Experts at Nextier’s 103rd Power Dialogue have identified critical financial tools to address the climate vulnerabilities in Nigeria’s power sector. Lucky Abeng, Technical Director and Climate researcher at Ecosteward and Humanitarian Foundation, moderated the session titled “Adapting Nigeria’s Power Sector to Climate Action“.
The Power Dialogue featured a panel of experts, including Omosede Imohe, Distributed Energy Researcher and Team Lead at Abuja Electricity Distribution Plc, and Solomon Joshua, Chief Operating Officer at Ceesolar Energy Limited.
Imohe explained that development financial institutions (DFIs) can incentivise climate funding by offering concessional finance to the power sector. According to her, this would help reduce capital costs and manage the risks associated with implementing climate-resilient projects.
She emphasised the importance of financial institutions providing technical assistance to identify climate vulnerabilities within networks. She noted that while climate resilience may not always be the sector’s top priority, aligning the sector’s goals with climate finance opportunities could make a significant impact.
Imohe stressed that financial tools for addressing climate vulnerabilities already exist in Nigeria but must be scaled up and deployed more effectively. For instance, she stated that green bonds have already been used to finance afforestation and solar rooftop projects.
“A typical example is the North-South Power Generation Company. They have used green bonds to expand their hydro and solar plants so companies in the sector could issue green bonds to secure funding, attracting investments from pension funds and other sources,” Imohe added.
Imohe also identified blended finance as a key tool. She highlighted the World Bank’s Distributed Access through Renewable Energy Scale-up (DARES) funding as an example of result-based finance, which combines private sector and government funds to reduce capital risks and improve funding access for private investors.
Additionally, she noted the importance of risk-sharing mechanisms such as the Africa Energy Guarantee Fund, which helps protect private sector investments in renewable energy.
Addressing the challenge of sustainably increasing energy access across Nigeria, Joshua emphasised the central role of financing. He stated that investors need assurance of returns, and for the country to maintain a focus on renewable energy, the government must provide concessional support to de-risk investments.
He also highlighted the importance of developing inclusive policies to address energy poverty in rural areas with the most severe energy deficits. He suggested that targeted financial mechanisms must be created to encourage investment in these underserved areas.
Joshua noted that technological advances are making renewable energy sources more affordable, and increased research would accelerate the adoption of clean energy. He also advocated for a diversified approach to energy generation, suggesting that Nigeria should not focus solely on solar power but explore other energy sources to create a more resilient and sustainable energy infrastructure.
On his part, Abeng highlighted the challenges posed by climate change, citing discussions from the 2023 Africa Climate Summit that called for Africa to move away from fossil fuels. He noted that despite the vast solar potential in Nigeria, where sunlight could theoretically power the country for a year, Africa would require $8 billion annually until 2030 to meet the United Nations SDG 7 goal of universal access to clean and affordable energy.
Abeng also pointed out the crucial need for significant funding, noting that the Development Bank of Nigeria (DBN) is one of the key institutions facilitating climate finance in the country. However, he stressed that the real impact would only be felt when the benefits of these financial tools reach local communities, such as rural women transitioning from fuel-powered to solar-powered grinding machines.
The 103rd Power Dialogue underscored the urgency of scaling up financial solutions to support Nigeria’s transition to sustainable energy, highlighting the importance of reaching local communities with impactful results.