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CBN N140bn Solar Intervention To Domesticate Renewable Energy, As Disbursement Begins

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Nigeria has started the disbursement of a N140 billion intervention facility by the Central Bank of Nigeria (CBN) to domesticate renewable energy technology and leapfrog mini-grid solutions to reduce the gap in access to electricity in Nigeria.

While the Sustainable Development Goals aimed at universal access electricity, access rate remained at 60 per cent in Nigeria. Although the situation is fair in the urban areas, less than 41 per cent of rural areas 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.

Reportedly, lack of reliable power is a significant constraint for citizens and businesses, resulting on annual economic losses estimated at $26.2 billion (₦10.1 trillion) which is equivalent to about 2 per cent 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.

Executive Director, Rural Electrification Fund, Sanusi Ohiare, stated in Abuja that government has been working and making remarkable progress through the N140 billion CBN fund, stressing that government idea was to encourage local developers in the renewable energy industry.

“Getting loans in naira denominated fund has been an issue because getting fund outside the country comes with foreign exchange problems.

“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.

To most stakeholders, the N140 billion facility provided by the CBN remained a leeway to projected national energy plan given high rate of rural to urban migration, challenges face by farmers to ensure food security and ineffective healthcare services.

Expected to complement the Economic Sustainability Plan (ESP), the CBN had launched the N140 facility aiming to provide five million solar home systems in under-served and off-grid communities across the country.

With the plan, called the CBN would make funds available to the private companies in the solar power subsector involved in the manufacture, assembling, installation, servicing of the solar systems, at rates ranging between 5 to 10 per cent. While about 250,000 jobs are expected from the scheme with an additional N7b increase in tax revenues per annum and $10million in yearly import substitution, government had targeted reduction of greenhouse gas emission by 20 per cent 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 component, there are indications that facility could reduce the challenges of dollar denominate loans for companies who operated are mainly in naira.

Analysts believe that proper implementation of the fund could reduce the challenges of food insecurity by providing energy access to farmers and farmland, warmed 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 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.

Special Adviser to the president on Infrastructure, Ahmad Rufai Zakari  had noted that off grid would see a further ramp up this year, adding that the Rural Electrification  Agency (REA) would fast track the  plan.

“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 (I.e World Bank and AFDB). Expect multiple commissioning of large mini-grid projects in Universities, Markets and Rural Areas across the country.

With a population of 195.87 million and Gross Domestic Product of  about $397.27 billion, electricity remained one of Nigeria’s key problem. While energy stands access, which is very epileptic stands at about 60 per cent in the urban central, access across rural communities remained dismal as about 80 million rural, mainly farmers are without grid connection.

This outlook has been a major challenges in addressing rural to urban migration and poverty while widening gender imbalance, limit agricultural sector and functional health facilities remained a mirage.

Energy expert at PWC, Habeeb Jaiyeola noted that in a developing market like Nigeria, the need for intervention remained sacrosanct, especially in the mini-grid.

“So intervention from government entities like CBN are all required in developing environments like Nigeria but proper integration is required. There’s a lot of infrastructural investment into that whole architecture,” he said.

Jaiyeola noted that while more funding has been going to conventional energy generations sources, distribution and transmission, Jaiyeola noted that investment in the renewable sector where government intends to generate 30 per cent of the 30,000 megawatts projection by 2030 remained dismal.

However, this intervention has to be in a way that it is able to pay back so that the fund can contribute to the development of other sectors. Also at the end of the day, all of this infrastructure cannot be in isolation,  they need to key into a larger power sector plan.

He noted that government needs to consider the plan in line with existing initiatives including the Siemens power deal, adding that the facility would be less difficult to service unlike a dollar denominated loan.

Jaiyeola said: “Forex differential is something that continues to play against you, when the narrative becomes unfavorable over time. So it is very good that the fund is coming locally. This development applies across board and not in the power sector alone.”

Executive Director, International Network for Africa Development (ISNAD-Africa), Adedoyin Adeleke stated that developing rural communities by bridging energy access makes the N140 billion intervention a welcome development, stressing that much needed to be done to improve access to electricity in rural areas in Nigeria.

“The intervention is relevant because there is high development deficit across the country but very worst in the rural areas, which house about half of Nigeria’s population.

“If the rural communities are still behind, the achievement of universal electricity will remain challenging. Because of the challenges of the rural areas, we cannot rely on single approach alone. Rural communities are more like a burden to electricity companies. It is difficult to run infrastructure to all communities. Most of them are not commercially viable,” Adeleke stated.

He said government must priority electricity access in the rural communities and ensure development in the communities, stressing that the nexus of energy access and development must be understood and applied.

According to him, rural communities need more of energization instead mere provision of electricity to ensure economic diversification, adding that energy technology must also be diversified as this would also address the challenges faced by women.

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