• Nigeria To Manufacture Solar Components, Address Volatility Of Forex Loans
• Experts Insist Loan Repayment, Alignment Of Govt Intervention Critical
The Federal Government and key stakeholders in the electricity industry, yesterday, raised concerns over the huge gap in access to electricity in rural communities, stressing that the N140b facility provided by the Central Bank of Nigeria (CBN) remained a leeway to the projected National Energy Plan.
Amid the high rate of rural-urban migration, challenges faced by farmers in ensuring food security, ineffective healthcare services, as well as hurdles against the attainment of Sustainable Development Goals (SDGs), especially in the area of universal energy access, over 70 per cent of the country’s rural population remain without access to electricity.
Expected to complement the Economic Sustainability Plan (ESP), the CBN launched the N140 facility to provide five million solar home systems in under-served and off-grid communities across the country.
As part of the ESP, the CBN was to make funds available to private companies in the solar power subsector that are involved in the manufacture, assembling, installation, servicing of the solar systems at rates ranging from five 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 $10m in yearly import substitution, the government also targeted a 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 the 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, who told The Guardian that proper implementation of the fund could reduce challenges of food insecurity, by providing energy access to farmers and farmland, warned 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 also called for the alignment of a series of power infrastructure, particularly in a manner that would reflect on the country’s long-term energy outlook, and also factor in existing architecture where distribution, generation and transmission companies play key roles.
The Special Adviser to the President on Infrastructure, Ahmad Rufai Zakari, had told The Guardian that off-grid would see a further ramp up this year, adding that the Rural Electrification Agency (REA) would fast track the plan.
“The NSIA just announced an N10b 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 programmes with critical Development Finance Institutions (i.e World Bank and the AFDB). Expect multiple commissioning of large mini-grid projects in universities, markets and rural areas across the country.
The Executive Director, Rural Electrification Fund, Sanusi Ohiare, who told The Guardian that the government has been making remarkable progress through the N140b CBN fund, stressed that the government’s idea was to encourage local developers in the renewable energy industry.
“The loans in naira denominated funds has been an issue because getting funds 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.”
With a population of about 195. 87 million, and a Gross Domestic Product (GDP) of about $397.27b, electricity remains one of the country’s key problems. While energy access, which is very epileptic stands at about 60 per cent in the urban centres, access across rural communities remain dismal as about 80 million rural dwellers, mainly farmers, are without grid connection.
Energy expert at PWC, Habeeb Jaiyeola noted that in a developing market like Nigeria, the need for intervention remains sacrosanct, especially in the mini-grid. “So interventions from government entities like the CBN, are all that are 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 funds have gone to conventional energy generation sources, distribution and transmission, investment in the renewable sector, where the government intends to generate 30 per cent of the 30, 000 megawatts projection by 2030 has remained dismal.
Insisting that this intervention has to be fashioned in a way that guarantees payback so that the fund can contribute to the development of other sectors, Jaiyeola 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 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.”
The Executive Director, International Network for Africa Development (ISNAD-Africa), Adedoyin Adeleke, stated that developing rural communities by bridging energy access makes the N140b facility a welcome development
Adeleke, who stressed that much has not been done in addressing access to electricity in rural areas, added that “the intervention is relevant because there is a high development deficit across the country, which is even worse in the rural areas that house about half of the country’s population.
“If rural communities are still behind, the achievement of universal electricity will remain challenging. Because of challenges faced in rural areas, we cannot rely on a 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 the government must prioritise 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 energisation instead of mere provision of electricity to ensure economic diversification, adding that energy technology must also be diversified as this would also address challenges faced by women.