Funding gap threatens Nigeria’s $2bn renewable energy investments

Nigeria’s renewable energy sector, currently on the cusp of growth will get a boost next year, if funding and capacity gaps are addressed, helping it unlock about $2billion worth of investments.

Stakeholders in the sector are calling for a deliberate policy to increase awareness and deepen reforms in mini grid regulations already started in the sector in 2016.

Godwin Aigbokhan, renewable energy market adviser, National Competitiveness Council of Nigeria, says two critical issues that ought to be addressed are funding and capacity development to deepen private sector participation in the sector, as current growth is fuelled by favourable government policy.

“Investors need financing, so there is need for the banks to understand the sector. As they have an energy desk, it is time for banks to have sub-desks for renewable energy, so that they can be able to come up with products that can really grow the sector and make fine returns.

Aigbokhan advocates, “The government should think about a new stimulus package for the sector, where the developers can access funds. Financing is one part, policy is another and the sector desperately needs capacity building.”

In July, Nigerian Bulk Electricity Trader (NBET) signed a Front-Runner Solar Power Purchase Agreements (PPAs) worth US$1.75 billion with 14 companies to build 1.125 Megawatts (MW) capacity of renewable power in the country.

Since the agreement, others have been signed, including a Joint Development Agreement (JDA) Scartec Solar signed with Africa50, an African Infrastructure Fund, sponsored by the African Development Bank and more than 20 African states and Norfund (the Norwegian Investment Fund for Development Countries) on December 19, securing investment into the 100 MW Nova Scotia Power plant located in Jigawa state.

As part of deliberate policy to grow the sector, in October 2016, Nigeria’s Electricity Regulation Commission (NERC) released the Draft Mini Grid Regulations 2016, a new regulation that gives distribution companies licences to use mini-grids to accelerate electrification across the country.

And when the Federal Government’s rural electrification projects using 44 tertiary institutions and small hydro dams, billed to cost US$150 million comes on stream next year, industry operators believe an exponential growth will be witnessed.

Meanwhile, beginning next year,  the Nigerian government intends to commence physical  inspection of vehicles under an emission control programme and collaborate with the Nigerian National Petroleum Corporation (NNPC) to reduce the sulphur level in imported diesel and fuel into the country.

These are part of the measures authorities are exploring to drastically cut down carbon emissions in the country for a healthier environment, in line with global efforts on Climate Change, Minister of Environment, Amina Mohammed told BusinessDay.

Mohammed said the two programmes are due to take off next year, and that while the vehicle emission control programme takes-off first quarter of 2017, the sulphur reduction in fuels and diesel will commence in July of same year.

“When it comes to the emissions project that we are looking at in the vehicles, that will be rolled out in the first quarter in FCT and we are also going to take on the generators as well. We don’t have a baseline for them and we need to establish that.

“As I went into the issue of reduction of emission in generator and vehicles, I suddenly found out that no matter what I do in reducing the emissions there, unless I deal with the sulphur in the fuel, then it is almost nonsense.

“So we have gone to the Hague, we have sat in ECOWAS and we have committed ourselves to do 50 PPM instead of the 3,000 PPM sulphur that

we have in diesel and fuel. I think that is a big move, that is not dragging our feet at all. That will come into operation in July. So what that does is give you cleaner fuel and then we still look at the emissions with vehicles and generators,” Mohammed said.

Vehicles and generating sets in Nigeria are reported as major sources of green house gas emissions. Also four major cities in Nigeria made it to the list of the world’s most polluted cities.

Nigeria alongside other countries have signed the Paris Agreement, a first International agreement after lengthy discussions on how to combat climate change and adapt to its effects.

ISAAC ANYAOGU & ELIZABETH ARCHIBONG