World Bank finances Nigeria’s renewable energy sector with $750m
…17.5m Nigerians to get solar, power grids
…As electricity subsidy gulps N204.5bn Q’3 2023
In line with its commitment to provide improved access to electricity through distributed renewable energy solutions, the World Bank has approved a $750 million facility for the Nigeria Distributed Access through Renewable Energy Scale-up (DARES) project.
The DARES project aims to provide over 17.5 million Nigerians deploying innovative financing solutions to scale up private sector-led clean electricity provision in Nigeria.
The program aims to support Nigeria in closing its electricity access gap and accelerate its transition towards sustainable, efficient, and economically viable electricity supply, demonstrating what can be achieved through effective collaboration and partnerships between the Government, private sector, and development partners.
The facility is to be financed via the International Development Association (IDA) funding. The International Development Association (IDA) is the World Bank’s fund for the poorest. IDA loans with maturities ranging from 25 to 40 years, grace periods of 5 to 10 years, and interest rates of between 1.5% -2.8%, depending on whether the borrower is a blend country and to which degree it is eligible. A regular IDA eligible borrower may take advantage of no-interest loans
In a statement yesterday, the Bank said it would leverage over $1 billion of private capital and significant parallel financing from development partners, including $100 million from the Global Energy Alliance for People and Planet and $200 million from Japan International Cooperation Agency.
Other development partners collaborating on the programme include the United States Agency for International Development (USAID), the German Development Agency (GIZ), SEforAll, and the African Development Bank (AfDB).
As of 2021, over 85 million Nigerians lacked access to electricity; businesses and households with access to the national grid have faced unreliable and insufficient supply, a gap often filled with power from petrol and diesel-run generator sets that are costly and highly polluting to people and the environment.
The bank explained, “To further address the access gap, DARES will build on the achievements of the World Bank-financed Nigeria Electrification Project (NEP), which has supported the establishment of 125 mini grids and the sale of over a million Solar Home Systems, through which more than 5.5 million Nigerians have gained access to electricity.
“NEP has also resulted in the creation of over 5,000 private-sector local green jobs in Nigeria.
“The DARES program will enable the Federal Government of Nigeria to coordinate and finance all off-grid electrification efforts and will help states access technical assistance to develop institutional capacity and policy frameworks for rooftop solar.
“The program will prioritise gender and inclusion by building on the NEP’s gender-related actions to facilitate access to electricity for disadvantaged female-headed households and women-led MSMEs, as well as, actions to increase the employment of women in the energy sector.”
Commenting, Shubham Chaudhuri, World Bank Country Director for Nigeria, said that his team was committed to providing many more Nigerians access to electricity.
“We are committed to expanding clean energy-based access in Nigeria, with the USD $750 million Nigeria DARES project being the largest ever single distributed energy project of the World Bank globally.
“It will benefit over 17.5 million unserved, underserved, rural, and remote Nigerians through the deployment of standalone solar and mini grids and replace more than 280,000 polluting and expensive petrol and diesel generator sets, an important step for Nigeria towards achieving its energy transition targets.”
“Through the DARES project, Nigeria will be able to provide up to 237,000 MSMEs with reliable and clean electricity for productive uses that will help improve their potential to generate income and create local jobs.”
Speaking also, the Minister of Power, Chief Adebayo Adebalu, said, “I am excited to contribute to this revolutionary movement, emphasizing innovative financial instruments like the DARES program. These initiatives not only unlock the full potential of the off-grid sector but also fuel investments, propelling forward clean energy solutions.
“The ripple effect reaches unserved and underserved communities, unlocking access to a realm of clean and equitable energy for all. It’s a powerful journey of empowerment and transformation.”
Meanwhile, the Nigerian Electricity Regulatory Commission (NERC) in its third quarter report released at the weekend disclosed that due to the absence of a cost reflective tariff, the Federal Government incurred a subsidy cost of N204.59 billion over the period.
The report identified that the rise in the government’s subsidy obligation meant that “in 2023/Q3, DisCos were only expected to cover 45 percent of the total invoice received from NBET. For ease of administration of the subsidy, the MRO is limited to NBET only with the MO being allowed to recover 100 percent of its revenue requirement from the DisCos.”
According to the Commission, the total revenue collected by all DisCos in 2023/Q3 was N267.61billion out of the N349.55 billion that was billed to customers which translated to a collection efficiency of 76.56 percent.
“The DisCos overall collection efficiency increased by +1.02pp from 75.54 percent recorded in 2023/Q2. This is explained by the fact that although there was a marginal difference in total collections in 2023/Q3 (-0.09 percent) compared to 2023/Q2 (N267.86 billion), the total billings declined by -1.42% (compared to N354.61 billion in 2023/Q2).”
The report revealed that all DisCos except Eko and Abuja recorded improvements in collection efficiency in 2023/Q3 compared to 2023/Q2.
NERC attributed the overall increase in collection efficiency in 2023/Q3 to the implementation of various collection campaigns by DisCos to improve remittance from post-paid customers.
“The most proven method for reducing collection losses is the installation of meters (especially prepaid meters for non-maximum demand customers). Therefore, DisCos are expected to utilise one or more metering frameworks provided for in the NERC MAP and NMMP metering regulation (2021) to improve end-use customer metering in their franchise area. This will reduce commercial and collection losses and will ensure the flow of funds to upstream market participants in the sector,” it added.
