Nigeria Case Study: Financing Instruments for the Mini-Grid Market

GET.transform explores successful off-grid electrification regulation
Nigeria Centre for Disease Control, Gaduwa, Nigeria

75 mini-grids are currently in operation in Nigeria, showing a total capacity of approximately 7 MW and serving about 160,000 people. The latest GET.transform case study illustrates the country’s successful approach to establishing large-scale mini-grid programmes.

One of the success factors in Nigeria is the development of strong financing instruments, on top of a series of power sector reforms and regulations in place for the development of mini-grids. The clear instruments boost private sector confidence, and has allowed Nigeria to attract significant funding from donors like the World Bank and African Development Bank to support its electrification endeavours.

The Government of Nigeria uses both performance based grants and minimum subsidy tenders, with result-based financing (RBF) instruments used under both the Nigeria Electrification Project (NEP) and the Rural Electrification Fund (REF), to guarantee consistency in reimbursement of developers’ costs.

Despite the progress made, affordable commercial lending or community expectations of lower tariffs still affect profitability. As mini-grids are capable of supporting productive uses for the agricultural sector and small and medium enterprises, Nigeria will now look to tap into this potential to also promote rural economic development, income creation, and therefore more demand for electricity, which will further support sustainability of mini-grid businesses and local economies.

Find more success factors for off-grid electrification in the case studies from Ethiopia, Sierra Leone and Uganda.