BANKS EMERGE AS KEY FINANCIERS OF $20.5BN POWER GAP

Nigerian banks are increasingly taking on a larger role in financing renewable energy projects as the country seeks to close an estimated $20.5 billion funding gap in the electricity sector.

The Rural Electrification Agency recently signed a ₦50 billion financing agreement with Alpha Morgan Bank to support renewable energy developers working on electricity projects in underserved communities.

Under the facility, eligible developers can access revolving project finance, with individual projects able to secure up to ₦10 billion, subject to credit approval. Alpha Morgan Bank will also provide up to 70 per cent counterpart financing for qualifying projects.

The agreement reflects growing reliance on commercial banks to complement government funding and development finance as Nigeria works to expand electricity access and improve reliability.

According to the REA, Nigeria requires about $23 billion to address its electricity access and reliability challenges but has so far secured less than $2.5 billion, leaving a funding shortfall of approximately $20.5 billion.

REA Managing Director Abba Abubakar Aliyu said mobilising commercial financing was necessary to move renewable energy projects from approval to actual deployment.

Other Nigerian banks have also announced financing commitments to the renewable energy sector. Stanbic IBTC has committed $100 million, while Lotus Bank pledged ₦100 billion for renewable energy projects. FCMB has also provided about $188 million in financing for renewable energy initiatives.

The growing involvement of banks comes amid persistent financial challenges in Nigeria’s conventional electricity market, which have affected lenders with exposure to generation and distribution companies.

Renewable energy projects, particularly distributed solar and mini-grid systems, are increasingly being considered an alternative for expanding electricity access without relying solely on the financially constrained national grid.

Aliyu said electricity demand would continue to rise as population growth, digitalisation, artificial intelligence and data centres increase power consumption.

Stakeholders said stronger commercial financing would be essential to scaling renewable energy, improving electricity access and reducing the funding constraints holding back Nigeria’s power sector.