Nigeria gets $1.1bn from AfDB for electricity expansion

From the newsletter
Nigerian President Bola Tinubu at the just concluded Mission 300 Africa Energy Summit in Dar es Salaam confirmed a $1.1 billion loan from the African Development Bank. The fund aims to provide electricity to 5 million people by the end of 2026, with part of the investment supporting solar and wind energy projects in rural areas.

• He also highlighted the AfDB's $200 million investment in the Nigeria Electrification Project (approved in 2018), which aims to provide electricity to 500,000 people by the end of 2025. This will be achieved through support for private sector development, off-grid solutions, and dedicated power systems for Federal Universities.

• Additionally, Nigeria is set to benefit from a $700 million investment in the Nigeria Desert to Power program, alongside a planned $500 million facility for the Nigeria-Grid Battery Energy Storage System. This project is expected to provide power to an additional two million people.

More details

• Despite being Africa's largest economy and a major oil and gas producer, Nigeria faces significant challenges in its power sector, with a generation capacity of only about 5,000 MW despite its 13,000 MW installed capacity. This is far below that of its peer countries, like South Africa, with an installed capacity of about 60 GW despite having just a third of Nigeria's population.

• Nigeria also has a small capacity of renewable energy power with sources like Hydro, Solar, and Wind accounting for only 20% of the energy mix. This is a big deficit considering its vast renewable energy potential.

• Only about half of Nigeria's population is connected to the grid, with the majority of those unconnected residing in rural areas. The International Finance Corporation (IFC) has provided $72 million in funding to five leading mini-grid developers in Nigeria to connect 400,000 people to electricity. They include Havenhill Synergy Ltd., Prado Power Ltd., PriVida Power Ltd., Sosai Renewable Energies Ltd., and Virtuitis Solaris Ltd.

• The AfDB-funded project will be implemented in phases, with close collaboration between the Nigerian government, the AfDB, and other stakeholders. The AfDB will provide technical assistance and oversight to ensure the effective use of funds and the timely completion of projects.

• Nigeria is also making plans to ensure that the World Bank’s $750 million support for expanding its distributed energy access through standalone solar systems and mini-grids is effective for the 16.2 million people it will serve.  

Our take

• The loan by AfDB to Nigeria is timely and a step in the right direction. It presents an opportunity for Nigeria to leverage funds to address its power access gap by investing in renewable energy sources like Hydro, Wind, and Solar power to meet its growing energy demand.

• Nigeria sits in the tropics of Africa meaning on average it receives 5–7 kWh/m²/day of solar radiation making it a prime location for solar project investment in different scalable levels from large-scale solar plants to off-grid systems on its populous roofs. The funds present immense potential for electrification in rural areas through solar.