The African Development Bank Group has approved a $500 million loan to Nigeria, marking a significant step toward transforming the nation’s electricity infrastructure and enhancing access to cleaner energy.
This loan, designated for the first phase of the Economic Governance and Energy Transition Support Program (EGET-SP), aims to close the financing gap in Nigeria’s Federal Budget for the 2024/25 fiscal year and support the implementation of the country’s new Electricity Act and Nigeria Energy Transition Plan.
This $500 million loan from the African Development Bank Group is a critical financial component in Nigeria’s strategy to overhaul its electricity sector. The loan will directly support the Nigerian government’s initiatives to decentralize the electricity supply industry, paving the way for increased investments from subnational governments and the private sector. This move is expected to foster a competitive and efficient energy market, addressing the longstanding issues in Nigeria’s power sector.
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Nigeria’s Ambitious Energy Transition Plan
Launched in August 2022, Nigeria’s Energy Transition Plan aims to develop 250 GW of installed electricity capacity by 2050, with a bold target of sourcing 90% of this capacity from renewable energy. The plan also seeks to provide clean cooking access to the majority of the population by 2030, utilizing a mix of liquefied petroleum gas (LPG), biogas, biofuels like ethanol, and electric cookstoves.
The new Electricity Act, passed in June 2023, supports this vision by decentralizing the electricity supply industry, which is expected to spur significant investments and innovation in the sector.
The Role of EGET-SP
The Economic Governance and Energy Transition Support Program (EGET-SP) will be crucial in delivering much-needed upgrades to Nigeria’s electricity infrastructure. By facilitating the transition of millions of households and businesses to cleaner and renewable energy sources, the program is set to improve energy access, reduce greenhouse gas emissions, and enhance the quality of life for Nigerians.
This initiative aligns with the African Development Bank Group’s new Ten-Year Strategy (2024-2033), its High 5s priorities, and the New Deal on Energy for Africa, which aims to achieve universal access to modern energy by 2030.
How Much More Will Nigeria Invest in its Power Sector?
Over the years, Nigeria has secured numerous loans amounting to billions of dollars aimed at improving its power sector. In 2018, the Nigerian government signed a $200 million loan agreement with the Japan International Cooperation Agency (JICA) to upgrade transmission lines and enhance power supply. Additionally, in 2020, the World Bank approved a $750 million Power Sector Recovery Operation (PSRO) loan to support critical reforms and attract private investments in the sector.
Tekedia reported that the World Bank has restructured a $350 million loan to Nigeria. This restructuring is specifically focused on ensuring the completion of seven critical power plants within educational institutions, a key component of the Nigeria Electrification Project (NEP).
These volumes of funds in investments in the power sector have, unfortunately, not abated Nigeria’s struggle with a stable electricity supply.
Nigeria’s power sector has been plagued by inefficiencies, inadequate infrastructure, and governance issues. Despite these substantial financial injections, the country still experiences frequent power outages and an unreliable electricity supply, hampering economic growth and affecting the daily lives of millions of Nigerians.
The EGET-SP, backed by the African Development Bank’s $500 million loan, represents a renewed effort to address these challenges comprehensively. While there is hope that the initiative will birth an improved power supply for Nigeria, decades of failures in developing and managing a sustainable power sector have cast doubt over the project.