Energy financing in Africa: Nigeria’s role and the path to sustainable development

The place of energy financing in Africa is pivotal as the continent grapples with the dual challenge of meeting its growing energy demand while transitioning to sustainable energy sources.

With Nigeria at the forefront of Africa’s energy economy, the discussion on financing energy infrastructure is both timely and necessary.

Despite its status as Africa’s largest oil producer, Nigeria faces an energy paradox: significant energy resource wealth coexists with inadequate energy access, as nearly 43% of the population remains without electricity.

Adeoluwa Oluwatosin Eweje, an expert in business analysis and energy economics, underscores the urgency of reforming energy financing frameworks in Africa. Drawing from his extensive experience with leading financial institutions and energy projects, Eweje provides key insights into the strategies needed to address this pressing challenge.

Nigeria’s energy sector is characterized by heavy reliance on fossil fuels, with oil and gas contributing approximately 90% of export earnings and 60% of government revenue. Yet, the domestic energy market remains underdeveloped.

The Nigerian electricity grid operates below capacity, delivering less than 5,000 megawatts to a population of over 200 million, leading to widespread reliance on diesel generators and off-grid solutions. The country also lags in renewable energy adoption, with solar and wind accounting for less than 2% of its energy mix.

Eweje highlights that the financing gap in Nigeria’s energy sector is a major constraint to achieving energy security. “The investment required to close Nigeria’s energy deficit is estimated at over $20 billion annually, yet actual investment falls far short of this figure,” he explains.

Bridging this gap will require a multifaceted approach involving private investment, public-private partnerships (PPPs), and international development financing.

To attract private capital, Eweje advocates for creating a stable and transparent regulatory environment. Unpredictable policies and inefficiencies in project approvals have historically deterred investors. Strengthening institutions like the Nigerian Electricity Regulatory Commission (NERC) and ensuring adherence to the Energy Transition Plan will be essential to building investor confidence.

Public-private partnerships offer another pathway to financing energy projects in Nigeria. Successful PPPs, such as the Azura-Edo Independent Power Plant, which added 459 megawatts to the national grid, demonstrate the potential of collaborative efforts between the government and private entities.

Expanding such models to include renewable energy projects can help diversify Nigeria’s energy mix and enhance sustainability.

International financing institutions, including the African Development Bank (AfDB) and the World Bank, also play a crucial role in bridging funding gaps. Nigeria has already benefited from AfDB loans for renewable energy projects, such as the Jigawa Solar Project.

However, Eweje notes that access to such funds often requires robust project management frameworks, which many African nations, including Nigeria, need to strengthen.

Eweje further stresses the importance of innovation in energy financing. Green bonds, which have gained traction globally, remain underutilized in Africa. Nigeria was a pioneer in issuing a sovereign green bond in 2017, raising $29.7 million for sustainable energy projects.

Scaling up such initiatives and encouraging corporate green bonds could unlock significant capital for renewable energy projects.

Challenges to energy financing in Nigeria include currency volatility, high interest rates, and insufficient technical capacity to execute large-scale projects.

These barriers often lead to delays and cost overruns, eroding investor trust. Addressing these issues will require targeted interventions, such as currency stabilization measures, interest rate subsidies for energy projects, and capacity-building programs for project managers.

Policy recommendations to improve energy financing in Nigeria include the introduction of incentives for renewable energy investments, such as tax breaks and grants.

Expanding the scope of the National Renewable Energy and Energy Efficiency Policy (NREEEP) to include clear timelines and implementation mechanisms could accelerate progress in this sector.

Strengthening collaboration between Nigeria and international organizations, particularly in knowledge sharing and capacity building, will also be essential.
Eweje emphasizes the role of technology and data-driven decision-making in transforming Nigeria’s energy sector.

“Implementing advanced analytics tools and platforms like Salesforce CRM can enhance project efficiency, improve stakeholder management, and provide transparency, which is critical for attracting investment,” he explains.

He also highlights the potential of blockchain in enhancing transparency and reducing corruption in energy financing.

The transformation of Nigeria’s energy sector through innovative financing models and strategic policy interventions could position the country as a leader in Africa’s energy transition.

By leveraging its vast natural and human resources, Nigeria can close its energy access gap, boost industrialization, and drive sustainable development.

As Eweje aptly puts it, “Energy financing is not just about funding projects—it’s about creating a future where every Nigerian has access to reliable, affordable, and sustainable energy.”