Nigeria targets N7bn new tax revenues from CBN-backed solar connection facility

Charles Abuede

• Project to raise $10m in import substitution revenue annually

• FG to expand energy access to 25 million individuals through the provision of solar connection to a mini-grid

 As part of efforts to support the federal government of Nigeria (FGN) initiatives on the economic recovery plan in response to the COVID-19 pandemic, the Central Bank of Nigeria (CBN) has introduced the Solar Connection Intervention Facility to complement the government’s effort at providing affordable electricity to rural dwellers.

The CBN in the framework for implementation of the solar connection facility by its development finance department on Monday, the FG launched the initiative as part of its Economic Sustainability Plan (ESP) to achieve the roll-out of five million new solar-based connections in communities that are not grid-connected. This programme, however, is expected to generate an additional N7 billion increase in tax revenues annually and $10 million in annual import substitution.

“The pathways to energy access, financial inclusion and poverty reduction are closely linked and require rapid scale of pay-as-you-go (PAYG) off-grid technologies that will create a $2 billion (~N7.5 trillion) annual market opportunity as penetration today is less than 5% of total market potential,” the framework reads.

The achievement of the newly launched initiative, as cited in the framework, will be through the provision of long term low-interest credit facilities to the Nigeria Electrification Project (NEP) pre-qualified home solar value chain players that include manufacturers and assemblers of solar components and off-grid energy retailers in the country.

The facility from the CBN will see:

1. Upstream participant which includes the manufacturers, assemblers, those in repair and maintenance, research and development and any other off-grid body corporates in the solar components value chain receive funding not more than 70 per cent of the total project cost from the CBN and participating financial institutions on an interest rate not exceeding 9 per cent per annum for a 10-year tenor.

2. Downstream participants which include solar components distributors, mini-grid project developers, those in engineering, procurement and /or construction and other retail base off-grid body corporates in the solar components value chain receive funding not more than 70 per cent of the total project cost from the CBN and participating financial institutions on an interest rate of 10 per cent for up to 7 years tenor and a 2-year moratorium for Mini-grid developers; and 10 per cent interest for a 5-year tenor and 6 months moratorium for solar components distributors.

Meanwhile, a periodic joint monitoring and evaluation (M&E) of financed projects shall be conducted by CBN in union with Rural Electrification Agency (REA) and the respective PFIs.

The solar connection scheme is a federal government initiative whose objectives are to expanding energy access to 25 million individuals (5 million new connections) through the provision of solar home systems (SHS) or connection to a mini-grid; increasing local content in the off-grid solar value chain and facilitating the growth of the local manufacturing industry; and incentivizing the creation of 250,000 new jobs in the energy sector