The Federal Government of Nigeria is derisking lending to the off-grid energy sector through pragmatic policies including slashing import duties, offering cheap credit to operators and galvaning commercial banks to consider lending the sector.
In a bid to fix Nigeria’s energy supply challenge, it has designed a 5 million homes solar installation plan under the Economic Sustainability Plan (ESP) which is driven by the Rural Electrification Agency (REA) along with private companies, drawing funding from a low-cost loan facility from the Central Bank of Nigeria.
Under the Solar Home System of the ESP, the Federal Government is connecting 5 million households to solar systems and servicing 25 million Nigerians who are not connected to the national grid.
The scheme offers an option of outright ownership by beneficiaries possibly at a rough estimate of N4, 000 per month for a period of 3 years.
Nigeria’s Federal Government said this will provide value addition to the economy in the area of job creation for at least 250, 000 persons and the ramping up of local content in solar equipment manufacturing systems installation and maintenance.
“Our Solar Home System was designed to be a game-changer in the renewable energy space, in other words, it is not just a programme to provide off-grid power alone, but one that creates opportunities for the development of the local capacities in the assembly, manufacture and even maintenance of equipment,” said Yemi Osinbajo, Nigeria’s vice president, at a recent virtual engagement with stakeholders.
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Osinbajo further said, “We have seen quite a bit of interest already from international and local players across the off-grid solar value chain, there is indeed a lot of interest that we are seeing.”
The Solar Connection Intervention Facility will complement the Federal government’s effort of providing affordable electricity to underserved rural communities through the provision of 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, said the REA.
“The banks that are keyed into this have already shown a great deal of interest and leadership in this particular area and we commend them for what they have done so far. We hope that we will be able to work closely with them as we go ahead. And same with all of the assemblers, manufacturers of off-grid systems,” Osinbajo said.
Commercial banks in Nigeria have very little appetite for lending to the off-grid energy operators and many cite a lack of a clear path to cashflow, difficulty in scaling operations and uncertaintity about profits as major impediments. Only a handful of Nigeria’s commercial banks have Renewable Energy Desks.
While calling on commercial banks to support the Federal Government’s drive to develop the local capacity for the entire solar energy sector, the Vice President commended Sterling Bank for its stand financing off-grid power projects in the country.
“I like to highlight Sterling Bank’s continued support for the Off-grid space in partnership with the CBN’s development finance group. We have seen a couple of these huge transactions and we are hoping that we will be able to see more of these kinds of transactions and we are hoping that all our friends and partners will be able to collaborate with us.
“This programme, of course, can’t work without the commercial banks, and I will like to thank the UBA, Sterling Bank, First Bank, and Fidelity Bank for being at the forefront of off-grid financing and I will like to encourage you to be our anchor banks to drive the transactions at an accelerated but structured manner.
“As you know, the CBN is committed to this, and we hope that this partnership will be one that we will be able to leverage to achieve great things in the coming months. Please leverage on the funding opportunities that have been offered and all of our internal people are willing to work to ensure that you succeed,” the vice President said.
Industry operators are also excited that this could change and are suggesting ways the programme can be retooled to benefit the sector.
Sustainable Energy for All in a report said that to successfully deliver on the objectives of the Solar Power Naija Programme and increase local participation in the upstream value chain, it proposed four actions that should be taken.
The report canvassed for renewed focus on sharpening key enablers in existing policies to strenghten ease of doing business and industry attractiveness.
These include waivers to solar system components, access to finance, subsidies and grants and monitoring reporting of local content.
The report recommended access to data (energy audits and geospatial data) to enhance deployment execution, improve operator portfolio performance and reduce development costs.
It also called for access to financing, subsidies and grants to scale the indsutry and to galvanise the private sector to make its counterpart invesemnts especially in PV and battery assemblyto reduce product costs and create jobs
