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🇳🇬 Nigeria /Energy & Infrastructure

Banks emerge as key financiers of $20.5bn power gap

From The Punch · () English

Summarized and contextualized by DistantNews.

At a glance

News Named sources Context piece
  • Nigeria is seeking to involve deposit money banks in closing a $20.5 billion financing gap in its electricity sector.
  • The government aims to expand reliable power supply and accelerate renewable energy deployment by leveraging private sector capital.
  • A recent agreement between the Rural Electrification Agency and Alpha Morgan Bank provides financing for renewable energy developers, highlighting a growing reliance on commercial banks.

Nigeria is increasingly turning to commercial banks to help bridge a significant $20.5 billion financing gap in its electricity sector. The Federal Government is struggling to mobilize the necessary capital to expand reliable power supply and speed up the adoption of renewable energy technologies.

This push for bank financing presents a new opportunity for deposit money banks, some of which have previously faced financial challenges due to their exposure to the conventional power sector through loans to generation and distribution investors. A recent N50 billion financing agreement between the Rural Electrification Agency (REA) and Alpha Morgan Bank exemplifies this trend. The agreement aims to support renewable energy developers working on projects in underserved communities.

mobilising commercial financing had become necessary to move renewable energy projects from approval to actual deployment.

— Abba Abubakar AliyuREA Managing Director and CEO, explaining the need for private sector involvement in energy projects.

Under the facility, Alpha Morgan Bank will offer revolving project finance to eligible developers participating in REA programs, particularly those under the Distributed Access through Renewable Energy Scale-up initiative. Individual developers can access up to N10 billion, with loan terms ranging from 12 to 24 months, subject to credit approval. The bank will also provide up to 70 percent in counterpart financing for qualifying projects.

The REA estimates that Nigeria requires approximately $23 billion to address its electricity access and reliability issues, but has only secured less than $2.5 billion, leaving a substantial shortfall. REA Managing Director and CEO Abba Abubakar Aliyu stated that mobilizing commercial financing is crucial for moving renewable energy projects from approval to deployment, despite increasing global investment in the sector. This initiative follows similar commitments from other Nigerian lenders, including Stanbic IBTC ($100 million), Lotus Bank (N100 billion), and FCMB (approximately $188 million) for renewable energy projects.

the partnership was aimed at addressing one of the country’s most critical development constraints.

— Doyin AnyaehieExecutive Director of Alpha Morgan Bank, on the significance of the financing agreement.
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Originally published by The Punch. Summarized and contextualized by our editorial team with added local perspective. Read our editorial standards.

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