The United Kingdom(UK) alongside InfraCredit is providing up to £10 million of concessional aid to reduce the risk for pension and insurance funds to invest in energy access projects and support Nigeria’s COP26 commitments.
The financing will help Nigerian investors focus on low carbon energy, supporting off-grid, low-carbon energy projects.
The UK Minister for Africa, Latin and Caribbean, Vicky Ford said the £10 million will be blended to de-risk transactions and therefore mobilise domestic institutional investment from local pension funds, insurance firms and other local institutional investors.
Ford added that This will help scale up domestic financing for eligible off-grid clean energy infrastructures, such as solar mini-grid and home systems, clean cooking infrastructure and SME cold storage infrastructure in Nigeria.
“The UK is committed to increasing both renewable energy and energy access in Nigeria, driving clean, sustainable and resilient growth.
“As the world looks to transition to clean growth, we are witnessing an era-defining opportunity for the private sector. This transaction is particularly exciting as it brings together UK government support with the institutional capital which is essential to growing the sector at scale.”
This innovative blended finance initiative will provide affordable long-term financing from local investors for the low carbon energy sector to support the scaling up of off-grid low carbon energy projects in unserved and underserved communities.
“This initiative will support the implementation of Nigeria’s Nationally Determined Contributions(NDC) plan, which Nigeria submitted to the UNFCCC before COP26, its Energy Transition Plan, which was presented by the Nigerian government at COP26, and Nigeria’s plans to increase energy access including the Solar Naija programme”.
The Minister of State for Power, Goddy Jeddy Agba in his remarks pointed out that Nigeria kickstarted its clean energy transition as far back as 2014 with the first Solar Hybrid Projects executed across Lagos, Kaduna, and the Borno States.
Agba maintained that since then, Nigeria has continued to raise ambition by putting requisite regulations and policies in place, developing investor-grade data for project development, and securing the $550 million NEP facility from the World Bank and African Development Bank this is currently the largest clean energy access programme across the continent.
“This trajectory culminated in the development of Nigeria’s Energy Transition Plan at the end of 2021, with the support from the UK Government’s Energy Transition Council”.
“This plan showed the pathway to an energized economy and carbon neutrality by 2060, and highlighted the need for additional investments of S410 billion above business as usual over the next 40 years”.
“Whereas all efforts have been geared towards unlocking private sector activity in the clean energy transition, one major challenge continues to be private sector access to local currency financing”.
“This is where local institutions such as pension and insurance funds have a key role to play, as only these institutions possess the scale of local currency liquidity required to accelerate the transition”.
“It is important for international partners to start contemplating on how best they can collaborate with these institutions to define blended finance models that combine local institutional capital with foreign currency-denominated support to unlock local currency financing of off-grid development in a large scale”.
The MD/CEO of Nigerian Sovereign Investment Authority (NSIA), and Chairman of InfraCredit, Uche Orji, of said InfraCredit, is pleased to be working with FCDO to mobilise private investment from domestic pension funds and other institutional investors into such an important developmental area as low carbon energy access.
“This programme is aligned with NSIA’s other clean energy initiatives which aim to deliver up to 250-500MW of renewable energy capacity in Nigeria that will reduce annual CO2 emissions, alleviate poverty, create jobs and support local economic growth.”
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