Nigeria receives $500m from AfDB to develop energy and clean energy sector

The African Development Bank (AfDB) Group has approved a $500 million loan for Nigeria to transform the country’s energy infrastructure and improve access to cleaner energy sources.

In a statement issued by the bank on Thursday, the African lender said the loan would be used to finance the first phase of the Economic Governance and Energy Transition Support Programme (EGET-SP).

The statement said: “The Board of Directors of the African Development Bank Group has approved a $500 million loan to the Federal Republic of Nigeria to finance the first phase of the Economic Governance and Energy Transformation Support Programme (EGET-SP), a new programme aimed at accelerating the transformation of the country’s electricity infrastructure and improving access to cleaner energy sources.”

Also read: Nigeria’s GDP growth set to improve by 3.4% by 2025 — AFDB

The bank also said the loan will help plug the funding gap in the federal budget for the 2024/25 fiscal year and will specifically support the implementation of the new Nigeria Electricity Act and the Nigeria Energy Transformation Plan.

These initiatives aim to decentralise the electricity supply sector and attract investment from regional authorities and the private sector.

Nigeria unveiled its energy transition plan in August 2022 and passed a new electricity bill in June 2023. The plan aims to develop 250 gigawatts (GW) of installed electricity capacity by 2050, with 90 percent of that capacity coming from renewable sources.

The aim is to provide clean cooking solutions to the majority of the population by 2030, using liquefied petroleum gas (LPG), biogas, biofuels such as ethanol and electric stoves.

EGET-SP will support this policy by modernising Nigeria’s electricity infrastructure and accelerating the transition of millions of households and businesses to cleaner, renewable energy sources, the AfDB said.

The banking group’s $500 million in support for Nigeria is part of a series of initiatives aimed at supporting the country’s economic growth, poverty reduction and climate action.

The EGET-SP programme is in line with the new 10-year AfDB strategy (2024–2033), the High 5s priorities and the New Energy Deal for Africa, which aims to ensure universal access to modern energy by 2030.

The federal government’s plan to eliminate estimated billing by the end of 2024 is facing serious headwinds, as evidenced by the recent increase in the number of customers receiving estimated billing across all Nigerian electricity distribution companies (DisCos).

The “Nigeria Electricity Consumption Report” recently released by the National Bureau of Statistics (NBS) for the first quarter of 2024 showed a 10 per cent increase in estimated customer bills compared to the previous quarter, with the billing gap continuing to widen.

The number of customers on the estimated bill increased from 5.83 million in the fourth quarter (Q4) of 2023 to 6.43 million in the first quarter (Q1) of 2024, an increase of 10 percent.

Year-over-year, the number of estimated invoiced customers also increased significantly, up 8 percent from 5.96 million in Q1 2023 to Q1 2024.

Also read: Nigeria’s growth forecast threatened by rising inflation and food prices — AfDB

The increase is because the government continues to subsidize non-Group A customers, although Group A customers who receive estimated billing still have to pay based on the estimates.

This situation highlights a persistent problem in the Nigerian energy sector: the inability to adequately measure energy consumption of all customers to close metering discrepancies, leading to reliance on estimated billing despite various initiatives.

The recently approved AfDB loan comes at the same time as a World Bank oversight mission to Nigeria, which was intended to respond to the failure to meet expectations for a $500 million loan to improve the country’s electricity distribution sector.

The World Bank also restructured a $350 million loan to Nigeria to ensure the completion of seven key power plants at educational institutions, strengthening the country’s energy infrastructure.

According to the Nigeria Electrification Project (NEP) Restructuring Document, the restructuring comes with an extension of the project completion date, with the new deadline set at December 31, 2024.