The Federal Government of Nigeria, as part of its Economic Sustainability Plan (ESP), aims to achieve the rollout of 5 million new solar-based connections in communities that are not grid-connected, thereby creating a N7.5 trillion annual market opportunity as current penetration is less than 5 percent of total market potential.
Under the Solar Connection Scheme, the President Muhammadu Buhari-led government seeks to rapidly scale pay-as-you-go (PAYG) off-grid technologies and this is expected to generate an additional N7 billion increase in tax revenues per annum and $10 million in annual import substitution.
The objectives are to connect 25 million individuals to electricity through solar home systems (SHS) or connection to a mini-grid; increasing local content in the off-grid solar value chain and facilitating the growth of the local manufacturing industry; and incentivising the creation of 250,000 new jobs in the energy sector.
To complement the project, the Central Bank of Nigeria says it will provide long-term, low-interest credit facilities to the Nigeria Electrification Project (NEP) pre-qualified home solar value chain players that include manufacturers and assemblers of solar components and off-grid energy retailers in the country.
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Vice President Yemi Osinbajo, while speaking at the First Year Ministerial Performance Review Retreat organised for senior government officials last week, had said the Federal Government had begun the implementation of the N2.3 trillion stimulus package to address the economic distortions and hardship caused by the COVID-19 pandemic. Of this sum, N152.4bn was allocated for solar projects to power 5m homes.
According to the CBN guidelines seen by BusinessDay, two categories of participants are eligible: upstream participants (which include manufacturers, assemblers of solar components and those engaged in research and development) and downstream participants including distributors, project developers and those involved in engineering, procurement and construction of mini-grids.
The terms of the loan are flexible allowing for single-digit interest rate, up to 10 years tenor depending on the category, but beneficiaries will provide a collateral for the Participating Financial Institutions (PFIs).
The participants are obligated to use the facility for the purpose for which it was granted, adhere strictly to the terms and conditions of the facility and transaction, insure the project and make their records available for inspection by the CBN.
Some of the renewable energy operators who spoke to BusinessDay say they are excited about the plan.
“On paper, it sounds very good because they are making it compulsory that every project under the scheme will be produced in the country, and a lot of companies are talking to us to provide them solar modules so they can qualify. I can tell you the industry is excited,” said Chuks Umezulora, co-founder of Auxano Solar.
Umezulora, however, said that the CBN ought to provide clarity on the security and who the participating financial institutions will be.
“It is not clear what security will be. The directors will sign a guarantee but that covers people deploying mini-grid directly. For people like us who manufacture solar panel, it is not clear what the security will be. If we revert to PFIs, they will demand a bank guarantee or other forms of collateral which may be out of reach for operators,” he said.
Wiebe Boer, CEO, All On, an off-grid energy impact investor, said, “As an investor in the Nigerian solar space, we are pleased to see the CBN providing the framework for the affordable financing required to enable the private sector to deliver on the Federal Government’s plan for 5 million solar connections.
“The importance placed on the local content element cannot be overstated, and has the potential to provide the scale needed to localise the solar supply chain, create thousands of jobs, and light up millions of households.”
