Despite the abundance of energy resources in Nigeria, there is a big gap between the demand and supply of final end-use energy (mainly fuels and electricity). In this country, access to modern energy services is poor, which constitutes a major barrier to exploiting economic opportunities and, consequently, to sustained economic growth.
Loans for renewable energy (RE) projects and energy efficiency (EE) measures provided through the local banking sector could potentially support small and medium-sized enterprises (SMEs) to increase their access to reliable, clean and affordable energy sources (even in remote off-grid locations) and more efficient energy use. This could in turn improve business as well as reduce greenhouse gas (GHG) emissions.
In this regard, KfW aims to:
- Contribute to implementing RE/EE financing via Nigerian financial institutions and widening the offering of financial products to the Nigerian customer;
- Improve the supply chain for RE/EE products and their maintenance in the country;
- Increase access to reliable and clean energy resources for SMEs, reduce primary energy consumption and/or final consumption of electricity and/or fuels, and reduce GHG to help mitigate climate change.
It concluded that a potential for EE and RE projects was present and a future feasibility study should confirm this.
The feasibility study consisted of the following three activities:
Detailed Market Analysis
- Rationale and recommendations for an energy demand and supply model;
- Analysis of the EE potential and projects in the SMEs;
- Sectorial characteristics for RE/EE measures.
Detailed Analysis of Financial Institutions
- Establishing a prequalification list of financial institutions to extend RE/EE loans;
- Analysis of potential partner banks;
- Development of a sample pipeline of projects.
Recommendations on how to:
- Implement a RE/EE loan program;
- Define the eligibility criteria for RE/EE projects and for product suppliers to be financed by financial institutions in Nigeria;
- Propose a sustainable structure for the envisaged RE/EE loan program;
- Define processes to identify the target groups for a RE/EE loan program;
- Define the indicators to measure the impact of the proposed program;
- Determine areas where technical assistance is necessary.
In relation to the above activities, Econoler proposed a structure by which to adapt a green credit line to the Nigerian EE/RE context.