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Innovative off-grid solar systems have gained mainstream attention as they provide low-cost electricity to underserved populations in Nigeria.

By Ashvin Ramasamy

600 million people live without electricity in Africa. Some say it is the most pressing issue being discussed in the developmental dialogue. Has the Nigerian government made an outstanding difference among other nations? Sadly, the answer is no. However, enthusiastic players have demonstrated capabilities and eagerness to make up for the failure. In 2016, an important record was established when US $90 million was raised with debt securities and private equity in Nigeria, to build off-grid solar systems to power communities without access to the power grid. The payment system was strategically designed so that the low-cost objective could be mainstreamed. A pay-as-you-go plan has been operating through the main mobile phone carrier, providing solar-powered electricity for US 50 cents a day or less. Not only residential users have signed up, but small businesses, hospitals, churches and mosques have gained access to the service too. At the end of 2017, over 65,000 units of the solar power system had been sold in Nigeria alone. On the heels of a positive turnout, he entrepreneur reinvested the income in Ivory Coast for the same product and objective in 2017.

The African Development Bank successfully announced commitment of US $58 million in the Off-Grid Energy Access Fund (OGEF) in early August. OGEF is set up in a such way that borrowers can obtain financing largely in local currency, namely businesses seeking to tap into household energy access. Leveraging public and private investment capital for powering local capital markets is critical in this area of energy infrastructure. Why? On one hand, set up costs for solar systems do not make sense for middle- and low-income earners. On the other, mini-grid developers are being refused financial support from their local banks. While very few Nigerian banks support renewable energy, the handful that does do not align with the needs of borrowers. For a developer seeking a financing plan, 10 years of support is needed. Banks currently entertain business ventures with loans of 5 years, let alone adding prohibitively high interest rates in the agreement. The OGEF offers additional transactional opportunities that could deepen the local capital markets in Nigeria, thus enabling more attractive options for companies to offer affordable solar power systems in underserved communities.

Examples such as the OGEF are popping up in different forms and sizes and are becoming a trusted method of financing decentralized energy access in poor regions of Africa. This level of support is desperately needed to back Nigerian-based financial institutions who have their sights set on renewable energies. Some developers present less financial risk, such as the very popular “power-as-a-service” model, where users cover the cost of electricity use and the provider operates and pays for the equipment & infrastructure. The government has not met expectations to deliver on large scale electricity grids, while that model shows potential for high-volume market penetration and can replace many fossil fuel generators in Nigeria. Nationally, alternative clean energy solutions can allow Nigeria to improve their policies. The current Sustainable Development Goal for “Affordable and Clean Energy” shows about 43 percent of the total population lacking electricity while a worrisome 2 percent have access to clean sources of energy & technology for cooking, according to the latest SDG Index for Africa.

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