The Central Bank of Nigeria(CBN) has unveiled a framework for the implementation of solar intervention facility, which it said was designed “to complement Federal Government’s effort at providing affordable electricity to rural dwellers 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.”
As part of its Economic Sustainability Plan (ESP), the Federal Government had launched an initiative to achieve the roll out of five million new solar-based connections in communities that are not grid connected. According to the CBN, the programme, which is aimed at supporting economic recovery given the impact of the Covid-19, is expected to generate an additional N7 billion increase in tax revenues per annum and $10 million in annual import substitution.
In addition, the regulator said the initiative was expected to boost 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 incentivising the creation of 250,000 new jobs in the energy sector.”
According to the solar connection facility guidelines posted on the CBN’s website yesterday, upstream participants, including manufacturers of solar components and balance of system, assemblers of solar components, among others, who access the facility, are barred from using the funds to finance the importation of fully assembled solar components and Balance of System.
The CBN further stated that funding for participants would not exceed 70 per cent of the total cost of the project, while facilities granted under the facility “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.”
In addition, it said: “The moratorium on principal shall depend on the type and nature of the project but shall not exceed 2 years or the construction/ completion period, whichever is shorter.
“Additional moratorium of up to 12 months may be added to the moratorium period in order to address the risk of completion delays (request to be supported with evidences).”
On working capital facility, the CBN said this shall be for one year with provision for roll-over not more than twice (i.e maximum tenor of 3 years), while interest rate for the facility “shall be administered at an ‘all-in’ interest rate of not more than nine per cent per annum.” The ‘all-in’ interest rate of nine per cent will be shared as six per cent for the participating financial institution and three per cent for the sponsor(CBN).
However, the apex bank said that as part of its Covid-19 relief package, the interest rate to be charged up to February 28, 2021 would not exceed five per cent per annum.
Similarly, the guidelines bars downstream participants from using the facility to finance, “sales or deployment of fully (100%) imported solar home systems components with no proof of existing local content or credible plan for near-term integration of local content.”
They are also barred from deploying mini grid projects with 100 per cent imported components solar PV and Balance of System with no proof of existing local content or credible plan for near-term integration of local content.
According to the CBN, the amount for working capital for mini grid developers will be determined “as a percentage of the average of three-year adjusted projected cash flows subject to the maximum limit of N500 million.”
With an interest rate of 10 per cent, the tenor for working capital facility is “12 months subject to roll-over not more than twice (i. e. maximum tenor of 3 years) (depending on the nature and cash flow stream).”
Equally, it stated that the amount for the distribution/retail facility would be determined as a percentage of the average of three-year adjusted projected cash flows subject to the maximum limit of N500 million.
This facility has a tenor of up to 5 years depending on the cash flow stream and interest rate of 10per cent, the CBN said.