Energy Efficiency Policy 2015: It also provides incentives for retailers and importers of energy efficient products and promotes local manufacturing.(13)

National Energy Policy 2003: This policy promotes the use of alternatives to fuel wood, promotes improved efficiency in use of fuel wood and de-emphasizes fuel wood in nation’s energy mix.(7)

Financial Environment

Financial incentives: Credit is available for domestic and foreign investors in clean energy initiatives. The strong progress of the Kyoto Clean Development Mechanism (CDM) for clean cookstove programs in Nigeria has created a favorable carbon financing environment for future project developers.(11)

Regulatory Environment

The Nigerian Alliance for Clean Cookstoves (NACC), the Standards Organization of Nigeria (SON) and other key stakeholders approved new standards for improved cook stoves in Nigeria.(14)

Private Sector

Novastar Ventures, C-Quest Capital, StoveTec, DARE & BIA

Multilaterals

African Development Bank (AfDB), German Corporation for International Cooperation (GIZ), UN Habitat

Non-Profit

Happy Cook Stove, Clean Cooking Alliance

country static map
rural
Nigeria: North Central (Middle Belt)
Across the country, many rural dwellers and low income earners rely on fuel wood as their main cooking method. However, the North Central depends most on fuel wood, while the South West and South states depend more on kerosene.(11)
rural
Nigeria: South West
Across the country, many rural dwellers and low income earners rely on fuel wood as their main cooking method. However, the North Central depends most on fuel wood, while the South West and South states depend more on kerosene.(11)
rural
Nigeria: South South (Niger Delta)
Across the country, many rural dwellers and low income earners rely on fuel wood as their main cooking method. However, the North Central depends most on fuel wood, while the South West and South states depend more on kerosene.(11)
Sector Sources
  • 1) Nigerian Bureau of Statistics (2020). Nigerian Gross Domestic Product Report Q1 2020. 2) Federal Republic of Nigeria (2017). Economic Recovery and Growth Plan 2017 - 2020. Abuja: Ministry of Budget and National Planning. 3) Oxford Business Group (2021). Nigerian domestic market supports producers of fast-moving consumer goods. https://oxfordbusinessgroup.com/analysis/domestic-moves-major-manufacturers-fast-moving-consumer-goods-have-been-supported-expanding-domestic 4) Odey, J., Saliu, H., Achukwu, E.O. and Olashina, O. (2018). Challenges and opportunities in the Nigeria textile sector. 5) Clean Technology Fund (2014). Investment Plan For Nigeria.
IOA Sources
  • 6) World Bank Database. 7) National Energy Policy 2003. 8) PwC analysis based on Prof. A. Damodaran data, 2020. 9) Jewitt, S., Atagher, P. and Clifford, M. (2020). 'We cannot stop cooking': Stove stacking, seasonality and the risky practices of household cookstove transitions In Nigeria. https://www.sciencedirect.com/science/article/pii/S2214629619304700?via%3Dihub 10) Clean Cooking Alliance (2020). Nigeria. https://www.cleancookingalliance.org/country-profiles/focus-countries/3-nigeria.html#:~:text=Exposure%20to%20smoke%20from%20polluting,deaths%20in%20Nigeria%2C%20every%20year. 11) Accenture Global Alliance for Clean Cookstoves (2011). Nigeria market assessment sector mapping 2011. 12) Gujba, H., Mulugetta, Y. and Azapagic, A. 'The household cooking sector in Nigeria: environmental and economic sustainability assessment'. Resources 2015, 4, 412-433. 13) National Renewable Energy and Energy Efficiency Policy (NREEEP) 2015. 14) Standards Organisation of Nigeria (2017). Nigerian Alliance for Clean Cookstoves and SON agree standards for improved biomass cookstoves. https://son.gov.ng/nigerian-alliance-for-clean-cook-stoves-and-son-agree-standards-for-improved-biomass-cook-stoves 15) Clean Cooking Alliance (2021). Wise Ecostove Nigeria Limited. https://www.cleancookingalliance.org/partners/item/999/2561 16) Federal Republic of Nigeria (2017). Implementation of the SDGs: a national voluntary review. https://sustainabledevelopment.un.org/content/documents/16029Nigeria.pdf 17) Federal Republic of Nigeria (2020). Nigeria Economic Sustainability Plan (2020). https://media.premiumtimesng.com/wp-content/files/2020/06/ESC-Plan-compressed-1.pdf 18) Federal Republic of Nigeria (2020). Integration of the SDGs into National Development Planning: A Second Voluntary National Review (2020). https://sustainabledevelopment.un.org/content/documents/26309VNR_2020_Nigeria_Report.pdf 19) International Finance Corporation. Case study: women entrepreneurs find business opportunities in Nigeria’s fastmoving consumer goods sector. https://www.ifc.org/wps/wcm/connect/7386ef01-05fe-4a26-8909-ead2143c6863/IFC-Daraju+gender+case+study+2019.pdf?MOD=AJPERES&CVID=mSnCvut