Energy finance experts and stakeholders have identified green bonds as a viable pathway for mobilising domestic capital to address Nigeria’s persistent electricity access deficit, estimated to affect about 85 million people.
This formed the focus of discussions at the 117th Power Dialogue convened by the Electricity Hub in Abuja last week, where industry players examined strategies for structuring green bond instruments to fund distributed renewable energy (DRE) projects at scale.
The session, titled “Mobilising Local Capital: Green Bonds for Energy Access,” was moderated by Lucy Eworo, Senior Portfolio Officer at the African Enterprise Challenge Fund (AECF), and featured Musa Obed, a capital structuring and investment expert.
Setting the context, Eworo noted that while solutions such as solar home systems, mini-grids and commercial solar installations have proven effective in expanding electricity access, financing remains a major constraint. She explained that the fragmented nature of DRE projects, combined with short loan tenors, foreign exchange risks and limited credit enhancements, continues to deter large-scale investment.
Despite these challenges, she pointed out that Nigeria holds over ₦18 trillion in pension fund assets, with less than one per cent currently invested in infrastructure and energy—raising questions about how such domestic capital can be unlocked.
In his presentation, Obed highlighted practical examples of successful green bond issuances in Nigeria, including projects by North South Power, Prapower and Cee Solar. He explained that these deals relied heavily on credit enhancement structures, particularly guarantees provided by InfraCredit and backing from institutions such as the Nigeria Sovereign Investment Authority (NSIA).
According to him, such guarantees helped achieve strong credit ratings and competitive pricing, making the bonds attractive to institutional investors. He stressed that project aggregation is critical, noting that the minimum bond size set by Nigeria’s Debt Management Office stands at ₦10 billion, making it difficult for standalone projects to qualify.
On pension fund participation, Obed said recent regulatory provisions allowing up to 15 per cent allocation to infrastructure present an opportunity for green bonds. However, he noted that federal government securities still dominate pension portfolios, accounting for about 65 per cent of investments.
He argued that development finance institutions (DFIs) remain crucial in bridging this gap by de-risking investments. Institutions such as InfraCredit, supported by first-loss provisions from the UK’s Foreign, Commonwealth and Development Office (FCDO) and the British International Investment (BII), were described as instrumental in building investor confidence.
Obed also called for policy incentives, including tax credits, to encourage commercial banks to increase lending to renewable energy projects. He noted that some financial institutions have already begun establishing dedicated green finance units to support such investments.
Beyond financing structures, the dialogue emphasised the need to scale from isolated pilot projects to a pipeline of bankable DRE investments. Obed identified poor project siting and inadequate socioeconomic assessment as key reasons for project failure, warning that installations in low-income communities without sufficient demand are unlikely to succeed.
He proposed the creation of a national database of pre-assessed projects to reduce feasibility costs and improve investor confidence, potentially coordinated by relevant government agencies.
Participants also stressed the importance of standardisation, recommending the establishment of uniform quality benchmarks for equipment and project design, as well as independent validation mechanisms to assess project viability.
Addressing broader sector coordination, Obed underscored the importance of aligning stakeholders around national priorities, arguing that sustained commitment from both public and private actors is essential to unlocking local capital.
“There must be genuine national interest in making the system work,” he said, noting ongoing engagements between government institutions and international climate finance bodies as a positive step.
In her closing remarks, Eworo reiterated that while green bonds present a clear opportunity to bridge Nigeria’s energy financing gap, success will depend on strong collaboration, effective risk-sharing mechanisms, and a steady pipeline of viable projects.
“The opportunity is clear,” she said. “What we need now is coordinated action and strong leadership to bring it all together.”
The Electricity Hub said it would continue to share insights from the dialogue with policymakers, development finance institutions and private sector stakeholders to support ongoing efforts to expand energy access in Nigeria.
