ELECTRICITY AND THE FOURTH INDUSTRIAL REVOLUTION: IMPLICATIONS FOR THE

NIGERIAN ECONOMY

David Chukwuemeka1, Okafor, Samson Nonso2, Ekesiobi, Chukwunonso .S3 and Obegolu Casmir4
1
Centre for Socioeconomic Policy and Development, Department of Economics, Chukwuemeka
Odumegwu Ojukwu University
2
Graduate Student, Department of Economics, University of Nigeria, Nsukka
3,4
Department of Economics, Chukwuemeka Odumegwu Ojukwu University, Anambra State
Corresponding Author: chukwuemeka.david@zoho.com, 08117380075.

1. Introduction

The increasing societal complexity has continued to necessitate revolutions in different facets of life. The
continued changes in the way of life, societal needs and the quest for improvements in the production
process have culminated into variations in growth and development among countries of the world with
technology being the base for these variations. Industrial revolutions over time have moved from the first,
second, third and present, fourth industrial revolutions (Good and Jebbin, 2015). The first industrial
revolution came into existence through the introduction of mechanical production facilities with the help of
water and steam power (hydropower). The increasing use of steam power led to the development of the
steam engine propelled machinery; the second industrial revolution came into existence through the
introduction of mass production (assembly lines) with the help of electrical energy; the third industrial
revolution came into existence at the end of the 20th century through the application of electronics and
information technology to further automate production.

The Fourth Industrial Revolution is based on full automation and digitization which will result in more of
automated devices in operation and less of a human, but the human will be working in a highly complex
and sophisticated technological environment and with the major work of programming through
communication. Fourth industrial revolution is the era of linking the innovated existing first industrial
revolution devices with the innovated existing second industrial revolution devices and innovated third
revolution devices. The linking will be done with effective communication through programming
(Adeniran, 2016). Digitization and automation of work—frequently referred to as the fourth industrial
revolution (Schwab, 2016)—is therefore considered by many to be the most important societal and
economic trend in the world: one that will fundamentally change the nature of work, business, and society
in the coming decades (Arntz, Gregory, & Zierahn, 2016; Brynjolfsson & McAfee, 2014; Ford, 2015; Frey
& Osborne, 2013).

As the fourth industrial revolution takes the center stage in most economies, policy analysts have continued
to analyse the fate of developing economies and have sought to provide answers to such question as: what
will be the place of electricity in this revolution? To what extent will electricity be needed for this
revolution to take place? Will this revolution totally take the place of electricity energy? These questions
continue to beg for answers among researchers and the academia. The use of energy is a close indicator of
industrial activity and a significant index of standard of living. In the developing countries, no activity is
more basic to the fuller utilization of their resources than the development of the energy industries. In most
of tropical Africa, industrialization post-dates the age of steam as a source of energy. Electricity, rather
than the steam engine drives the developing industries of modern Africa (Ubi and Effiom, 2013).

Nigeria has an abundant supply of energy sources. It is endowed with thermal, hydro, solar, and oil
resources, and yet it is described as an energy-poor country because the sector is relatively under-
developed. The statistics available show that only about one third of Nigerians or approximately 40 per
cent of the population has access to electricity. The distribution of electricity shows great disparities
between rural and urban, and between residential and industrial areas in the urban centres (Ali-Akpajiak &
Pyke, 2003).

This study therefore seeks to examine the link between electricity and the fourth industrial revolution in a
bid to understanding their nexus and the implication of such interplay for the future of the Nigerian
economy. Given the theoretical nature of this study, the descriptive statistics technique will be employed in
a bid to presenting a better, vivid and clearer picture of the role electricity plays in the fourth industrial
revolution. To achieve these objectives, the paper is organised as follows: the second section follows this
introductory section to present the historical background and conceptual framework of the fourth industrial
revolution; section 3 looks at electricity in the Fourth Industrial Revolution; section 4 depict the status of
electricity in Nigeria, concerns and challenges. Finally, section 5 looks at the implications and conclusion.

2. The Fourth Industrial Revolution: Historical Background And Conceptual Framework

According to the Cambridge Dictionary (2017), the term industrial revolution is initially defined as: “[…]
the period of time during which work began to be done more by machines in factories than by hand at
home”. The advances in science and technology have continuously supported the development of
industrialization all around the world, and have helped to bring more specific and explicit meanings to this
term over the years (Belvedere et al., 2013).

At the present time, even though there is still no universal agreement on what constitutes an industrial
revolution (Maynard, 2015), four general phases have been identified from the perspective of the
technological evolution (National Academy of Science and Engineering, 2013).

The First Industrial Revolution which started in the Great Britain is considered as one of the important
advancements in humanity, which started by using water and steam-powered mechanical manufacturing
facilities and systematically shifted human away from animals since the end of 18th century. Later, at the
start of 20th century, the application of electrically-powered mass production technologies, through the
separation of components and the assembly of products based on the division of labour, was marked as the
second industrial revolution. It took people to an age of affordable consumer products of mass production.
After that, to support further automation of manufacturing, the third industrial revolution began, around
mid-1970s, by popularizing electronics and information technology (IT) in factories. Digital systems,
modern communications, and the advent of the modern computers ushered in the third industrial
revolution, bringing to us products such as the smartphone and social media. In total, these three industrial
revolutions took roughly two centuries to develop (LI et al., 2017; Uzair, 2017; LIAO et al., 2018)

In the past few years, along with the increased research attention on the Internet of Things (IoT) (Atzori et
al., 2010) and Cyber-Physical Systems (CPS) (Khaitan & McCalley, 2015), industry, governments and
society in general have noticed the trend towards the “Fourth Industrial Revolution” and acted to benefit
from what it could provide (Siemieniuch et al., 2015).

Each revolution built on the progress made in the previous era and the fourth industrial revolution is no
different. We can expect existing and future technologies to become fully embedded in societies and
humans. It is characterized by the widespread application of cyber-physical systems in the manufacturing
environment (Liu and Xu, 2017). The fundamental background of the Fourth Industrial Revolution is the
deep integration of intelligence and networking system (Zhang, 2014). Advances in robotics and
automation, artificial intelligence, nanotechnology, and material sciences will fuel this era and
fundamentally change the functions of the modern economy (Uzair, 2017).

Table 1: Industrial Revolutions

Source: World Economic Forum (2016)

At the 2011 Hanover Fair, the German Government put forward the concept of Industrial 4.0, and later in
2013 released the Recommendations for Implementing the Strategic Initiative Industry 4.0. This action
posed great impacts to the whole world and pulled over the curtain of the Fourth Industrial Revolution.

The Fourth Industrial Revolution is not limited to industrial production. It is manifested in all aspects of the
society, including technology (Xu et al., 2013; Lalanda et al., 2017; Theorin et al., 2017), production
(Kube and Rinn, 2014; Webster, 2015), consumption and business (Sommer, 2015; Gentner, 2016; Ivanov
et al., 2016), and it is influencing every field of human life (Home et al., 2015; Singer, 2015; Qin and
Cheng, 2016; Sackey and Bester, 2016; Weiss et al., 2016).

The three fundamental technological drivers of the Fourth Industrial Revolution are the developments of
digital, physical, and biological technologies (LI et al., 2017). At its heart, the Fourth Industrial Revolution
is driven by enduring new breakthroughs in these three areas within their respective areas as well as a great
fusion with each other. These three technological drivers can be summarized in Table 2.

Table 2. Technological drivers for the Fourth Industrial Revolution

Technology drivers Fields
Digital The Internet of Things (IoT)
 Artificial intelligence and machine learning
Big data and cloud computing
Digital platform
Physical Autonomous Cars
3D printing
Biological Genetic Engineering
Neurotechnology
Source: LI et al. (2017)
While the major technological drivers for the Third Industrial Revolutions came from the hardware field,
technological drivers for the Fourth Industrial Revolution mainly originate from the software field.

3. Electricity in the Fourth Industrial Revolution

A reliable, economically competitive and environmentally sustainable electricity system is the cornerstone
of a modern society. The Fourth Industrial Revolution builds on the digital revolution and combines
multiple technologies that are leading to unprecedented paradigm shifts in the economy, business, society,
and for individuals. It involves the transformation of entire systems. The electricity landscape is a prime
example of the Fourth Industrial Revolution as it undergoes transformation, becoming more complex than
ever before, with rapidly evolving technologies, emerging innovative business models and shifting
regulatory landscapes (Cheryl et al, 2017).

The electricity system is in the midst of a transformation, as technology and innovation disrupt traditional
models from generation to beyond the meter. According to World Economic Forum (2017), three trends in
particular are converging to produce game-changing disruptions:
– Electrification of large sectors of the economy such as transport and heating
– Decentralization, spurred by the sharp decrease in costs of distributed energy resources (DERs)
like distributed storage, distributed generation, demand flexibility and energy efficiency
– Digitalization of both the grid, with smart metering, smart sensors, automation and other digital
network technologies, and beyond the meter, with the advent of the Internet of Things (IoT) and
a surge of power-consuming connected devices.

These three trends act in a virtuous cycle, enabling, amplifying and reinforcing developments beyond their
individual contributions (see Figure 1). Electrification is critical for long-term carbon reduction goals and
will represent an increasingly relevant share of renewable energy. Decentralization makes customers active
elements of the system and requires significant coordination. Digitalization supports both the other trends
by enabling more control, including automatic, real-time optimization of consumption and production and
interaction with customers.

Figure 1: Three trends of the grid edge transformation

3.1 Electrification
As generation shifts to more renewable sources, electrification creates further environmental benefits by
shifting many end uses of electricity (e.g. transportation and heating) away from fossil fuel sources, and in
many cases electrification increases energy efficiency.

In broadly cited estimates, in which EV adoption relies on individual customer purchases, EVs will
represent a growing and significant portion of new car sales globally: 25% by 2030 and 35% by 2040.
Sales at this level would mean that EVs could make up 5% to 10% of total vehicle stock by 2030, in line
with International Energy Agency (IEA) estimates to reach the United Nations Framework Convention on
Climate Change (UNFCCC) Paris Agreement targets of deploying 100 million electric cars by 2030.
3.2 Decentralization
Decentralization refers to several technologies with different implications for the grid:
– Distributed generation from renewable sources (primarily photovoltaic solar) reduces demand during
sunny hours of the day. Deployment of solar PV panels has increased dramatically in recent years
with global installed capacity reaching 260 GWp (gigawatt-peak) in 2015 and expected to surpass
700 GWp by 2020. This growth has brought down the installed price of residential solar PV from
about $7 per watt in 2009 to $3 per watt in 2015 in the US (and less than $3 in parts of Europe, such
as Germany).

– Distributed storage collects electrical energy locally for use during peak periods or as backup,
flattening demand peaks and valleys. Projections estimate that demand for energy storage, excluding
pumped hydro, will increase from 400 MWh globally in 2015 to nearly 50 GWh in 2025.

– Energy efficiency allows for reduced energy use while providing the same service, reducing overall
demand. In IEA countries, investments in efficiency since 1990 have helped to avoid electric
consumption equivalent to about 5 million homes each year. Energy consumption for lighting has
fallen more than 75% as compact fluorescents and LEDs replace incandescent lamps.

– Demand response enables control of energy use during peak demand and high pricing periods,
reducing peak demand. Demand response creates flexibility by providing price and volume signals
and sometimes financial incentives to adjust the level of demand and generation resources
(consumption, distributed generation and storage) at strategic times of the day.

3.3 Digitalization
Digital technologies increasingly allow devices across the grid to communicate and provide data useful for
customers and for grid management and operation. Smart meters, new smart/IoT sensors, network remote
control and automation systems, and digital platforms that focus on optimization and aggregation, allow for
real-time operation of the network and its connected resources and collect network data to improve
situational awareness and utility services.
Though market penetration of smart, IoT-enabled devices, including refrigerators, microwaves and
dishwashers, is currently low at 3% to 5% of major customer appliances, this share is forecasted to
dramatically grow, with the number of sensors in power consuming devices multiplying by six by 2020.

4. Nigeria’s Electricity Status

Nigeria is the biggest economy in Africa, with a GDP of USD569 billion (2014). However, its power sector
is performing below the level of its peer countries. Over half of the population (~55%) has no access to
grid-connected electricity and those who are connected to the grid suffer extensive power outages. To
improve the power sector, the Nigerian government has undertaken long-term structural reforms (which
started in 2005 but gained momentum in 2010) focused on privatizing legacy power assets and instituting
regulatory reform. However, these reforms have proved insufficient and more must be done to address the
challenges in the sector, which include sub-optimal utilisation of generation plants (partly due to
insufficient gas molecule availability), inadequate transmission infrastructure and high distribution losses
(with related liquidity and viability issues).

These challenges are evident in all four segments of the Nigerian power value chain:

 Generation. Today, Nigeria has 12,522MW of installed capacity, but due to maintenance, gas,
water and transmission constraints, an average of only 3,879MW of capacity is operational (January
to 15 August, 2015).
 Primary energy — gas. The majority (85%) of installed capacity is fuelled by gas. Availability of
gas molecules is low due to insufficient production, economic disincentives, inadequate
infrastructure and frequent vandalism.
 Transmission. Nigeria’s transmission system has the capacity to transmit ~5,300MW but is
disrupted by system collapses and frequent forced outages. Currently, transmission capacity is
higher than operational generation capacity, but transmission will rapidly become a constraint due
to increasing operational capacity.
 Distribution. Nigeria’s distribution companies suffer significant losses, with ~46% of energy lost
due through technical, commercial and collection issues.

At 126kWh per capita, Nigeria lags far behind other developing nations in terms of grid-based electricity
consumption. Based on the country’s GDP and global trends, electricityconsumption should be four to five
times higher than it is today.For example, Ghana’s per capita consumption (361kWh) is 2.9 times higher
than that ofNigeria, and South Africa’s (3,926kWh) is 31 times higher.

At 45%, Nigeria’s electrification rate is low – much lower than that of Ghana (72%) and South Africa
(85%). Furthermore, unreliable power supply forces both households and industry to rely on privately
owned generators for much of their power. These generators are more than twice as expensive (NGN 62 -
94/kWh) than grid-based power (end user tariff of NGN 26 - 38/kWh).
There are three stages in the delivery of power to customers: generation at the power plant (requiring a
source of primary energy, i.e., water or gas), transmission to the distribution companies and distribution to
the end user.

Only ~25% of Nigeria’s 12,522MW of installed capacity reaches the end user. Widespread inefficiency
means that only 3,879MW of this capacity is operational (average January to 15 August, 2015), with
~3,600MW transmitted and ~3,100MW distributed.

The concerns and challenges

 Electricity demand exceeds supply. Presently, Nigeria’s population is over 180 million according to
Worldometers. Also, it is the country that attracts more direct foreign investments than any other in
Africa. An estimate for developing countries to meet their electricity demand is about 1000MW per
million people. That means Nigeria would require about 180,000MW generation of electricity to
meet up with her current demands. This is a far margin from the present status of total installed
capacity the country possesses.
 Nigeria’s actual power generation is a third of its capacity. Though power generation has
improved, maximum peak generation hovers around 4,700MW which is a third of what the country
is capable of producing, and below TCN’s wheeling capacity of 6,700MW.
 Constraints in power distribution. Frequent rejection of load by DisCos exposes an underlying
challenge in the power distribution sector.
 Constraints in availability of gas. Currently, about 74% of power generation is dependent on gas as
the primary energy source. Limited funds to procure gas and gas pipelines vandalism are among the
main reasons for insufficient gas.
 Epileptic power supply continues. Many have turned to alternate source of power such as
generators. This situation is not helpful for the economy. Records from the Manufacturing
Association of Nigeria (MAN) show that Nigerian manufactures spent N66.99 billion on generators
and alternative energy resources to power their factories in the second half of 2016 due to poor
power supply from DisCos.
 As previously mentioned, the significant gap between demand and supply of electricity, has led to
recurrent power shortcuts. Thus, the heavy reliance on gas, limited technical/technological know-
how, lack of energy efficiency practices and infrastructure maintenance, inadequate regulations and
attacks on energy infrastructure contribute to the challenges the sector faces.

5. Implications for Nigeria

Like the revolutions that preceded it, the Fourth Industrial Revolution has the potential to raise global
income levels and improve the quality of life for populations around the world while at the same time pose
some positive and negative impacts on the electricity sector. To date, those who have gained the most from
it have been consumers who have been able to afford and access the digital world; technology has made
possible new products and services that increase the efficiency and pleasure of our personal lives.

As the saying goes that the end of the stine age did not bring the existence of stones to an end, sp also the
advent of the fourth industrial revolution will not bring to an end the existence of electricity in Nigeria.For
the Nigerian electricity sector, the implication of the fourth industrial revolution is that more electricity
generation and supply of electricity is pertinent for the success of this revolution. Owing to the fact that the
machines and appliances that will drive this revolution will all function by the help of electricity, there will
tend to be an increasing need for more electricity generation and/or improvement in other sources of energy
to power these machines.

In the future, technological innovation will also lead to a supply-side miracle, with long-term gains in
efficiency and productivity. Transportation and communication costs will drop, logistics and global supply
chains will become more effective, and the cost of trade will diminish, all of which will open new markets
and drive economic growth.

At the same time, as the economists Erik Brynjolfsson and Andrew McAfee have pointed out, the
revolution could yield greater inequality, particularly in its potential to disrupt labor markets. As
automation substitutes for labor across the entire economy, the net displacement of workers by machines
might exacerbate the gap between returns to capital and returns to labor. On the other hand, it is also
possible that the displacement of workers by technology will, in aggregate, result in a net increase in safe
and rewarding jobs.

This helps explain why so many workers are disillusioned and fearful that their own real incomes and those
of their children will continue to stagnate. It also helps explain why middle classes around the world are
increasingly experiencing a pervasive sense of dissatisfaction and unfairness. A winner-takes-all economy
that offers only limited access to the middle class is a recipe for democratic malaise and dereliction.
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