Leveraging public-private partnerships to increase energy access in Nigeria
Securing adequate electricity drives economic opportunities, increased health, and development across Africa. The U.S. African Development Foundation (USADF) and All On came together to co-create a new public-private partnership to increase access to power in Nigeria. We stand excited to announce this partnership today.
More than half the population of Nigeria, that is 95 million people, lack access to electricity. For those who do, they often suffer from power outages and blackouts. The lack of reliable, affordable and sustainable access to energy affects everyday life in Nigeria, including the ability to do business, ultimately hindering economic growth.
On December 7, 2017 my organisation, privatisation the U.S. African Development Foundation announced an innovative new partnership with All On, an impact investing company seeded by Shell Corporation which works to increase energy access in underserved markets in Nigeria, in particular in the Niger Delta.
The Niger Delta, a region too often known for headlines featuring conflict and insecurity, might seem a challenging environment for tackling energy poverty. Yet from working on the ground in the Delta since 2013, USADF knows there is potential to fill the gap where the market has failed to reach and communities have been left behind.
USADF invests in underserved communities in frontier markets and post-conflict areas, from the Sahel to Africa’s Horn, that are often overlooked by “traditional” investors and even donors. But to USADF, this doesn’t mean they aren’t investment-worthy. USADF believes strongly in the value of public-private partnerships, investing in local energy enterprises with “blended finance” solutions– the idea that combining USADF’s grant dollars with private sector funding in the form of loans and equity can produce results that are greater than the sum of its parts.
Companies like Green Village Energy (GVE), a Nigerian mini-grid development company founded by two young engineering graduates started with a $100,000 grant through the Off-Grid Energy Challenge to catalyse growth and develop a solar mini-grid in the Delta. Since this beginning GVE achieved new heights, powering more than 2,000 households in Nigeria. GVE secured financing of $1.2 million from Nigeria’s Bank of Industry (BOI) to replicate their mini-grid network in six new communities.
The USADF-All On partnership invests start-up capital in companies like GVE, companies with huge potential that only lack the seed funding to grow. Each year, the partners will jointly provide up to $1 million in funding for up to ten African-owned enterprises working in Nigeria. Each of USADF’s grant dollars will leverage a 1:1 contribution from All On in the form of convertible loans and/or an equity stake in the recipients’ organizations.
From All On, recipients will benefit from access to convertible loans at reasonable interest rates, with sizes and tenors that are appropriate for local small-scale off-grid energy start-ups. USADF will contribute $100,000 in seed capital and local technical assistance to each recipient, giving each business a lower-risk period during a time when many young companies face their greatest challenges, whether importing their first container of solar home systems or connecting their first 100 customers to a mini-grid.
USADF sees first-hand the effect that off-grid energy can have on communities and businesses throughout Nigeria. In two rural villages in Kaduna State, northern Nigeria, USADF invested in Sosai Renewable Energies Limited to install two solar-powered mini-grids which generate power for lighting and solar tunnel drying.
Solar electricity allows farmers, many of whom are women, to dramatically increase their yields of red peppers, a local cash crop, by drying peppers, while at the same time local businesses are expanding and diversifying. Drying on the newly installed Innotech 18 Meter Tunnel Solar Dryer, this year’s pepper crop is expected to increase the incomes of region’s farmers by 30 percent.
Many local entrepreneurs use the electricity to power businesses which could never have been possible before. “With this light, I can now diversify and augment my income,” says Gaffar Yau, a local business owner. He has decided to expand his kiosk to include a solar charging business, as well as to buy a refrigerator to sell cold drinks.
Enterprises like Sosai Renewable Energies demonstrate that projects with potential to scale do not just exist just at the multi-million dollar scale, but also at the off-grid level. By combining USADF grant dollars with private sector funding, we can increase impact and grow local enterprises working to bring affordable energy solutions to all Nigerians. USADF proudly works with All On to create the new access to electric power to create new opportunities in communities in Nigeria and across Africa
Glin is President/CEO of the U.S. African Development Foundation