The future of renewable energy in Nigeria

Last December, we launched our first round of the SDG Investor Maps sessions together with our partners The United Nations Development Programme Nigeria and The International Chamber of Commerce Nigeria. These maps serve as a digital tool providing market intelligence on investment opportunities and related impact data to identify and increase Sustainable Development Goal (SDG) aligned actionable investments in Nigeria. The Nigeria SDG Investor Map thus maps the overlaps and gaps between public sector initiatives and private sector interest, aiming to facilitate more private-sector investment and public sector support for three SDG-enabling sectors that include renewable energy, agriculture, and healthcare.

By initiating constant and meaningful engagement with private sector investors and channelling market intelligence derived from the Maps to investors, and the outcome of stakeholder engagement to policy-makers, it seems to me that the overall rationale for the Maps is to ensure there is alignment between what the investment community requires to galvanise investments and what policy-makers and governments deliver by way of an enabling business and investment environment to attract and retain those investments.

Notably, there are currently clear regulatory frameworks that govern licencing, charging of tariffs, exclusivity arrangements and compensation regime. The Mini-grid Regulations issued by the Nigerian Electricity Regulatory Commission are designed to promote investments in rural electrification and provides a framework for (i) engagement between mini-grid developers (off-grid electricity), community stakeholders and existing distribution companies, (ii) private retail tariff arrangements for certain operators; and (iii) compensation for developers in the event of operational expansion by the distribution company into licensed to cover the relevant community. There are also various financial and fiscal incentives available to investors (more recently through the Finance Acts of 2019, 2020 and 2021) such as tax exemptions and waivers for eligible projects.

The break-out session on Renewables also identified that investment in Nigeria’s renewable energy market is not without challenges, such as exposure to illiquidity risks. The areas with poor grid infrastructure tend to be rural areas where most residents are low-income earners. Therefore, investing in off-grid technologies targeted at rural areas carries a significant bankability risk arising from the mismatch between the quantum of capital investments required relative to volume of collections. Accordingly, any potential renewable energy developer would only be willing to invest if there are assurances it would be able to raise and repay the necessary financing from project revenues.

In all, the discussions during the Session were illuminating and insightful. I thoroughly enjoyed the opportunity to rub minds with policymakers and investors and to see the different perspectives on how to propel the Nigerian renewables market forward, with the SDGs as a central goal. My hope and expectation is that this is the first in a long line of meaningful private sector engagements that will enhance the utility of the SDG Investor Maps and ultimately lead to more investments in credible and sustainable projects that are socially relevant and transformational.

Sir Richard Branson (2014)

Sir Richard Branson is the founder and owner of Virgin Group. Branson uses his reputation to influence important issues also outside business.