By Milcah Tanimu
The Federal Government of Nigeria is set to introduce a solar subsidy program aimed at supporting developers and operators of solar mini-grids in underserved areas. This initiative, funded through a $750 million loan approved by the World Bank under the Distributed Access through Renewable Energy Scale-up (DARES) project, seeks to enhance electricity supply to households and micro, small, and medium-sized enterprises (MSMEs) through private sector-driven renewable energy projects.
According to the financing agreement signed by Minister of Finance Wale Edun and World Bank’s Country Director for Nigeria Shubham Chaudhuri, the loan will facilitate the implementation of privately owned and operated solar hybrid mini-grids. These mini-grids will cover isolated and interconnected areas, as well as solar rooftop solutions in participating states. Additionally, the program includes provisions for performance-based grants to eligible mini-grid operators based on new customer connections and capital expenditures.
The initiative also extends support for Standalone Solar (SAS) systems targeting households, MSMEs, and agribusinesses in rural areas. Performance-based grants will be provided to eligible companies for the rapid deployment of SAS solutions, along with the deployment of solar productive use of electricity (PUE) equipment.
The financing, structured into three segments totaling $750 million, will be managed by the Rural Electrification Agency (REA) and the Lagos State Electricity Board (LSEB), with collaboration from various government bodies including the Federal Ministry of Power, the Nigerian Electricity Management Services Agency (NEMSA), the Federal Ministry of Environment, the Nigerian Electrification Regulatory Commission (NERC), and the Federal Ministry of Finance.
Interest rates and repayment terms for the loan are delineated in the agreement, with a commitment charge rate applied to the unwithdrawn financing balance. This initiative underscores Nigeria’s commitment to advancing renewable energy access and addressing electricity challenges in underserved communities.