Nigerian Government Announces N500M Intervention Fund to Support Local Solar Companies; Here is How to Apply

The Central Bank of Nigeria (CBN) has announced a solar intervention fund that will offer Solar companies credit facility of up to N500 million to provide a solar-based connection for off-grid rural communities.

The apex bank announced the funds in a document titled the ‘Framework for implementation of the solar connection facility’ released on Monday.

According to the document, the initiative is part of the Federal Government’s Economic Sustainability Plan (ESP) to achieve the roll-out of 5 million new solar-based connections in communities that are not grid-connected.

“The central bank has introduced the solar connection intervention facility to complement the Federal Government’s effort of providing affordable electricity to rural dwellers through the provision of long-term low-interest credit facilities to the Nigeria Electrification Project pre-qualified home solar value chain players that include manufacturers and assemblers of solar components and off-grid energy retailers in the country.”

To create 250,000 Jobs

Highlighting the potential of the industry, the CBN pointed out that the rapid scale of pay-as-you-go off-grid technologies would create a $2bn (N7.5tn) annual market opportunity. Penetration is presently less than 5% of the total market potential.

It also added that the initiative was expected to generate an additional N7bn increase in tax revenues per annum and $10m in annual import substitution.

Apart from the revenue benefits, the CBN explained that the initiative will expand energy access to about 25 million individuals (five million new connections) through the provision of solar home systems or connection to a mini-grid.

It also plans to create 250,000 new jobs in the energy sector as well as increase local content in the off-grid solar value chain and facilitate the growth of the local manufacturing industry.

Details about the N500m Credit Facility

The credit facility is available for upstream and downstream solar companies performing activities relating to manufacturing and assembly of solar components and balance of system, the establishment of solar manufacturing facilities, repair and maintenance of solar home systems among other services.

Solar companies can get up to N500 million in working capital from the intervention fund. According to the CBN, the amount would “be determined as a percentage of the average of three years adjusted projected cash flows subject to the maximum limit of N500m.”

The bank also revealed that the facility would be administered at an “all-in” interest rate of not more than 9% per annum. It also granted a maximum tenor of up to 10 years.

However, as part of its COVID-19 relief package, the interest rate to be charged up to February 28, 2021, would not exceed 5% per annum.

Eligibiliy

Interested solar companies must be able to prove they have the following requirements:
– Technical capacity up to the quality standards instituted by the Rural Electrification Agency (REA) and/or Standards Organizations of Nigeria (SON)
– Financial capacity to repay the loan through a sufficient debt service current ratio (DSCR)
– Off-take agreement with one or more Nigeria Electrification Project (NEP) prequalified companies.
– It must be Nigerian-owned entities or consortiums involving a minimum of 70% local ownership and demonstrate a commitment to employing local
talent with a detailed vocational and technical training plan.

How to Apply

Eligible Solar companies should submit its request to the Participating Financial Institutions (PFI) like GTBank.

Along with the request, documents like certificate of incorporation, MEMART, Form CAC 2A, Off-taker agreements with prequalified NEP companies and 3 years audited financial statements for existing companies or a 6-months of Management Account for new companies.

A business plan including completed Environmental and Social Management System (ESMS) template, organizational chart, health and safety guidelines, bill of Materials, detailed vocational and technical training plan.

The request will be processed and approved internally by the PFI. It will then be forwarded to the CBN for final approval and release of funds.

To begin, register here.

Only Clause: Local component requirement

The CBN warned that the fund must not be used for sales or deployment of fully (100 per cent) imported solar home systems or mini-grid projects components with no proof of existing local content or credible plan for near-term integration of local content.

However, the current quality of local contents may it difficult for many Nigerian solar companies to meet the requirement.

A solar installer, Babawale Solomon told Technext that they prefer imported components to Nigerian component because it’s easier to repair and last longer.

Another engineer, Goodness expressed that local manufacturers do not have access to raw materials so they often repurpose components from spoilt solar systems thereby reducing the life span of their products.

While the manufacturing sector for solar components is growing, there is a major gap in quality that may affect the systems to be deployed if not improved.