The local commercial banks are planning some concessionary loans of about 15 to 20% interest rates for mini-grid operators under the Nigeria Energy Support Programme (NESP) II, it was learnt on Wednesday.
According to the Executive Director, Rural Electrification Fund (REF), Dr. Sanusi Ohaire, who spoke with The Nation at the mini-grid a certain scheme stakeholders workshop in Abuja, the banks are already conducting their due diligence on the sector.
He added that the banks have reached a “stage when they are comfortable to take that leap. It is a good thing because once we have the local commercial banks key into this project it is easy for us to scale up.”
But speaking in the workshop, the Advisor, Sustainable Energy Access (off-grid) NESP, Temitope Udo- Affia, revealed that the rate is for about five to seven years and a moratorium period.
The loan, according to her, will be denominated in Naira to remove the foreign exchange risk and provide access to large amount of credit.
She, however, revealed that the Program was yet to know how long the due diligence will take and the risk mitigation that the local financiers will need.
Her words: “In NESP 2, we will also be targeting access to local finance which is good for replication. We are currently in discussion with a few local commercial banks.
“So far we have received some terms from to 15 to 20% interest rate for over five to seven years, plus grace period. The strength is that these are Naira denominated loans so it reduces or removes the forex risk, and there is access to large amount of finance.
“The weakness is that we are not yet sure what the duration of the due diligence process will take. And what are the risk mitigation that these local financiers require in NESP 2. NESP 2 is also looking at concessionary finance, training finance and capital investments.”
Earlier, the Managing Director, Rural Electrification Agency (REA), Damilola Ogubiyi, the agency needs the financial institutions to come and key in with the flexibility of guarantee they would not have in any other project.
Right now, she said, the agency knows that “it is not just the rural people that need power a lot of urban places are also in need of power.”
She acknowledged the assistance of the USAID, GIZ with the help of the European Union in terms of funding, noting that they have taken the agency’s programmes and fit them into their plans instead of making decisions for Nigerian’s project from the diaspora.
She informed the stakeholders that the program which has a bias of encouraging women, has made it mandatory that there should be 20% of women participation in the project implementation.
Source: The Nation