Though Senegal enjoys political and economic stability relative to its neighbors in Western Africa, the high cost and unreliability of electricity production impose a major barrier to the country’s continued growth. Private firms must contend with high fixed costs, unpredictable manufacturing schedules, and a limited ability to pursue economies of scale. Individual consumers face higher prices for domestic goods as well as costly and unreliable electricity for household use. 1.1 million households, mostly in rural areas, lack access to electricity entirely
- Unsophisticated Financial Planning: Senegal’s energy sector is dominated by a single state-owned electricity utility that lacks the appropriate financial instruments to manage operational cash flows, streamline maintenance planning, ensure profitability, implement a sound capital investment strategy, and measure the effects of these investments over time.
- Dependence on Energy Imports: Senegal’s heavy reliance on liquid fuel imports raises electricity costs and introduces unsustainable exposure to volatility in global energy prices. This exposure can in turn generate political instability, as during the energy crisis the country faced from 2010 to 2011. Ample domestic solar and natural gas resources remain untapped as a result of historic under-investment in crucial infrastructure.
Senegal can expand access to affordable electricity in the following ways:
Management of Sector Finances: Through careful sector analysis and organizational restructuring, the Senegalese government can improve its ability to address pressing maintenance needs and make impactful investments in infrastructure. Clarifying intra-government cash flows and streamlining the internal decision-making process for financial planning will aid this process significantly.
Rural Electrification: Senegal should implement a centralized, country-wide investment program to develop generation and transmission infrastructure in rural areas. The Senegalese government should work towards improving cooperation among the diverse and geographically diffuse stakeholders whose participation will be necessary to carry out this effort.
Hedging: Until the exploitation of domestic energy resources becomes viable, Senegal’s government can gather necessary data to implement a hedging strategy to reduce its economy’s exposure to global shocks in petroleum prices.