Operators excited as Nigeria’s off-grid market attracts new $300m funding

With over $300 million in new funding coming into Nigeria’s off-grid sector in the coming months, the energy gap in Africa’s biggest economy is creating opportunities for massive investments, having proven to become the sector with the most capacity to attract new investment.

Wiebe Boer, CEO of All On, an impact investment firm seeded by Shell, said the massive challenge of energy gap in Nigeria also means there is a massive commercial opportunity. And investors seem to be falling over themselves to take position.

“There is capital ready to be deployed to finance the takeoff of the sector. Just in the last month, three off-grid energy companies in Nigeria have raised around $10 million each – this would have been unheard of two years ago,” Boer said in a keynote address at the fourth edition of the Nigerian Energy Forum.

“There is over $200 million in grant capital coming through the REA’s Nigeria Electrification Programme. There is another $80 million in debt capital coming through the EU/AFD’s SUNREF programme through Access and UBA. The EU is announcing another funding window tomorrow (Thursday) through Electrifi. There is the AfDB’s Off Grid Energy Fund. DeutscheBank is coming with a debt fund. Sterling Bank is the first Nigerian commercial bank to lend to the space in a serious way,” Wiebe said.

“Persistent Energy Capital now has an office in Nigeria. Acumen has moved from Accra to Lagos and is actively seeking off-grid energy investment opportunities. Leading local PE firm Verod just made a big investment in Daystar. Helios has invested significant capital in Starsight. NorFund and Breakthrough Energy Ventures have both just made their first investments in the Nigerian off-grid energy space. It is big and is only going to get bigger,” he added.

Quentin Antoine, senior investment officer at ElectriFI, told BusinessDay on the sidelines of the conference that the company would announce a new $30 million fund for operators in the solar home system, mini-grids and industrial/commercial off-grid space in Nigeria.

ElectriFI, a specialist debt and equity financing partner for small scale private companies focusing on generation capacity from sustainable energy sources, has opened an office in Nigeria. The company has a €215 million impact investment facility for renewable energy companies active on- and off-grid in emerging markets.

In a sign that the dollar rain is not letting up, Ketil Karlsen, head of the European Union Delegation to Nigeria and ECOWAS, said the EU is committing $165 million to Nigeria’s off-grid sector while pledging the EU will not interfere with regulation and operation of the market in Nigeria.

According to Wiebe, Nigeria’s energy gap is a massive social problem with ripple effect in virtually all parts of the economy.

“And there is no better way to solve a massive social problem than one that makes money along the way,” he added.

Nigeria’s energy demand is expected to double over the next 10 years and consumers are willing and able to pay for alternate sources of power. This presents massive opportunities but the sector is constrained by poor government policy including an obnoxious solar panel tariff enforced last year by the Nigerian customs.

Policy implementation has also proved untidy with government ministries failing to converge around a plan. While the Ministry of Trade and Investment is granting the sector pioneer status, Customs is enforcing new tariffs.

This limits the ability of the sector to thrive even with massive potential. A recent research from the Rural Electrification Agency and think tank based abroad suggests that mini-grids alone are a $10 billion opportunity in Nigeria.

“Taken together, I doubt there are many commercial opportunities left in the world anywhere, in any sector, at this scale,” Wiebe said.

Operators say all the government needs to do is consolidate on these gains.
“The government has done their part – putting in place the right regulations, securing significant capital from the World Bank, the African Development Bank and others, and supporting private sector actors in important ways. Every major development partner in Nigeria is contributing as well in an increasingly coordinated and collaborative manner,” Wiebe said.

Apart from foreign funding, local investors are participating. Sterling Bank is funding new projects. Shell has made substantial capital available through All On, and the Bank of Industry has also provided significant funding.

ISAAC ANYAOGU