N500m limit, 100% imported solar systems prohibited… Terms of CBN’s solar intervention fund

The Central Bank of Nigeria (CBN) has launched a solar intervention fund as part of efforts to provide affordable electricity to rural dwellers around the country.

In a document released on Monday titled ‘Framework for implementation of the solar connection facility’, the apex bank said the fund has a target of completing five million new connections thereby expanding energy access to 25 million individuals.

“To support the economic recovery in response to the COVID-19 pandemic, the Federal Government of Nigeria (FGN) has launched an initiative as part of the economic sustainability plan (ESP) to achieve the roll-out of five million new solar-based connections in communities that are not grid-connected,” the document read.

“This program is expected to generate an additional N7 billion increase in tax revenues per annum and $10 million in annual import substitution.

“The solar connection scheme is a federal government initiative whose objectives are to expanding energy access to 25 million individuals (5 million new connections) through the provision of solar home systems (SHS) or connection to a mini-grid; increasing local content in the off-grid solar value chain and facilitating the growth of the local manufacturing industry.”

The CBN said the fund will be disbursed through long-term low-interest credit facilities to qualified home solar value chain players including manufacturers and assemblers of solar components and off-grid energy retailers.

According to CBN, upstream corporations for the intervention fund are prohibited to use the facility to finance the importation of fully assembled solar components and balance of system.

“Funding shall not exceed 70 percent of the total cost of the project; the facilities granted shall have a maximum tenor of up to 10 years as determined by the project’s cash flow profile but not exceeding December 31, 2030.

“The moratorium on principal shall depend on the type and nature of the project but shall not exceed two years or the construction/ completion period, whichever is shorter.

“The facility shall be administered at an ‘all-in’ interest rate of not more than 9 percent per annum. However, as part of the bank’s COVID-19 relief package, the interest rate to be charged up to February 28, 2021, shall not exceed 5 percent per annum.”

For downstream companies, the CBN said the amount would “be determined as a percentage of the average of three-year adjusted projected cash flows subject to the maximum limit of N500 million”.

“For downstream participants which is any company or body corporate involved in the distribution and after-sales support of solar home systems, it prohibited the sale or deployment of fully 100 per cent imported solar home systems components with no proof of existing local content or credible plan for near-term integration of local content.”