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Stakeholders canvass sustainable financing for rural electrification

By Kingsley Jeremiah, Abuja
30 November 2022   |   3:17 am
As Nigeria battles with electricity supply with millions of rural dwellers totally unconnected to the grid despite the poor performance of the electricity grid system, stakeholders are demanding for sustainable financing that will increase electricity....

As Nigeria battles with electricity supply with millions of rural dwellers totally unconnected to the grid despite the poor performance of the electricity grid system, stakeholders are demanding for sustainable financing that will increase electricity access across unserved and underserved communities.

Despite being privatised about eight years ago, over 80 million people in Nigeria reportedly lack access to electricity and those with connections do not have a reliable supply.

Although the privatisation of the power sector left the responsibility of rural power supply in the hands of Rural Electrification Agency (REA), the funding gap remained a critical challenge as over N3 trillion is reportedly needed yearly to bridge the electricity access in the country.

This is coming at a time when the International Energy Agency says about $49 trillion should be invested in renewables and efficiency over the decade until 2030 as the agency predicted that renewables would provide 57 per cent of global power generation by 2030, up from 25 per cent in 2017 and an expected 30 per cent in 2020.

Some stakeholders, who noted that funding remained critical, especially that the government would power rural communities and enable them to contribute meaningfully to national development, insisted that getting policies and strategies would be a key enabler to the efforts being made through the REA.

Last week, the Federal Government said $550 million loan borrowed from World Bank and African Development Bank (AfDB) is currently being spent to electrify rural communities across Nigeria.

The fund targeting unserved and underserved communities comes under the Nigeria Electrification projects (NEP) and implemented by the Rural Electrification Agency (REA).

About 267 agreements totaling $395 million have already been signed for renewable electricity deployment, REA said in a media parley in Abuja, while adding that $350 million of the loan came from the World Bank and $200 million loan came from AfDB.

The agency, in a briefing noted that $64.8 million of the commitments have been disbursed to private sector partners for the execution of the projects.

The plan would provide off-grid reliable and clean electricity supply to 705,000 households, 90,000 micro, small and medium enterprises, 100 isolation and treatment centres and 400 primary healthcare centres in unserved and underserved areas of the country, Managing Director of REA, Ahmad Salihijo Ahmad said.

Ahmad said: “Now government money is used as an enabler to attract private investment. For instance, for the rural electrification fund, you have a capital subsidy where if a project cost N100 million, that subsidy will come in at may be 50-60 per cen and the private developer will come up with the rest of the money, deliver the service to the community and go into an agreement with the community for the rest of the money”.

“What we are used to doing is every year we wait and get government’s money from the budget, go to the site and then implement the projects. However, if you are to do this for the next 100 years, you will not be able to meet those targets hence it became important for the agency to ensure that its mandate does end at implementation”.

He explained that with the Rural Electrification Fund, which is a private sector driven initiative, REA became a hub and enabler to ensure that funding comes from different areas to enable it to deliver on its mandate.

Head of the Project Management Unit at the Nigeria Electrification Project, Anita Otubu explained that the Nigeria Electrification Project have five components including solar hybrid mini-grid ($213m), standalone solar home systems ($75m), energizing education programme ($250m), energy efficient equipment and productive use of appliances ($20m) and Technical assistance ($37m).

She said 67 mini-grids have been completed with 995,396 solar home systems deployed and 1,151 jobs created.

Founder/Executive Director, International Support Network for African Development (ISNAD-Africa), Adedoyin Adeleke, noted that while there were major investment gaps in the Nigerian renewable energy industry, it was crucial to acknowledge the recent growth in renewable energy investment in the country. He highlighted the efforts of development partners such as the German-EU Nigeria Energy Support Programme (NESP) being implemented by GIZ, and the leadership of Ahmad and his team at the Rural Electrification Agency that attracted World Bank’s support for renewable energy development in Nigeria.

Adeleke insisted that renewable energy investment in the country remained low relative to its potentials and the targets for renewable energy installed capacity as spelt out in the Nigerian Renewable energy and energy efficiency policy and the country’s renewable energy masterplan.

“An overarching challenge is the overall business environment. Security is a major element in the decision matrix of multinationals and Nigeria is not doing well on this and institutional bottlenecks, among other issues,” he stated.

According to him, the private sector participation in the Nigerian electricity sector is emerging and trying to get its feet, especially for large scale investment, adding: “despite being implemented by an Act of Parliament, there have been calls, within the government, for the reversal of the privatisation of the electricity sector. This does not give any potential investors, especially multinationals, reasons to invest in such a country and sectors.”

Urging stronger renewable energy policies and laws, convener of PowerUp Nigeria, Adetayo Adegbemle stated that while Nigeria had targeted an energy mix, which includes 35 per cent from renewable energy, inconsistent policies continue to deter private sectors in the sector.

Private capital would always go to where the risk is low or the profit corresponds to the risk, Prof. Adeola Adenikinju, an energy economist at the University of Ibadan stated, while giving reasons for major investors not showing interest in clean energy investment in Nigeria.

“If the risk level is elevated, risk-averse investors will not be attracted. There is a need to have very clear laws, regulations and policies that will provide the appropriate framework to attract, and incentivise private capital into the renewable energy sector,” the Professor stated.

Professor of Law and Deputy Vice-Chancellor, Afe Babalola University, Damilola Olawuyi, had told The Guardian that high renewable energy potential, availability of clear policy, legal and institutional frameworks on renewable energy investments; and overall investment climate in the country in terms of security, infrastructure and fund repatriation are key determinants of the flow of private sector investment into renewable energy.

Though Nigeria has significant renewable energy resources and potential, ranging from solar to hydro and biofuels, Olawuyi insisted that the country’s lack of clear policy, legal and institutional frameworks on renewable energy investments remain a key impediment.