Financing Rural Energy Projects in Developing Countries: a case study of Nigeria

Date

2014-07

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De Montfort University

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Thesis or dissertation

Peer reviewed

Abstract

The recent awareness created by the UN Secretary General on the need to provide universal energy for all by 2030, which culminated in the declaration of 2012 as the “International Year of Sustainable Energy for All”, laid particular emphasis on the challenge of funding rural electrification in developing countries, and the need for innovative ways and financing options to be developed at national, regional and global levels towards achieving the ‘energy for all’ target of 2030. This research, as part of efforts towards remedying the rural electrification scourge of developing countries, particularly in Nigeria, provides financing options for rural electrification as far as the Nigerian Electricity Supply Industry (NESI) context is concerned.

The study does this by first identifying appropriate least-cost electrification supply mode (Grid, Mini-grid and Off-grid), and estimating the financing requirement for providing universal energy access to rural Nigeria by 2030, using a spatial electricity planning model called the ‘Network Planner’. Results from this research shows that by the end of the seventeen year planning period (2013-2030), 98% of currently un-electrified communities will be viable for grid expansion, while only 2% will be mini-grid compatible. This is based on a proposed MV line extension of 12,193,060 metres or (12,193 kilometres), LV line length proposal of 711,954,700 metres or (711,954 kilometres), and an estimated total cost of US$34.5 billion investment within the planning period. More so, a total number of 28.5 million households are to be electrified by 2030, which is equivalent to an estimated 125million people to be provided electricity by 2030.The analysis was done for the 36 states of Nigeria and the entire country, using data from the 774 Local Government Areas of Nigeria.

In addition to the Rural Electrification Fund (REF) of the FGN, which gets funding from yearly budgetary allocations from the FGN, fines obtained by NERC, surplus appropriation, interests accruing to the REF and donations from various sources, the following financing options were recommended for rural electrification in Nigeria: The establishment of a Renewable Energy Development Charge (REDC); The establishment of a Rural Electrification Fund Tax (REFT) Law; adopting rural electrification as part of Corporate Social Responsibilities (CSR) for oil and other companies; Exploring the option of Crowd-funding; and Establishing a Renewable Energy Private Equity Fund in Nigeria.

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Financing, Rural Electrification, Nigeria, Electricity

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