To tackle Nigeria's long-standing power crisis, the Federal Government is negotiating with commercial banks and other investors to secure $23.2 billion in funding for its ambitious plan to achieve universal electricity access.

The plan aims to provide 120 million people across 22 million households with electricity within five to ten years. To make this happen, Nigeria requires a total investment of $23.2 billion, with $14.1 billion needed upfront.

This initial investment constitutes 60% of the total amount required.

Currently, Nigeria generates just 5,500 megawatts of electricity. The universal electrification project is set to increase this supply, aiming to provide 11,499 gigawatt-hours of electricity annually to the 22 million unelectrified households. Various stakeholders will contribute to the upfront investment phase of the project.

In an exclusive interview, Abba Aliyu, the Managing Director/Chief Executive Officer of the Rural Electrification Agency (REA), highlighted the commitment of President Bola Tinubu and Minister of Power, Adebayo Adelabu, to achieving universal electricity access for Nigeria.

Aliyu also revealed that several banks have already committed funds to the sector, and discussions are still ongoing with other institutions. REA, as a Federal Government agency, plays a key role in this initiative.

The grid connection is expected to require $5.5 billion, solar home systems will need $11.1 billion, and mini-grid connections are projected to cost $6.6 billion.

Aliyu disclosed that First City Monument Bank and Stanbic IBTC, in collaboration with Standard Bank, have each committed $100 million. Talks are also ongoing with Access Bank, Zenith Bank, and other financial institutions.

He emphasized that although the $23.2 billion required for nationwide electricity access is substantial, banks and other private investors are confident that they will receive returns on their investments through tariffs, making funding more accessible.

Aliyu revealed that the REA, along with other agencies, conducted surveys in each state to determine the most effective ways to electrify Nigeria. He pointed out that mini-grids and solar home systems would be the primary solution, as grid extension is not viable in many states.

The REA boss noted that funds from local banks would complement contributions from the government, the World Bank, the African Development Bank, and other development partners.

“The wisdom of the current government is to drive private sector funding into the sector. The Minister of Power secured the Distributed Access through Renewable Energy Scale-up (DARES)  $750m, and we have access to that funding. That funding will catalyse a private sector funding of $1.1bn. As we bring the public funding, it will catalyse private sector funding to combine to do more,” he said.

Aliyu disclosed that the REA is targeting 17.5 million Nigerians under the DARES programme. "The programme will have $750 million from us, and the private sector will contribute $1.1 billion, making a total of $1.85 billion," he said.

He mentioned that the power minister is also focused on obtaining further co-financing from the Japan International Cooperation Agency, as the Japanese government has approved $190 million to provide electricity to an additional 1.83 million Nigerians.

He explained that the initiative will also attract nearly an additional $300 million in private sector financing. "The Federal Government is creating public funding to stimulate private sector investment," he said. 

"When the President visited Tanzania, the International Finance Corporation signed a $20 million financing deal with four Nigerian local developers."

"This financing will support the developers with $20 million in debt financing. Additionally, discussions are underway for $700 million from the Desert-to-Power initiative, funded by the African Development Bank. 

This $700 million will leverage another $1 billion in private sector investment. All of these efforts are part of the strategy to secure the necessary funds for achieving universal electricity access."

He also highlighted commitments from banks, including First City Monument Bank, which has pledged $100 million in debt financing, and Stanbic IBTC, along with Standard Bank, which also committed $100 million. 

"In the last few days, I met with the management of Access Bank and their sustainable finance group, who are working to secure funding for the sector. The same is true for Zenith Bank, as well as several other Nigerian banks that are committed to the project," he added.

 "I have no doubt about financing; we will secure the necessary funds to meet our goals."

When asked what the banks would receive in return, he explained that the investors would recover their funds through the tariffs paid by electricity consumers using the mini grids.

“This mini-grid investment is seen as infrastructure financing. You put in your finances and recoup the finances with your predetermined internal rate of return over a period of time from the tariffs because a tariff is a function of paying back the capital cost, paying for O&M (Operations & Maintenance), and paying for capital appreciation or capital gain. These are the three components that make a tariff. And that is why we built the entire methodology in project financing.

“So, the banks or the financier or even anybody can put in some billions of naira to finance a developer to build a mini-grid, and you recoup your investment from the monthly tariff that comes in and goes back to the developer,” he stated.

Aliyu stated that despite concerns about low recovery rates faced by distribution companies, particularly regarding affordability, investments in mini grids have proven successful, with a recovery rate of about 95 percent.

He added, “I would like to debunk the myths surrounding affordability and payment. Based on the data we have, we see nearly a 95 percent collection rate. People in rural areas do pay for the electricity.”

He pointed out that in terms of collection and commercial losses, rural dwellers perform better than those in urban areas, as there are fewer commercial losses in rural regions.

He emphasized that rural communities pay well, boasting a 95% collection rate. This success, he explained, is due to 100% metering and the implementation of a SCADA system, which allows for the detection of any losses. 

He added that the stability of the electricity supply encourages payment, with the communities even requesting it.

He also shared an example from the past two months, when he commissioned a one-megawatt interconnected mini-grid project on the border of Ogun and Lagos States, in Ibaragun. 

He mentioned that neighboring communities were eager to switch from their current electricity providers, asking for the solar hybrid interconnected mini grid to ensure reliable and sustainable power.

Aliyu advocated for giving Nigerians the freedom to choose their power provider, believing this would improve reliability and allow consumers more control over their electricity costs. He noted that the Rural Electrification Agency (REA) has faced challenges in intervening in communities seeking reliable power due to the agency's limited mandate.

To address this, Aliyu suggested renaming the REA to the Renewable Electrification Agency. This change would enable the agency to expand its focus beyond rural and pre-urban areas, giving it the flexibility to support a broader range of projects.

He also pointed to India’s two-grid system as an example. In India, people can choose between the main grid and the under-grid, switching as needed. Aliyu argued that this system enhances reliability and allows consumers to manage their electricity consumption and tariff costs more effectively.

The document also outlines that solar home systems will account for the largest share of connections, making up 45% of the least-cost mix. Mini grids will provide 31%, while grid extensions will contribute 24%.

For mini-grids, the private sector, particularly mini-grid developers, is expected to handle the investment, which will likely be financed through a mix of debt, equity, and grants. In contrast, consumers will bear the full cost for solar home systems.

A document reviewed by our correspondent reveals that in the universal electricity access plan, the national grid capital expenditure (CAPEX) will be shared between the public sector (40%) and the private sector (60%), in line with the ownership structure of the Distribution Companies (DisCos).

Factors driving these allocations include demand levels, proximity to the grid, and population density. Solar home systems are considered most suitable for dispersed rural areas, grid extensions for urban locations, and mini-grids for densely populated off-grid regions.

The report stated, “Grid expansion is the least costly for settlements close to the grid (i.e., within 10km) and with moderate to high population densities. Mini-grids serve as an intermediate solution, catering to areas with a balance of population density and distance. Solar home systems are the primary solution for remote, low-density areas, as they are the most cost-effective option for widely dispersed populations.”

Our correspondent learned that 9.9 million households (45%) will be electrified through solar home systems, primarily in sparsely populated areas.

Meanwhile, 5.3 million households (24%) will receive power through grid connections in densely populated areas near existing grid infrastructure. The remaining 6.9 million households (31%) will be connected via mini grids in densely populated areas further from the existing grid infrastructure.

The report revealed that Nigeria’s 36 states and the Federal Capital Territory were assessed across five pillars: Policy, Funding, Infrastructure, Capacity, and Data. It showed that Lagos was the only state ready for universal electricity access, with 30 states classified as being in the ‘early’ to ‘developing’ stages and six states in the ‘progressing’ stage.

While most states have adopted the Electricity Act 2023, the report pointed out that legal frameworks remain underdeveloped. Institutional fragmentation, inter-agency conflicts, and unclear mandates are significant challenges. 

The report also stated that one in four states requires intensive support to move beyond planning and into implementation. Additionally, it was noted that most states lack dedicated electricity budgets, with funding often hidden within broader infrastructure allocations.