Nigeria secures $1.25 billion in electricity loans from World Bank and AfDB under Tinubu

Nigeria has secured at least $1.25 billion in loans from the World Bank and the African Development Bank (AfDB) to boost electricity supplies under President Bola Tinubu.

December 14, 2023 World Bank approved the $750 million Distributed Access through Renewable Energy Scale-up (DARES) project in Nigeria.

Recently, on July 31, 2024, the African Development Bank Group (AfDB) approved a $500 million loan to the Federal Republic of Nigeria to help transform the country’s energy infrastructure and facilitate access to cleaner energy sources.

On the World Bank’s $750 million loan to Nigeria under the DARES program

The World Bank loan is divided into three separate segments that together form a financial package worth $750 million. The package is divided into loans of $350 million, $250 million and $150 million, each earmarked for different aspects of the project and subject to conversion as needed.

The Rural Electrification Agency (REA) and Lagos State Electricity Board (LSEB) are the main implementers of this project, with significant support from the Federal Ministry of Power, Nigerian Electricity Management Agency (NEMSA), Federal Ministry of Environment, Nigerian Electrification Regulatory Commission (NERC) and the Federal Ministry of Finance.

According to a press release announcing the loan approval, the $750 million loan from the International Development Association (IDA) will be used to leverage more than $1 billion from private investors and additional financing from various partners.

Donations include $100 million from the Global Energy Alliance for People and Planet and $200 million from the Japan International Cooperation Agency (JICA).

The initiative also includes the United States Agency for International Development (USAID), the German Development Agency (GIZ), Sustainable Energy for All (SEforAll) and the African Development Bank (AfDB).

This ambitious DARES project aims to provide over 17.5 million Nigerians with improved access to electricity through distributed renewable energy solutions. The aim is to address the electricity access deficit.

The DARES program will help the Federal Government of Nigeria coordinate and fund off-grid electrification efforts. It will also help states develop capacity and policies to promote rooftop solar energy.

Nairametrics had earlier reported that the Federal Government was planning provide subsidies to developers and operators of solar mini-grids in unserved or underserved areas of the countryThe grant will be provided through a World Bank-approved $750 million loan under the Distributed Access through Renewable Energy Scale-up (DARES) project.

On AfDB’s $500 million electricity loan to Nigeria

According to an AfDB statement, the funds will be used to finance the first phase of the Economic Governance and Energy Transition Support Programme (EGET-SP), which aims to transform the country’s electricity infrastructure and improve access to cleaner energy sources.

The statement also noted that the loan will help close the funding gap in the federal budget for fiscal year 2024/25, particularly by supporting the implementation of the new Nigeria Electricity Act and the Nigeria Energy Transformation Plan. These initiatives aim to decentralize the electricity supply sector and attract investment from subnational governments and the private sector.

What you should know

Nigeria had been approved for loans worth close to $2 billion from international organisations, especially the World Bank, before Bola Tinubu became president.

For example, on June 23, 2020, the World Bank approved $750 million loan for Power Sector Recovery Operation (PSRO) project to enhance the reliability of electricity supply, achieve financial and fiscal stability and strengthen the accountability of the energy sector in Nigeria.

Nigeria also received approval of $500 million on February 4, 2021 for the Nigeria Distribution Sector Recovery Program (DISREP) aimed at improving the electricity distribution sector in Nigeria. The program performed below expectations, leading to World Bank plans oversight missionscheduled for July 8-12, 2024, in response to ongoing challenges and unsatisfactory progress of the program.

There is also the Nigeria Electrification Project (NEP), for which Nigeria received an approval of $350 million on June 27, 2018. The World Bank recently restructured loan to Nigeria to ensure completion of seven key power plants in educational institutions, strengthening the country’s energy infrastructure. According to the restructuring document, this restructuring includes extending the project closure date, and the new deadline for the loan project has been set at December 31, 2024.

Despite the loans granted to Nigeria, the energy sector is still struggling as Nigerians face electricity shortages.