A new report by the Lagos-based financial advisory company, Financial Derivatives Limited has advised the federal government to incentivise the private sector in investing in renewable energy through cheaper financing and lower taxes.

In its latest economic report, the company stressed that lending rates in Nigeria – currently at an average of 17.5 per cent – were too high for investors who require capital to start up businesses such as in renewable energy. The report noted that countries such as China, United States and India, which are leading the renewable energy revolution, offer substantially lower rates.

According to the report, the average commercial bank lending rate in India, for example, was about 9.45 per cent per annum. In the US and China, the rates are at an average of 4.3 per cent per annum, the report revealed. The report also noted that Nigeria’s installed electricity capacity is 12,522 megawatts (MW), well below the current demand of 98,000MW.

“Nigeria’s total electricity mix is largely dominated by non-renewable energy despite a vast potential in renewable sources,” it stated. According to the report, its exploration and adoption through private investments, offer a probable solution to the power challenges in the country. The report added that attracting private sector investment into this area demands business-friendly measures such as lower interest and tax rates.