At the 109th edition of Nextier Power Dialogue, energy experts revealed that unlocking private capital for Nigeria’s renewable energy sector goes beyond the availability of funds. It requires strong technical skills, corporate governance, innovative financing structures, and effective risk-sharing mechanisms.
The session, hosted by The Electricity Hub, was titled: “Leveraging Private Capital for Scalable Renewable Energy Access in Nigeria.”
The panel, moderated by Motunrayo Akinfala, Programme Manager at the Renewable Energy Association of Nigeria (REAN), featured notable speakers, including Dr. Abba Aliyu, MD/CEO of the Rural Electrification Agency (REA); Kelly Aigbedion, Head of Business Development, Renewable Energy (Digital) at Sterling Bank; and Dr. Naa Adjekai Adjei, Senior Associate at the Universal Energy Facility, Sustainable Energy for All (SEforAll).
Capital de-risking
Dr. Aliyu emphasised that unlocking capital for renewable energy access requires ensuring those seeking financing meet the requirements. He explained that access to funding depends on the availability of technical skills within companies and individuals, as well as strong corporate governance within organisations, which provides financiers with the confidence and assurance needed to release funds.
Building on this point, in response to questions on the specific de-risking mechanisms successfully employed by the Rural Electrification Agency (REA) to attract private capital for off-grid and mini-grid projects, he noted that the Agency has worked to bridge the knowledge gap among local financial institutions in Nigeria, helping them better understand the renewable energy sector.
The MD/CEO of REA disclosed that, before this intervention, only Sterling Bank and the First City Monument Bank had committed to financing the renewable energy sector. To address this challenge, REA advised banks to create a platform that allowed staff from renewable energy companies to work within the bank, helping to structure financing solutions tailored to the sector’s specific requirements.
He stated that REA de-risked the sector by providing capital grants through public sector financing, enabling the private sector to access the capital needed to implement renewable energy projects.
However, Dr. Aliyu noted that private sector investors in the off-grid space should not replicate the on-grid model, where investors often avoid risks and prefer ready-made projects that guarantee returns. He stressed that this approach should not apply to the off-grid sector, emphasising that private investors must be willing to take on some level of risk, even as REA continues to de-risk the sector.
Acknowledging industry innovation, he commended Stanbic IBTC Bank and Standard Bank for developing financial solutions that allow any private sector company signing a grant agreement with REA to directly connect with a Tier 1 manufacturer of PV panels in China—an opportunity that would ordinarily require going through multiple layers of intermediaries before accessing such funding.
According to him, financiers and private sector players must embrace innovation and develop solutions to sustain the sector rather than rely solely on government support. He emphasised that the sector’s success depends on effective risk allocation, ensuring that each risk is assigned to the party best positioned to manage it, which, in turn, will enable the sector to thrive.
Turning to the policy and regulatory landscape, he explained that the Electricity Act of 2023 mandates REA to oversee the entire renewable energy deployment in the country. The Act further requires REA to develop the National Electrification Strategy and Implementation Plan, coordinate renewable energy initiatives at the state level, and support the establishment of local government electrification boards. He emphasised that this represents a significant mandate entrusted to the Agency.
Dr. Aliyu noted that the National Electrification Strategy and Implementation Plan has been developed and is expected to receive approval from the National Economic Council within the week. He described this as a significant milestone for the renewable energy sector, emphasising that the plan unifies previously fragmented electrification initiatives that had been operating in silos.
Investment criteria
Adding a private sector perspective, Aigbedion stated that Sterling Bank has positioned itself as a pace-setter in the renewable energy sector by financing projects and driving innovation across the industry. On lending frameworks, he explained that financial institutions seeking to participate in the sector must recognise that conventional loan tenures are not applicable, given the unique nature of renewable energy.
He added that two—or four-year loan tenures are unsuitable for the renewable energy sector and recommended that local financial institutions adopt extended repayment periods. He further suggested phased disbursements tied to specific project milestones to curb developers’ misappropriation of funds.
Aigbedion stated that credit guarantees are the first consideration for local financial institutions, noting that they are more willing to invest in a project once a clear third-party guarantee is provided. He further explained that blended financing makes such investments more attractive to financial institutions for large-scale projects, as it helps to de-risk the projects.
The Head of Business Development, Renewable Energy (Digital) at Sterling stressed that for any project under consideration, financial institutions will scrutinise the details beyond the feasibility studies to ensure that the projected revenue stream is sufficient to repay the financing provided.
According to him, this means that the power purchase agreement must be bankable. He emphasised that financial institutions will assess factors such as the off-taker’s creditworthiness and the tariff structure. He noted that these elements serve as critical instruments for evaluating the decision to invest in a project.
Developers Challenge
Speaking from an international financing perspective, Dr. Adjei, reflecting on the UEF’s grant agreements with 19 clean energy developers in Nigeria and the country’s readiness to leverage private capital for renewable energy access, highlighted two key insights from UEF projects.
Dr. Adjei’s first insight was that many capable clean energy developers in Nigeria are prepared to deliver renewable energy solutions at scale. She disclosed that when the UEF opened its application window for developers, it received over seventy submissions, of which thirty qualified. She explained that the qualified developers submitted proposals requesting fifty million dollars in grant financing to deploy more than twenty-five thousand connections.
The Senior Associate at the Universal Energy Facility added that the large number and high quality of applications demonstrated a strong pool of developers with the appetite and technical capacity to scale the renewable energy sector.
Furthermore, she noted another key insight from the programme’s implementation: the most effective way to scale renewable energy, particularly off-grid solutions, is to link them to productive uses. She emphasised that this connection enhances financial viability, especially for standalone solar systems.
She stated that despite the large pool of experienced developers ready to undertake these projects, many face delays in securing financing due to the lengthy due diligence process and the need to align financing structures with debt and equity investors.
She added that a gap remains between developers’ plans and what they can secure financing for within the required timeframe. Since the UEF was established to scale renewable energy projects rapidly, many developers and their projects have struggled to meet timelines because of the lengthy financing processes.
Dr. Adjei explained that the UEF operates as a results-based financing mechanism, disbursing funds only when pre-determined milestones are achieved. She noted that developers must first secure debt and equity financing, after which UEF provides incremental grant support, covering a certain percentage of the total project cost once the milestones are met.
Decentralised Solutions
Rounding up the discussion, Motunrayo Akinfala, Programme Manager at REAN, noted that the sector must be continually de-risked through innovative approaches, while emphasising that all stakeholders should be willing to share risks and commit to making the sector succeed.
She added that private capital would flow more strongly into Nigeria’s renewable energy sector with the right financing tools to de-risk investments. The Programme Manager at REAN added that credit guarantees, blended financing, and off-takers’ creditworthiness are key factors to consider when assessing the bankability of energy projects.
Despite existing challenges, she noted that Nigeria can expand access to renewable energy through innovative financing, strong policies, and decentralised solutions.
Finally, stakeholders called for urgent collaboration among government, financiers, and developers to accelerate investment in renewable energy and ensure Nigeria achieves universal energy access.