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Central Bank of Nigeria rolls out fresh financing package for solar value chain players

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MON SEPT 14, 2020-theGBJournal-The Central Bank of Nigeria (CBN), today announced a new intervention facility, the Solar Connection Intervention Facility, and framework for the intervention, for solar value chain players in Nigeria to complement the Federal Government’s efforts of providing affordable electricity to rural dwellers.

The Solar Connection Intervention Facility will be facilitated through the provision of long-term low interest credit facilities to the Nigeria Electrification Project (NEP) pre-qualified home solar value chain players that include manufacturers and assemblers of solar components and off-grid energy retailers in the country.

The beneficiaries are grouped into two sets of participants, Upstream Participant and the Downstram participants.

The upstream participants are any company or body corporate engaged in the Manufacturing of solar components and Balance of System, establishment/expansion/upgrade of solar manufacturing facilities, assembly of solar components and Balance of System, repair and maintenance of solar home systems and mini grid equipment, solar component Research and Development (R&D) and any other off-grid solar value chain activity as may be prescribed by CBN.

‘’The facility shall not be used to finance the importation of fully assembled solar components and Balance of System,’’ the CBN said.

According to the CBN, the eligible obligors should demonstrate verifiable evidences of Technical capacity, Financial capacity, Off-take agreement. Eligible component manufacturers should be Nigerian-owned entities or consortiums involving a minimum of 70% local ownership as well as demonstrate Job creation focus- commitment to employing local talent with a detailed vocational and technical training plan. They must also demonstrate vertically integrated participant- that is Downstream participants (SHS distributors and mini gird developers) planning to manufacture or assemble their own products will need to comply with the criteria above, including terms of technical capacity by demonstrating ability to comply with the REA and SON quality standards.

Participating Financial Institutions (PFIs) must be financial institutions licensed by the CBN to provide banking services in Nigeria.

The CBN said funding shall not exceed 70 percent of the total cost of the project and shall have a maximum tenor of up to 10 years as determined by the project’s cash flow profile but not exceeding 31st December 2030.

The facility shall be administered at an “all-in” interest rate of NOT more than 9 per cent per annum.

‘’However, as part of the Bank’s Covid-19 relief package, the interest rate to be charged up to 28th February, 2021 shall not exceed 5 per cent per annum. Interest shall be payable by the loan beneficiaries in accordance with the approved repayment schedule outlined in the Transaction Documents,’’ the CBN said.

The “all-in” interest rate of 9% to be shared as follows:

Participating Financial Institution 6%

Sponsor (CBN) 3%

PFIs are to remit the interest due to the CBN on quarterly basis not later than 10 days after the end of the quarter.

Required documentation for the obligor to access funding includes:

i-Written request from the project promoter

ii-Certificate of Incorporation

iii) Copy of MEMART

  1. iv) Copy of Form CAC 2A (Return of allotment of shares);
  2. v) Business plan including: Completed Environmental and Social Management System (ESMS) template, Organizational chart o Health and safety guidelines, 3-year financial projections, Detailed vocational and technical training plan and Bill of Materials
  3. vi) Off-taker agreements with prequalified NEP companies;

vii) Three (3) years audited financial statements for existing companies or a 6-months Management Account for new companies.

The  Downstream Participant is any company or body corporate involved in:

  1. i) Distribution and after-sales support of solar home systems (SHS)
  2. ii) Mini grid project development activities including site identification and assessment, design and planning and customer acquisition

iii) Engineering, procurement and/or construction of Mini grids

  1. iv) Any other retail-based off-grid solar value chain activity as may be prescribed by CBN.

Nigeria Electrification Project prequalification include;  Companies would be required to pre-qualify under the World Bank Nigeria Electrification Program and have satisfied the minimum technical and financial requirements under the program

  1. ii) Local content: Eligible off-grid companies are Nigerian-owned entities or consortiums involving a minimum of 70% local ownership

iii) Job creation focus: In line with the program’s job creation objectives, eligible companies must demonstrate commitment to employing local talent with a detailed vocational and technical training plan.

Periodic joint monitoring and evaluation (M&E) of financed projects shall be conducted by CBN in conjunction with REA and the respective PFIs.

The responsibility will be to articulate clear guidelines for the implementation of the Facility, provide funds for the Intervention, appoint an Administrator to manage the Downstream Window of the Facility, monitor and evaluate implementation of the Scheme and review the Guidelines of the Facility as may be necessary.

Recall that the Federal Government recently launched an initiative as part of the Economic Sustainability Plan (ESP) to achieve the roll out of 5 million new solar-based connections in communities that are not grid connected. 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; and incentivizing the creation of 250,000 new jobs in the energy sector.

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