By Bisola Adeyemo
Stakeholders, renewable energy practitioners and investors in Nigeria are seeking for the Federal Government’s intervention to provide access to longer-term credit lines to DMBs for green investment.
At a two-day Stakeholders’ Consultative Forum on “Unlocking low-cost capital for grid-connected renewable energy investment in Nigeria” held from June 8 to 9, 2021 in Lagos, renewable energy practitioners and investors explored avenues for fresh financial opportunities amid reforms in the Nigerian financial sector.
The event was held under the De-Risking Renewable Energy NAMA (Nationally Appropriate Mitigation Action) for the Nigerian Power Sector Project, being promoted by Global Environment Facility (GEF) and United Nations Development Programme (UNDP) in collaboration with the Energy Commission of Nigeria (ECN). The five-year project commenced in 2017.
In his opening remarks, Prof. E. J. Bala, Director-General/CEO, ECN, submitted that the challenges facing large-scale renewable energy development in the country because the deposit money banks’ (DMBs) liabilities (sources of funding), such as deposits and borrowings, are much shorter term than what would be needed to match the needs of renewable energy project finance.
“Secondly, DMBs only have limited access to foreign currency – most of their funding is Nigerian Naira (NGN) denominated. Thirdly, it is unlikely that any will yet have the internal capability to assess the credit and other risks associated with solar PV,” Prof. Bala said, adding that, these notwithstanding, there is good reason to further explore supporting DMBs in addressing these barriers, Environews reports
His words: “It is therefore commendable that the UNDP-GEF project made this attempt to assess the potential for domestic financial sector reform in Nigeria to unlock low-cost capital for green investment. This includes consideration of financial de-risking instruments for large-scale, grid-connected PV electricity generation.”
In a presentation, Okon Ekpenyong, Director (Linkages, Research & Consultancy), ECN, stated that it is widely believed that large-scale deployment of solar PV electricity generation is a key area for addressing the nation’s energy deficit but that the sector has been encountering financial challenges.
“The domestic financial sector could play a role in green investment, but currently no domestic financial institutions are willing or able to lend to these solar PV projects,” he said.
