Nigeria’s energy distribution significantly relies on installed base of electricity production that is heavily dependent on expensive and polluting fossil fuels.
The grid is so underdeveloped and unreliable that most households, businesses and institutions that can afford to do so have turned to gasoline- or diesel- powered generators.
Expanding access to clean and reliable energy is among the most powerful available levers to quickly change the economic prospects of all Nigerians.
Between 2010 to the first half of 2022, Nigeria’s power grid suffered at least 222 partial and total collapses, according to industry data, mostly from the Nigerian Electricity Regulatory Commission (NERC), has shown.
In mid September (Last Month) the grid collapsed a couple of times barely two weeks after the celebration of 400 days of stable or incident-free operations by the Transmission Company of Nigeria(TCN).
However, to combat all these challenges, Nigeria created an Energy Transition Plan (ETP) that includes an ambitious commitment to reach net zero emissions by 2060 while closing the energy access gap, improving Nigeria’s national grid, and making Nigeria’s electricity sector commercially viable.
This will require an estimated $400 billion of total investment over the coming decades.
Advancing New Partnership Frontiers
There are several partnerships that is designed to promote efforts especially in the renewable energy initiative of the government.
The Alliance upstream partner Rocky Mountain Institute (RMI) is working with the Rural Electrification Agency (REA) of Nigeria on a program, Energizing Agriculture, that is applying this lesson.
Interestingly, Proparco, a French development finance institution, which has just marked 15 years of operations in Nigeria, has deployed with a total of USD 1 billion invested over the period.
Proparco, under its well articulated climate action is keying into the country energy transition plan, supporting deployment of mini grids across under served and energy starved rural communities.
The development partners is working closely with the government of Nigeria through equity funding and private sector outreach to build the country’s planning and policy capacity and to improve market conditions for renewable energy.
Today, the Nigerian government is seeking $10 billion of funding for the first tranche of Energy Transition Plan (ETP) investments, developing a carbon market to facilitate the energy transition, and decarbonising multiple economic sectors.
These projects are an important starting point for Nigeria’s transformational goals.
Unfortunately, market conditions for clean energy are constrained by the underperformance of past investments in off-grid electricity as some existing mini-grid sites have not experienced the anticipated levels of electricity demand, which increases the perception of risk for future projects.
But to address this issue, Proparco is supporting A4&T Power Solutions and helping other renewable energy project developers identify the best locations to build mini-grids. With better data and analysis on project sites, more developers will be able to attract investors, enabling scaled deployments and deeper impact.
Innovation and entrepreneurship are central to this partnership program in Nigeria and by encouraging experimentation, supporting venture-building, and catalysing new business models, Proparco is significantly magnifying impact over time.
In the last 15 years it has been leading an Innovation Hub that is supporting ventures that are developing commercial energy products and services in underserved communities. This intervention is creating a cohort of economically sound, sustainable, and scalable off-grid energy businesses. The Innovation Hub offers participating ventures training, grants, workspace, and a variety of support services to help them grow and achieve scale, including help with raising debt and equity financing.
Since its inception in Nigeria in 2008, Proparco has focused its efforts on partnering with local and Pan-African financial institutions, investment funds, growth stage companies as well as startups within the renewable energy, agribusiness and tech space. The goal of these investments is to improve the lives of Nigerians by providing access to essential needs such as electricity and financial services.
Proparco provides loans, equity, guarantees and technical assistance aimed at strengthening its customers’ financial capacity or bearing part of their risk. The bulk of its commitments are intermediated via Nigerian banks and investment funds, which finance SMEs and start-ups in key development sectors such as agriculture, healthcare, education, energy, and financial services.
The African private sector is at the core of Proparco’s work; of the €2.3 billion committed globally by Proparco in 2022, 45 per cent was for businesses based on the African continent.
In order to sustain this commitment, Proparco has over the years designed or enhanced various tools on Digital Africa, a subsidiary that focuses on providing support to high impact digital tech startups; a venture capital activity focused on Africa, and Choose Africa, an initiative by the AFD Group which has committed €3.5 billion between 2018 and 2022 and supported more than 40,000 businesses and hundreds of thousands of micro-entrepreneurs.
This focus is equally reflected in the 2023-2027 strategy, which aims at supporting various players in the fight against long-term challenges affecting food security, inequality and climate.
“Africa holds the answers to many of the major challenges of the 21st century and unlocking its entrepreneurial dynamism is at the core of our strategy for the next five years,” said Proparco’s CEO Françoise Lombard during her visit to Nigeria. “This is why we aim to concentrate a large share of our resources in the continent. As we mark an important milestone in Nigeria, we are committing to support the African private sector more effectively by enabling entrepreneurs to unleash their potential.”
Over the last 15 years in Nigeria, Proparco has grown to become one of the prominent partners catalysing growth in the finance, tech, energy, and climate sectors. Together with its mother company Agence Française de Développement (AFD), the group has successfully supported projects to develop and improve Nigeria’s energy infrastructure, including renewable energy and transmission and distribution networks.
For Jean Guyonnet-Dupérat, Regional Director of Proparco in Nigeria: “Nigerian business people are extremely bold entrepreneurs with an unshakable dynamism. Our commitment as financial partners is to build trust and support them with the expertise and financial tools they need to grow beyond their target. Together, we serve one common objective: building a prosperous and sustainable future.”
Exemplifying Benefits Of The Partnership
One of the private sector support initiatives of Proparco is deployment of mini grids by A4&T Power Solutions which has executed several renewable energy projects across Nigeria.
In an interaction with the media in Lagos, Ayo Ademilua, director at A4&T disclosed that the firm has constructed 11 solar powered mini grids (1.6MW) in rural communities for the unserved, serving over 18,000 people accessing uninterrupted power supply and the provision of 0.35MW solar powered home systems to over 6,500 low income households and MSMEs among other projects that is supported by Proparco.
According to Ademilua, who is also the president of the Renewable Energy Association of Nigeria, REAN, through those projects several thousands f people in the rural areas now have access to uninterrupted power supply, transforming lives, improving economic opportunities, social wellbeing and protecting the environment through provision of reliable , affordable and clean energy through renewable sources.
He said, “In the next five years, we aim to provide sustainable energy access to one million connections comprising of residential houses, commercials, (SMEs and Corporate) and industries”
Our Correspondent reports that in 2022, Proparco and the European Union (EU) supported Nigerian bank, First City Monument Bank Ltd (FCMB), through the financing of a €325,000 technical assistance (TA) program.
This program intends to enable the bank develop its non-financial services offer, aimed at improving the financial inclusion of local Very Small and Medium Enterprises (VSEs) and women entrepreneurs, and to support them in their entrepreneurial process.
In the same year Proparco announced a $20million Trade Finance Guarantee Facility for Coronation Merchant Bank (CMB), to enable the bank establish and deepen partnerships with correspondent banks, thereby increasing access to trade finance in Nigeria.
It also, made a USD 5 million equity investment into Ventures Platform, a seed fund for Africa, designed to fill structural gaps by connecting underrepresented communities while improving livelihoods in Africa.
Fifty innovative startups will be supported, specifically in the development of IT services (in the logistics, financial, e-commerce, education, transport and health sectors). One such startup already supported is Traction Apps, which develops IT tools for SMEs to manage their payments, sales, invoicing, and inventories, etc.
Earlier in 2021, Proparco supported the Nigerian bank FCMB to strengthen its commitment to high-impact SMEs and climate projects.
The operation consisted of a USD 35 million loan and a EURIZ portfolio guarantee of NGN 5 billion (EUR 10 million equivalent) to support First City Monument Bank Ltd (FCMB) strategy to serve high-impact SMEs and for climate finance.
As a result, FCMB Bank’s client A4&T Power installed 1.5MWp of renewable capacity across mini-grids and customized systems for schools, health facilities, businesses, banks and communities impacting more than 100,000 people and creating 75 direct and indirect jobs.
Proparco structures its action globally around a shared vision of three key challenges, broken down in the new strategy such as acting for a more sustainable and resilient economy. This is to enable private sector actors to access economic opportunities and strengthening the resilience of local economic systems in the most vulnerable African economies and regions.
It dedicates action for the planet by targeting financing to have a greater impact on climate change mitigation and adaptation and on protecting biodiversity by helping our clients with their own climate transition.
