This blog was published on 23rd June 2023.
In 2019, the Government of Nigeria launched the Nigeria Electrification Programme (NEP), a USD$550 million program supported by the World Bank (US$350 million) and the African Development Bank (US$ 200 million) to bridge the energy access deficit in the country. The NEP was intended to sustainably provide electricity to households, MSMEs, educational and healthcare facilities in unserved and underserved rural communities through the deployment of mini-grids, solar home systems (SHS), captive power plants and productive use appliances.
An important pillar of these efforts to drive affordability and increase energy access in Nigeria’s rural areas was a USD $60 million Output-Based Fund (OBF) for solar home systems.
Over the last 3 years, the OBF program in the NEP has been extremely successful and has made an important contribution that has seen Nigeria become the 2nd largest market for off-grid solar (OGS) products in the world according to the latest GOGLA data.
The Nigeria Rural Electrification Agency (REA) has reported total grants disbursement of $110.9 million under NEP. Further, REA statistics indicate that during this period, 1.4 million SHS have been deployed, close to four times the initial program target. The systems deployed represent an equivalent of over 45MW installed across the 36 States in the country. Further, this has translated into about 36,000 jobs created of which 35% are female and an equivalent of almost 450,000 tonnes of CO2 saved.
With the overwhelming success of the program, in the second half of 2022, the REA signalled to the sector that the program was likely to exhaust its funding allocation under the OBF, but was pursuing alternatives to keep this key program going. In January 2023, REA notified stakeholders that the program funding was exhausted and guided sector players to reassess their business models and pricing until further funding was secured.
With the key contribution that the OBF has played in improving affordability and accelerating market growth, GOGLA, REAN – the national industry association in Nigeria – and our members noted possible concerns on the future outlook for the sector in Nigeria.
To assess the possible impact on the sector and help identify possible steps to secure the gains made under the NEP program, GOGLA and REAN engaged with their members through individual consultations and a working group meeting of the West Africa Regional Working Group for members affected.
One of the key takeaways is that access and affordability remain critical constraints to energy access in the country. The cessation of the OBF has the potential to greatly undermine the progress made so far in this regard.