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Scaling clean energy deployment via financing initiatives

By Femi Adekoya
21 September 2022   |   3:05 am
Mobilising investment and finance to support clean energy transitions and deployment in emerging and developing economies remains challenging, especially the onboarding costs.

Mr Ladi Balogun, GCE FCMB Group

Mobilising investment and finance to support clean energy transitions and deployment in emerging and developing economies remain challenging, especially the onboarding costs. Having deployed the same solutions for their operations, financial institutions are leveraging their experiences to support households and businesses. FEMI ADEKOYA writes.

With energy costs taking a toll on the operating expenses of many commercial banks, the deployment of clean energy has become a necessity, pushing many operators to embark on solar-related projects and lean operations.

A new solar report commissioned by the Netherlands Enterprise Agency, a department of the Dutch Ministry of Economic Affairs and Climate Policy, identified 10 Nigerian commercial banks using solar-related projects banks to reduce their dependency on diesel generators.

According to the report by NL Enterprise Agency, “there is also an increasing adoption of solar as an energy source and the country’s climate is suitable for its application.”

“While the cost of solar energy has deterred many households, there are more and more financing and grant schemes that help spread solar across the country.” NL Enterprise Agency said.

For instance, the FCMB Group has over 100 branches running on solar power. In early 2021, the bank won an award for making effective use of solar energy.

Indeed, decarbonisation and scaling clean energy are top on the agenda of Nigeria’s FCMB Group in an environment overwhelmingly reliant on fossil fuel. Although the Group has much ground to cover, it has cut its carbon footprint considerably and scaled its financial commitment to businesses committed to clean energy.

Already, First City Monument Bank, a subsidiary of the FCMB Group, has moved 150 (73%) of its pan-Nigeria branch network from grid/diesel generators to solar power. As a result, it is ahead of industry peers in the race toward a low-carbon future where clean energy takes centre stage. The same applies to its strides in financing renewable energy resources to support global decarbonisation efforts.

The lender is backing clean off-grid energy solutions to bridge the supply gap in Africa’s most populous nation as the demand for household and commercial energy rises exponentially. This is a radical departure from the country’s predominant energy source – fossil fuels.

Energy guarantees basic comfort and quality of life. It is an essential element of contemporary life that fuels productive activities such as commerce, manufacturing, agriculture, education, healthcare and more. For example, life without electricity, one of the many forms of energy, is tortuous and described as living in the dark.

FCMB Group Chief Executive and contributing expert at the University of Oxford (Leading Sustainable Corporations Programme), Ladi Balogun, said access to energy drives economic growth and development. He urged more commitment to clean energy finance to improve the quality of life and accelerate growth and development in developing and underdeveloped economies.

Indeed, Nigeria, a developing economy with the lowest access to electricity globally, according to the Energy Progress Report 2022 by Tracking SDG 7, will benefit significantly from targeted off-grid interventions. It would ensure access to electricity for about 92 million persons out of the country’s 200 million population lacking access to power.

To bridge this gap, First City Monument Bank partnered with development finance institutions to provide targeted financing to improve Nigeria’s energy access through mini-grids and energy-efficient projects. The partner institutions include African Development Bank, Proparco and International Finance Corporation. In addition, there were project collaborations with the Nigerian Electrification Programme (NEP) and Nigeria Energy Support Programme (NESP) under the Rural Electrification Agency, Solar Naija Programme and the Central Bank of Nigeria.

Managing Director of the Bank, Yemisi Edun, described FCMB’s bold intervention in the renewable energy sector as the solution to the energy shortfall challenge facing individuals and businesses in Nigeria. She believes it will unlock the sector’s potential and pave the way for more private sector investments in renewable energy projects.

Already, the FCMB Group subsidiary has executed credit enhancement agreements worth over N21 billion to improve energy supply, enhance cost efficiency and access to clean energy. Its financing proposition allows value chain players in the renewable energy sector to access loans of up to 70% of their project cost without collateral under the World Bank/Rural Electrification Agency (REA) of Nigeria scheme.

Between June and July this year, the lender provided credit lines worth about N1.7 billion to firms operating in the renewable energy sector. Out of the funds, over N265m went into mini-grid projects, with a total PV capacity of 392KWp, in Rivers, Niger, Ebonyi state and the Ondo States.

It also financed three hybrid energy efficiency projects in Lagos and Abuja with about N330m. These projects increased access to sustainable energy sources for about 3,000 households and Small and Medium Scale Enterprises (SMEs) across the country. They now enjoy a constant electricity supply from clean and environmentally friendly solar, hydro and biomass sources.

A purpose beyond profit corporation, FCMB Group is building and driving an ecosystem that fosters inclusive and sustainable growth across Nigerian communities.

Enabling universal access to electricity by 2030 requires an investment of $35 billion per year, with half of that for decentralised solutions including $13.5 billion in sub-Saharan Africa. While debt fundraising has improved as some markets have become more attractive to lenders, public concessional funds continue to underpin investment, especially in countries with high risks or weak underlying economics.