Accelerating Access to Off-grid Financing in Nigeria

The electricity access deficit in Nigeria is a huge contributor to the poor development witnessed across the various sectors of the country’s economy. This deficit is majorly caused by the cost of connecting communities with low energy demand to the grid and the already existing poor grid infrastructure. This situation presents renewables as the most sustainable and affordable means of closing the deficit gap. However, with the development of off-grid projects in the country majorly challenged by funding, what assurances are there for accelerating access to off-grid financing in Nigeria?

Over the years, the federal government has implemented numerous initiatives to boost the adoption of off-grid energy sources in the country. The Rural Electrification Agency (REA) is the federal government’s implementing agency to ensure the electrification of the country’s unserved communities.

The REA’s dedication to encouraging the development of off-grid projects has led to the deployment of mini-grids and solar home systems under the agency’s programmes. These programmes which provide grant funding to off-grid solutions providers include the Nigeria Electrification Project (NEP), the Rural Electrification Fund (REF) and the Energising Economies Initiative (EEI).

For example, the NEP aims to increase private sector investment in off-grid deployments in the country. The programme is funded by the World Bank ($350 million) and the African Development Bank (AfDB) ($200 million). So far, the NEP has successfully connected 3.8 million Nigerians.

However, the onset of the Corona Virus (COVID-19) pandemic urgently highlighted the need for increased off-grid deployment. This translated into a demand for more efforts to accelerate access to off-grid financing in the country. This need was critical to bridge the energy access deficit and support the ailing healthcare industry. Therefore, as part of its COVID-19 recovery strategy, the federal government introduced the Nigerian Economic Sustainability Plan (NESP). The plan worth $5.9 billion (₦2.3 trillion) was approved in June 2020.

Among the key projects of the NESP is the Solar Power Naija (SPN) initiative. The $619 million commitment aims to install solar home systems for 5 million households in unserved communities across the country. Earlier this year, the Nigeria Sovereign Investment Authority (NSIA) provided $24 million in funding for the SPN programme.

Despite these interventions, the off-grid sub-sector in Nigeria still faces numerous challenges, including access to finance. According to a Power Africa Nigeria Power Sector Program (PA-NPSP) report, unlocking financing for off-grid projects remains challenging. To address this, local financing from commercial banks would be advantageous in scaling off-grid project development. This would protect developers from foreign exchange risks. The Central Bank of Nigeria (CBN) can introduce de-risking measures such as the credit facility provision under the SPN to encourage commercial banks.

The already existing initiatives in the Nigerian power sector have come a long way in boosting off-grid solutions deployment in the country. However, a lot more policies and incentives directed at accelerating access to off-grid financing in Nigeria would improve electricity access for citizens and boost the economy.