The renewable energy industry in Nigeria continues to gain momentum, with more than a handful of private sector players within the industry providing power to commercial and industrial clients across the country.
Despite having different business models, the largest 5 private-sector entities providing solar photovoltaic power to commercial and industrial clients have generated a combined total of over 240 Megawatts of power (between 2017-2022), with several pipeline projects backed by investment funds.
With the recent merger and acquisition of Starsight Energy and Daystar Power Solutions (both providers of solar photovoltaic power to commercial and industrial clients), this sector continues to experience an increase in foreign investment.
It is of interest that the Nigerian Federal Minister for Power – Engineer Abubakar D. Aliyu, at the recently concluded Nigeria Energy Conference, highlighted four renewable energy policies, geared towards increasing the renewable energy contribution to the overall power supply within Nigeria.
The aim of the policies is to recognise the contributions of private organisations within the renewable energy sector and support foreign investments in the sector.
This in turn increases the overall contribution of renewable energy towards power generation in Nigeria, and the eventual attainment of vision 30-30-30: which is 30 gigawatts of generated energy by the year 2030, and 30% of the
generated power from the renewable energy sector.
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In the future, we hope to see how financial policies support energy policies toward sustainable operations. While investor interest has been established, there are major concerns over the repatriation of investment dividends out of Nigeria considering the prolonged scarcity of foreign exchange and the uncertainty of when this will be stabilised.
Over the last 2 years, the market has experienced continued uncertainty over the availability of foreign exchange to businesses, in addition to the existing knowledge gaps in the available processes for legally documenting investment funds. Investor concern is increasingly centred around the impact of the unavailability of foreign exchange on the repatriation of investment funds.
This has a knock-on effect on the organisations and their commercial clients. For the organisations, continued inability or delay in remitting returns may impact their ability to secure future investments. And for the clients, a follow on impact is the cost of power from higher financing costs.
Access to official rates for repatriating investment funds through certificates of capital importation (CCI) has been limited. Over the last 2 years, commercial banks have had to make partial remittances due to the scarcity of foreign exchange. Presently, the total value of remittances/repatriations in 2022, is less than 30% of the value between 2019 – 2021.
In addition to the above, there are further peculiarities, unique to financing in the Nigerian renewable energy sector which have not been addressed by current financial policies and practices. All of which, when addressed, will create an enabling environment for the flow of investment into the sector.
Without addressing the current difficulties with documenting and returning investment funds, may be a hindrance to achieving renewable energy targets as laid out by the Honourable Minister. In recognising the new renewable energy policies and acknowledging the synergies necessary to attain vision 30-30-30.
