Nigerian FG turns to banks for $23bn lifeline to solve power crisis
In a bid to end age-long power woes, the Federal Government is in talks with commercial banks and other investors to fund its ambitious universal electricity access, which requires a whopping $23.2bn investment.
The PUNCH learnt that Nigeria will require $23.2bn of aggregate investment to achieve the planned universal electricity access in five to 10 years, reaching 120 million people across 22 million households.
It was gathered that $14.1bn of the cost is an upfront investment to which multiple stakeholders must contribute. The $14.1bn initial investment is 60 per cent of the total $23.2bn investment required to provide universal electrification to Nigerians.
As the country still struggles with a paltry 5,500 megawatts of electricity, the universal electrification plan aims to supply 11,499 gigawatt-hours of electricity per annum to the 22 million unelectrified residential households.Grid connection is expected to gulp $5.5bn; solar home systems would require $11.1bn; and mini-grid connections would take $6.6bn.
The Managing Director/Chief Executive Officer of the Rural Electrification Agency, Abba Aliyu, disclosed that some banks have already committed funds to the sector, while the agency is still in talks with others.
REA is an agency of the Federal Government, In an exclusive interview with our correspondent, Aliyu highlighted the commitment of President Bola Tinubu and the Minister of Power, Adebayo Adelabu, to ensuring Nigeria achieves universal electricity.
He revealed that the REA and other agencies have carried out a survey in each state to determine how best to electrify Nigeria, saying mini-grids and solar home systems will be mostly deployed as grid extension is not viable in most states.
Aliyu said that though the $23.2bn required to provide electricity across the country is huge, banks and other private investors will provide funding as they are assured of returns on investments through tariffs.
According to him, First City Monument Bank has committed $100m, while Stanbic IBTC with Standard Bank also committed $100m. He said talks are ongoing with Access Bank, Zenith Bank, and others.
The REA boss maintained that funds from the local banks would augment those from the government, the World Bank, the African Development Bank, and other development partners. “The wisdom of the current government is to drive private sector funding into the sector.
The Minister of Power secured the Distributed Access through Renewable Energy Scale-up (DARES) $750m, and we have access to that funding. That funding will catalyse a private sector funding of $1.1bn.
As we bring the public funding, it will catalyse private sector funding to combine to do more,” he said. Aliyu disclosed that the REA is targeting 17.5 million Nigerians under the DARES programme. “We have $750m and the private sector will bring $1.1bn. That is $1,850,000,000,” he said.
He recalled that the power minister is also working towards securing additional co-financing from the Japan International Cooperation Agency, having secured the approval from the Japanese government to put in $190m as co-financing to electrify an additional 1.83 million Nigerians.
This will also catalyse close to an additional $300m financing to be added to the private sector funding.
So, we, the Federal Government, are creating public funding that will catalyse private sector funding.
When the President was in Tanzania, there was the signing of $20m financing to four Nigerian local developers by the International Finance Corporation.
“They commit to financing these developers with a $20m debt financing. That’s another financing. Also, there is conversation around $700m of Desert-to-Power financing that will come from the African Development Bank.
That $700m will also catalyse another $1bn of private sector financing.
All this is the strategy being implemented to make sure there is financing to achieve this universal electricity access.
“We have also seen banks committing funding. First City Monument Bank has committed a $100m pool of debt financing to the developers. Stanbic IBTC with Standard Bank also committed $100m. So all these finances are there.
“In the last few days, I was with the Access Bank management with their sustainable finance group.
They are putting in place their funding for the sector. The same thing with Zenith Bank. Also, there are Nigerian local banks that have seen it and are committing funding to it.
I don’t have any fear with financing; we will be able to achieve the level of financing that is required,” he stated.
Asked to state what the banks would get in return, he replied that the investors would recoup their funds from the tariffs paid by electricity consumers using the mini-grids.
“This mini-grid investment is seen as infrastructure financing. You put in your finances and recoup the finances with your predetermined internal rate of return over a period of time from the tariffs because a tariff is a function of paying back the capital cost, paying for O&M (Operations & Maintenance), and paying for capital appreciation or capital gain.
These are the three components that make a tariff. And that is why we built the entire methodology in project financing.
“So, the banks or the financier or even anybody can put in some billions of naira to finance a developer to build a mini-grid and you recoup your investment from the monthly tariff that comes in and goes back to the developer,” he stated.
In terms of collection and commercial losses, he argued that rural dwellers do better than those in the cities, as there are fewer commercial losses. “They pay well.
We have a 95 per cent collection rate. And it’s also because we do 100 per cent metering and we do a SCADA system. So, we can know if there are any losses. And they have stable electricity. When it is stable, the people pay. The people will even ask for it. “Last two months, I commissioned a one-megawatt interconnected mini-grid project on the border of Ogun and Lagos States, Ibaragun.
Neighbouring communities were begging that they wanted to be off the Disco.
They said, ‘Come put this solar hybrid interconnected mini-grid. Let’s have reliable and sustainable electricity,” he stated.
