Business
INTERVENTION: CBN boosts renewable energy with N140bn solar facility
BY EMEKA EJERE
The disbursement of a N140 billion intervention facility by the Central Bank of Nigeria (CBN), which commenced last year is expect to domesticate renewable energy technology and leapfrog mini-grid solutions to reduce the gap in the country’s access to electricity.
The CBN had launched the N140 facility with the aim of providing five million solar home systems in under-served and off-grid communities across the country. In view of this, the apex bank makes funds available to renewable developers involved in the manufacture, assembling, installation, servicing of the solar systems, at rates ranging between 5 to 10 per cent.
While the Sustainable Development Goals aimed at universal access to electricity, access rate remained at 60 per cent in Nigeria. The situation is far worse in the rural areas where less than 41 per cent of the dwellers have access to electricity.
According to the apex bank, 85 million Nigerians do not have access to grid electricity. This represents 43 per cent of the country’s population and makes Nigeria the country with the largest energy access deficit in the world.
Reports say lack of reliable power is a significant constraint for citizens and businesses, resulting in annual economic losses estimated at $26.2 billion (₦10.1 trillion) which is equivalent to about two percent of GDP.
The 2020 World Bank Doing Business report, ranked Nigeria 171 out of 190 countries in getting electricity and electricity access is seen as one of the major constraints for the private sector.
“Getting loans in Naira denominated funds has been an issue because getting funds outside the country comes with foreign exchange problems,” said Sanusi Ohiare, Executive Director, Rural Electrification Fund, who had stated in Abuja that the government has been working and making remarkable progress through the N140 billion CBN fund, and that the government is encouraging local developers in the renewable energy industry.
“We have already disbursed to a few developers and we are hoping that going forward we can scale up the disbursement so that we can manufacture renewable energy components and provide electricity through mini-grids and solar,” he said.
To most stakeholders, the N140 billion facility provided by the CBN remained a leeway to the projected national energy plan given the high rate of rural to urban migration, challenges faced by farmers to ensure food security and ineffective healthcare services.
Experts in the industry argued that the intervention would domesticate technical capacity by increasing local content in the mini-grid solar value chain, thereby reducing the importation of renewable energy components.
According to an Energy expert at PwC, Habeeb Jaiyeola, a developing market such as Nigeria needs such intervention especially as foreign exchange factors have continued to impact the ability of private investors
He said: “Forex differential is something that continues to play against you when the narrative becomes unfavourable over time. So it is very good that the fund is coming locally. This development applies across the board and not in the power sector alone.”
For the Executive Director, International Network for Africa Development (ISNAD-Africa), Adedoyin Adeleke, developing rural communities by bridging energy access makes the N140 billion intervention a welcome development.
The Special Adviser to the former President Mohammadu Buhari on Infrastructure, Ahmad Rufai Zakari, had said the off-grid chain would no doubt see accelerated improvement as apart from the CBN facility, the NSIA had announced a N10 billion intervention under Solar Power Naija.
“NSIA just announced a N10 billion intervention under Solar Power Naija and we see Solar off-grid connections moving towards new peaks as financing is crowded in through Solar Power Naija and other REA programs with critical Development Finance Institutions, that is. World Bank and AfDB).
Similarly, the Executive Director, Rural Electrification Fund, Sanusi Ohiare, said the government has made remarkable progress through the N140 billion fund as local developers in renewable energy are now empowered.
“We have already disbursed to a few developers and we are hoping that going forward we can scale up the disbursement so that we can manufacture renewable energy components and provide electricity through mini-grids and solar,” he said.
With a population of 195.87 million and a Gross Domestic Product of about $397.27 billion, electricity remained one of Nigeria’s key problems. While energy access, which is very epileptic, stands at about 60 percent in the urban centres, access across rural communities remained dismal as about 80 million rural people, mainly farmers are without grid connection.
While about 250,000 jobs are expected from the scheme with an additional N7 billion increase in tax revenues per annum and $10 million in yearly import substitution, the government had targeted the reduction of greenhouse gas emission by 20 percent by 2030 through the plan.
With some stakeholders insisting that the move could domesticate technical capacity by increasing local content in the mini-grid solar value chain thereby reducing importation of renewable energy components, there are indications that the facility could reduce the challenges of dollar-denominated loans for companies who operate mainly in naira.
Experts say proper implementation of the fund could reduce the challenges of food insecurity by providing energy access to farmers and farmland, even as they warn over the structure of the loan facility being provided by the CBN as the power sector is faced with the challenge of bad loans.
They are also calling for the alignment of a series of power infrastructure, particularly in a manner that would reflect on the long energy outlook in the country and also factor existing architecture where the distribution, generation and transmission companies play key roles.
For many years, despite abundant energy resources, Nigeria’s electricity supply remained dismal, standing at about 4,500mw, even with privatisation of the sector. The current installed capacity relies mainly on fossil fuels, as over 80 per cent of grid connected electricity comes from gas, while the other energy options for transportation, heating and lightning are mainly fossil fuels and biomass.
However, a new Renewable Energy Roadmap (REmap) being planned by the Federal Government could see the country generate about 178,000 megawatts renewable energy at a cost of $1.22 trillion by 2050.
By implication, and in a Transforming Energy Scenario (TES), about 92 per cent of energy sources would become renewable at a cost of $35 billion yearly, even as the document projected solutions to climate change challenges in the country.
