Nigeria turns to banks for $20.5 billion to expand renewable electricity

Deposit Money Banks (DMBs) in Nigeria are showing renewed interest in financing renewable energy, as the Federal Government struggles to raise $20.5 billion to fund electricity.

While most DMBs, which lent to investors to acquire distribution companies (DisCos) and generation companies, are trapped due to a liquidity crisis in the power sector, some commercial banks are transitioning to renewable energy financing.

This comes as the Rural Electrification Agency (REA) signed a N50 billion financing facility with Alpha Morgan Bank to expand renewable energy projects in underserved communities.

Of the $23 billion needed to bridge the current electricity gap, the Federal Government said only $2.5 billion has been realised, leaving an 89 per cent shortfall.

The new N50 billion deal is the latest in a series of partnerships aimed at leveraging commercial bank financing to complement government and donor-funded electrification programmes.

Previous commitments include Stanbic IBTC’s $100 million facility, Lotus Bank’s N100 billion commitment, and FCMB’s financing of about $188 million for renewable energy projects.

Under the arrangement, Alpha Morgan Bank will provide up to N50 billion in revolving project financing to eligible renewable energy developers participating in REA-led programmes, particularly the Distributed Access through Renewable Energy Scale-up (DARES) project.

Developers will be able to access loans of up to N10 billion each with repayment tenures ranging from 12 to 24 months, subject to the bank’s credit approval. The bank will also provide up to 70 per cent counterpart funding for qualifying projects.

Speaking at the signing ceremony in Abuja over the weekend, REA Managing Director and Chief Executive Officer, Abba Abubakar Aliyu, said Nigeria faced an enormous financing gap in expanding electricity access despite growing global investment in renewable energy.

He disclosed that Nigeria required about $23 billion to improve electricity reliability and expand access nationwide, but currently had less than $2.5 billion available, leaving a funding gap of approximately $20.5 billion.

Aliyu said the government was therefore seeking to crowd in private capital through commercial banks while awaiting an additional $1.19 billion financing package from the Japan International Cooperation Agency (JICA) to support interconnected and isolated mini-grid projects.

“This partnership provides a practical financing mechanism that can help developers move from project approval to implementation more quickly,” he said.

The REA boss said electricity demand would continue to rise as population growth, digitalisation, artificial intelligence and data centres drove consumption across the economy.

Speaking on behalf of Alpha Morgan Bank, Executive Director, Doyin Anyaehie, said the partnership reflects the bank’s commitment to addressing one of Nigeria’s most pressing development challenges.

She said reliable electricity remains fundamental to economic growth, particularly for small businesses and rural communities that cannot sustain expensive alternative power sources.