The Federal Government of Nigeria has secured a $750 million loan from the World Bank to provide subsidies to developers and operators of solar mini-grids in unserved and underserved areas across the country.
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The loan, approved under the Distributed Access through Renewable Energy Scale-up (DARES) project, aims to increase the supply of electricity to households and micro, small, and medium-sized enterprises (MSMEs) through private sector-led distributed renewable energy initiatives.
The financing agreement for the loan was signed by the Minister of Finance, Wale Edun, on March 31, 2024, and World Bank’s Country Director for Nigeria, Shubham Chaudhuri, on February 19, 2024. The loan will be used to provide Minimum Capital Cost Subsidies to selected developers and operators of isolated mini-grids, interconnected mini-grids, and solar rooftop solutions in participating states.
In addition to the subsidy, the federal government plans to provide performance-based grants to eligible mini-grid operators based on new customer connections for isolated mini-grids and a percentage of capital expenditures for interconnected mini-grid projects. The grant will also cover Standalone Solar (SAS) Systems for households, MSMEs, and agribusinesses, supporting the rapid deployment of SAS solutions in rural and underserved areas through supply and demand-side support.
The World Bank loan is structured into three distinct segments, with credits of $350 million, $250 million, and $150 million, each earmarked for different facets of the project and subject to currency conversions as necessary.
The primary implementers of the project are the Rural Electrification Agency (REA) and the Lagos State Electricity Board (LSEB), with significant support from 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.
Alongside varying interest rates, the principal payments will be done as follows:
The project’s loan terms are delineated with a Maximum Commitment Charge Rate of 1/2 of 1% per annum on the unwithdrawn financing balance.
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