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CBN introduces solar energy intervention facility to connect 25 million individuals

Facility is expected to incentive the creation of 250,000 new jobs in the energy sector

BY David Olalele

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Solar energy facility by CBN
Solar powered energy for household use

The Central Bank of Nigeria (CBN) has introduced the Solar Connection Intervention Facility to complement the federal government’s effort in providing affordable electricity to rural dwellers.

The CBN explained that it is going to achieve the goal through the provision of long term low-interest credit facilities.

The apex bank made this known on Monday, September 14, in a statement which is sub-divided into two sections including upstream participants and downstream participants.

Read the full statement below:

The pathways to energy access, financial inclusion, and poverty reduction are closely linked and requires a 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 the total market potential.

To support the economic recovery in response to the COVID-19 pandemic, the Federal Government of Nigeria (FGN) has launched an initiative as part of the Economic Sustainability Plan (ESP) to achieve the roll-out of 5 million new solar-based connections in communities that are not grid-connected.

This program is expected to generate an additional N7 billion increase in tax revenues per annum and $10 million in annual import substitution.

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.

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.

For the upstream participants, the guidelines state that the facility shall not be used to finance the importation of fully assembled solar components and balance of system.

Funding shall not exceed 70 percent of the total cost of the project and the facilities granted shall have a maximum tenor of up to 10 years as determined by the project’s cash flow profile but not exceeding 31st December 2030.

Working capital the facility shall be for one year with provision for roll-over, not more than twice (i.e maximum tenor of 3 years).

The facility shall be administered at an “all-in” interest rate of not more than 9 percent per annum.

However, as part of the Bank’s Covid-19 relief package, the interest rate to be charged up to 28th February 2021 shall not exceed 5 percent per annum.

Interest shall be payable by the loan beneficiaries in accordance with the approved repayment schedule outlined in the Transaction Documents The “all-in” the interest rate of 9% to be shared as follows: a) Participating Financial Institution 6% b) Sponsor (CBN) 3% PFIs are to remit the interest due to the CBN on a quarterly basis not later than 10 days after the end of the quarter.

According to the guidelines, a downstream participant is any company or body corporate involved in: distribution and after-sales support of solar home systems (SHS), mini-grid project development activities including site identification and assessment, design and planning and customer acquisition.

Activities that shall not be financed by this Facility include: Sales or deployment of fully (100%) imported solar home systems components with no proof of existing local content or credible plan for near-term integration of local content, and deployment of mini grid projects with 100% imported components solar PV and Balance of System with no proof of existing local content or credible plan for near-term integration of local content.

The working capital for this category is to be determined as a percentage of the average of 3 year adjusted projected cash flows subject to the maximum limit of N500 million.

The tenor is put at 12 months subject to roll-over, not more than twice (i. e. maximum tenor of 3 years) (depending on nature and cash flow stream), and the interest rate is 10 percent.

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