$119m Japanese financing expected for mini-grids, says Aliyu
Bank: It’s an attempt to generate measurable economic and social impact
Emmanuel Addeh in Abuja
The Rural Electrification Agency (REA) and Alpha Morgan Bank at the weekend signed a N50 billion financing agreement to support renewable energy projects and accelerate electricity access in unserved and underserved communities across Nigeria.
The financing partnership is expected to provide a bridge for renewable energy developers implementing projects under REA programmes, enabling them to secure the funds required to execute projects before accessing catalytic grants tied to project performance.
Speaking at the Memorandum of Understanding (MoU) signing ceremony in Abuja, the Managing Director of REA, Abba Aliyu, said the partnership had become necessary because Nigeria’s electricity demand was set to rise significantly, driven by population growth and the increasing dependence of economic activities on electricity.
He said the country was entering what he described as “the era of electricity”, with power expected to become increasingly central to transportation, agriculture, healthcare, education, digitalisation and artificial intelligence.
“Electricity is going to drive almost every single thing that we are going to do. Electricity will drive transportation, electricity will drive agriculture, electricity will drive health, education, and everything we do,” Aliyu said.
According to him, the rapid development of artificial intelligence and data centres would add further pressure to electricity systems globally, making countries with the capacity to generate sufficient power strategically better positioned.
Aliyu said Nigeria’s population was growing much faster than the pace of electrification, warning that the gap would become more pronounced as the population expanded and more economic activities became dependent on electricity.
“Population growth in Nigeria is expected to reach much more than the population of the United States by 2050, which would increase the need for electricity. And one of the reasons why we even have electricity access challenges in Nigeria is because the rate at which we are going to electrify the country and the population rate is not going any faster. The population is going much faster compared to the way at which we are electrifying,” he stated.
He said renewable energy, particularly solar, would remain central to efforts to meet the growing demand because of falling generation costs and improvements in battery storage technology.
Aliyu noted that the cost of solar-generated electricity had continued to decline, while advances in battery technology were making renewable power increasingly viable for both grid-connected and decentralised applications.
“This is just showing you the increase. But this prediction is even before taking into account the new game-changing technologies. Currently, this era is being termed as the era of electricity,” he said.
The REA boss said the scale of investment required to address Nigeria’s electricity access and reliability challenges remained enormous, putting the financing requirement at about $23 billion compared with less than $2.5 billion currently available.
“But still, what is required to address the electricity challenge in Nigeria and to enhance reliability of supplies is about $23 billion. And what we have currently is less than $2.5 billion. So that is why we need to continue to crowd-fund this financing,” he said.
Aliyu disclosed that the agency was expecting additional financing of $119 million from the Japan International Cooperation Agency (JICA), which would be deployed to support interconnected and isolated mini-grid projects.
He explained that the need for local bank financing was particularly important under REA’s performance-based project structure, where private developers are required to execute projects before receiving catalytic grants.
He said domestic banks had increasingly moved from viewing renewable energy as an uncertain area to recognising it as an infrastructure investment opportunity, citing growing participation by local financial institutions.
Aliyu said Alpha Morgan Bank could also benefit from opportunities beyond the immediate N50 billion facility, particularly through the Renewable Energy Asset Management Company (RAMCO), which REA plans to launch.
Aliyu said the expansion of decentralised renewable energy was also creating an ecosystem of businesses around the projects, including fintech companies involved in revenue collection and assurance, energy service companies and local manufacturers.
He said mini-grid developers were also increasingly using electricity infrastructure to support productive activities in rural communities by providing equipment such as grinders, dryers and welding machines through leasing and lending arrangements.
On its part, Alpha Morgan Bank said the financing commitment was driven by the need to address what it identified as a major structural weakness in the power sector, which is the absence of appropriate financing structures.
The bank’s Managing Director, Ade Buraimo, represented by Executive Director, Doyin Anyaehie, said the institution had considered what role it could play in addressing Nigeria’s long-standing electricity problem before deciding to enter into the partnership with REA.
“We all know that Nigeria has electricity challenges, power challenges, and we thought to ourselves, what can we do? What part can we play to chip away at the monolithic problem of power? So we sat down and had these conversations and it became very clear that one of the major challenges is that financing structures, the right financing structures, are oftentimes absent and nowhere is it more evident than in the power sector,” Buraimo said.
He said the consequences of inadequate electricity should not be viewed only through statistics on megawatts and generation capacity, but through its effect on people and businesses.
“And you know when we talk about Nigeria’s power challenges, oftentimes we talk about them in numbers and gigawatts and all of that. But oftentimes, we don’t drill it down to the human challenge, which is what it really is.
“It is the rural business person who is hampered in their ability to thrive, to develop, to grow their businesses. It’s in the medical facilities that cannot preserve medication, that can’t save lives. It’s in the schools, the children that are going to school in the dark,” he added.
Buraimo said the N50 billion commitment was therefore not simply a commercial financing transaction, but an attempt to generate measurable economic and social impact from the projects that would be funded.
“It is drilling down to what that financing can achieve. It is the lives that will ultimately be transformed in the rural communities. We don’t know what people can achieve until you give them the opportunity,” he stressed.
He said the bank was prepared to support developers with viable projects by putting appropriate financing structures behind them, including considering ways of reducing the cost of financing where necessary.
“Once the fundamentals are right, the project is viable, we’re willing to put the right financing structures behind any developer. We’re willing to even subsidise some of the costs because, again, it’s more than money. It is national development,” Buraimo said.
He said the bank’s assessment of the partnership would ultimately be based on what changed in the communities where the projects were deployed.
“We want to look tomorrow and say, because of Alpha Morgan, a school is functioning well in the rural area. Children are going to school. Children are being taught. Medical facilities are functioning effectively. Businesses are thriving. Lives are touched. Economic potential is unlocked. That is the real drive beyond us and beyond us being here,” he said.
Buraimo said Alpha Morgan intended to remain engaged beyond the immediate financing arrangement and explore opportunities across the renewable energy ecosystem as the partnership with REA develops.