Banks emerge as key financiers of $20.5bn power gap

Nigeria is increasingly looking to deposit money banks to help close a $20.5bn financing gap in the electricity sector as the Federal Government struggles to mobilise the capital required to expand reliable power supply and accelerate renewable energy deployment.

The funding push is opening a new avenue for deposit money banks, some of which have been exposed to the financial difficulties of the conventional power sector after lending to investors in electricity generation and distribution.

The latest move was reinforced by a N50 billion financing agreement between the Rural Electrification Agency and Alpha Morgan Bank to support renewable energy developers working on electricity projects in underserved communities.

Under the facility, the bank will provide revolving project finance to eligible developers participating in REA programmes, particularly projects under the Distributed Access through Renewable Energy Scale-up initiative.

Individual developers can access up to N10bn, with loan maturities ranging from 12 to 24 months, subject to credit approval. Alpha Morgan Bank will also provide as much as 70 per cent counterpart financing for qualifying projects.

The agreement reflects the government’s growing reliance on private-sector capital to complement public funding and development finance as electricity demand rises across the country.

The REA said Nigeria requires about $23bn to close its electricity access and reliability gap but has so far secured less than $2.5bn, leaving an estimated $20.5bn funding shortfall.

The agency’s Managing Director and Chief Executive Officer, Abba Abubakar Aliyu, said mobilising commercial financing had become necessary to move renewable energy projects from approval to actual deployment.

He said the financing gap existed despite increasing global investment in renewable energy, adding that the government was seeking to attract more private capital into the sector.

The latest bank facility follows other financing commitments from Nigerian lenders. Stanbic IBTC has committed $100m, while Lotus Bank has pledged N100bn for renewable energy projects. FCMB has also provided about $188m in financing for renewable energy initiatives.

The growing participation of commercial banks comes against the backdrop of persistent liquidity challenges in Nigeria’s electricity market, which have affected lenders with exposure to conventional power generation and distribution assets.

Renewable energy, particularly distributed solar and mini-grid projects, is increasingly being viewed as an alternative route for expanding electricity access without relying solely on the financially constrained national grid.

Aliyu said demand for electricity would continue to increase as population growth, digitalisation, artificial intelligence and data centres expand power consumption.

Doyin Anyaehie, Executive Director of Alpha Morgan Bank, said the partnership was aimed at addressing one of the country’s most critical development constraints.

She noted that dependable electricity remained essential to economic activity, particularly for small businesses and communities that struggle to afford alternative sources of power.