Future-proofing the expanding market: Recommendations for improving the bankability of the mini-grid regulatory framework in Nigeria
Over the last few years, mini-grids have played a key role in implementing Nigeria’s energy access and sustainable energy goals. They are now widely acknowledged as an integral component of the country’s energy ecosystem, delivering sustainable and reliable electricity access to nearly 27 thousand households living in areas that, until now, were out of reach of – or unreliably served by – the main grid infrastructure.
In 2016, two significant developments took place in the Nigerian energy sector. First, the Rural Electrification Agency (REA) released the Rural Electrification Strategy and Implementation Plan (RESIP), which acknowledged mini-grids’ role in closing the energy access gap and improving supply. In the same year, the Nigerian Electricity Regulatory Commission (NERC) approved comprehensive mini-grid regulations – NERC Regulation for Mini-grids 2016 (from here onwards referred to as ‘NERC mini-grid regulations’) – covering a broad set of issues, from mini-grid licensing to quality standards and tariff design.
These and related policy and regulatory developments have served as a significant breakthrough, which has firmly established Nigeria as one of the leading mini-grid markets in Africa – an achievement that was celebrated in the first Mini-grid State of the Market report and the recent ESMAP market report.
Energy sector policies, regulations, and governance need to evolve together with the rapidly growing sector. Six years since NERC’s mini-grid regulations and RESIP came into place, and with the Nigeria Electrification Programme (NEP) implementation now well underway and continuously scaling up, it is time to take stock of what has worked so far and what requires further improvement or updating to ensure the bankability of the sector’s regulatory and policy frameworks and their practical implementation.
This is critical for the successful and timely implementation of the NEP targets. Following a growth period that has seen the number of installations nearly triple over the past six years and as large-scale sector support programmes become fully operational, the sector is ready to scale up. However, the remaining lack of clarity on several policy and regulatory aspects and their implementation have maintained the pre-existing risk for mini-grid developers and their financiers, raising the cost of capital and holding back the pace of sector growth.
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