FG Launches Solar Intervention Fund, with N500m Maximum Access Limit
Nigeria, through the Central Bank of Nigeria (CBN) has introduced a solar intervention fund that will grant obligors access to credit facility not exceeding N500 million maximum. The CBN said the objective is to provide affordable electricity to rural dwellers in the country.
In a document released on Monday, entitled, ‘Framework for implementation of the solar connection facility,’ the apex bank said it is introducing the solar connection intervention facility to complement the federal government’s effort of providing affordable electricity to rural dwellers through the provision of long-term low-interest credit facilities to the Nigeria Electrification Project pre-qualified home solar value chain players that include manufacturers and assemblers of solar components and off-grid energy retailers in the country.
CBN said the working capital amount would be determined as a percentage of the average of three year adjusted projected cash flows subject to the maximum of limit of N500 million.
It also said the pathways to energy access, financial inclusion and poverty reduction were closely linked and required rapid scale of pay-as-you-go off-grid technologies that would create a $2 billion (about N7.5 trillion) annual market opportunity, with penetration currently less than five per cent of total market potential.
According to the apex bank, the federal government launched the initiative as part of the economic sustainability plan to achieve the rollout of five million new solar-based connections in communities that were not grid-connected. The programme was expected to generate an additional N7 billion increase in tax revenues per annum and $10 million in annual import substitution.
The solar connection scheme is a federal government initiative, which aims to expand energy access to 25 million individuals (five million new connections) through the provision of solar home systems or connection to a mini grid.
Other objectives are to increase local content in the off-grid solar value chain and facilitate the growth of the local manufacturing industry; as well as incentivize the creation of 250,000 new jobs in the energy sector.
The facility would be administered at an “all-in” interest rate of not more than nine per cent per annum. As part of its COVID-19 relief package, the interest rate to be charged up to February 28, 2021 would not exceed five per cent per annum, the apex bank explained.
The Bank warned however that the fund cannot be used for other purposes, including to finance activities such as sales or deployment of fully (100%) imported solar home systems components with no proof of existing local content or credible plan for near-term integration of local content.
By Chibisi Ohakah, Abuja