Nigeria injects $4.46 million into rural mini-grids

From the newsletter

The Nigerian government, through the Rural Electrification Agency (REA), has formalised agreements with 32 renewable energy firms. This third call of its Rural Electrification Fund (REF) attracted $4.46 million in private sector investments to power Nigeria’s rural communities as the country moves towards its goal of universal electrification by 2050.

• About 80% of Africans lacking electricity reside in rural regions. There is a huge opportunity for investors to bank on this statistic. REA through REF is setting a precedent by targeting Nigeria’s rural populace without power.

• High investment risk limits Africa's power access. REF's grants strategically engage private players, overcoming state funding issues, which often stall power projects.

More details

• At the signing ceremony in Abuja, REA’s Managing Director, Abba Aliyu (pictured above), revealed the REF program has already delivered 16.6 MW of renewable energy, powered 183 communities, and created 26,000 jobs. 

• The REA’s broader strategy includes other flagship programmes such as the Interconnected Mini-grid Acceleration Scheme (IMAS) and the Global Cleantech Innovation Programme (GCIP).

• Nigeria currently faces an unreliable grid problem, one of the worst in Africa. This is due to old infrastructure in their power grids. Moreover, the country registers a $1.25 billion annual loss from unreliable power, according to the UNDP. The REA’s focus on minigrids is because they present a more feasible and economically sound strategy than attempting to extend the already strained national network into remote and difficult-to-access areas.

• Furthermore, the agency’s emphasis on productive use of energy-supporting businesses, agriculture, and women entrepreneurs means these minigrids can drive real economic growth, not just provide light.

• There is also a major opportunity for firms and people looking to invest in renewable energy. The country’s power minister is targeting $10 billion annual investment over two decades to fix Nigeria's power crisis. These private players will avert project stalling, which may cause further economic damage.

• To make this possible, the country recently ratified the National Integrated Electricity Policy, targeting $122.2 billion in investments. These reforms will naturally make renewables more attractive to investors by diversifying the country's energy sources and improving grid infrastructure.

Our take

• Africa's power future market lies in rural areas. While urban clean energy projects show progress, the biggest electrification opportunity for investors is in rural areas. Countries like Nigeria now pay attention to these customer segementand this is expected to catalyse investments.

• The $4.46 million funding for REA proves investors see big potential in rural Africa's energy needs. Other African countries should copy this approach to bring power to more rural people and boost their economies.

• Renewable mini-grids offer a very clever way to get electricity, often ignored before. If Nigeria, a country with a very bad power grid, uses them, other African nations should look at how well they work. Maybe this was a great solution we missed.