The loan will help to improve power generation.
The African Development Bank (AfDB) on Thursday said it had approved $184.2 million loan to encourage private investments into the Nigerian power sector.
The approval is contained in a statement issued by the bank and made available to the News Agency of Nigeria in Addis Ababa.
The facility is under the bank’s Partial Risk Guarantee (PRG).
The bank said it also approved $3.1 million loan to enhance capacity building in power generation and distribution to meet the country’s 40,000 MW target by 2020.
“The Board of Directors of the AfDB group approved an African Development Fund (ADF) Partial Risk Guarantee (PRG) program of $184.2 million and an ADF loan of $3.1 million for capacity building, to support the Nigerian power sector privatisation programme.
“The Board’s decision will allow the AfDB to support the Nigerian Government’s efforts to reform the power sector and position the country for sustainable and inclusive growth”, said the statement.
According to the bank, the PRG program in Nigeria aims to increase the country’s electricity generation by catalysing private sector investment and commercial financing in the power sector.
“The PRGs will mitigate the risk of the Nigeria Bulk Electricity Trading Plc (NBET), a Federal Government of Nigeria entity established to purchase electricity from independent power producers (IPPs).
“It will also prevent the risk of not fulfilling NBET’s contractual obligations under its power purchase agreements with eligible IPPs.
“This in turn will increase the comfort level of private sector financiers and commercial lenders investing in the Nigerian power sector privatisation programme”, added the statement.
According to the bank, available data from the Nigerian government shows that power outages cost the country about three per cent of its GDP annually.
“It is anticipated that the IPPs eligible for coverage under the programme could generate additional 1,380 MW of power by 2016.
“This will in turn increase Nigerians’ access to more reliable and affordable electricity from 41 per cent currently to 50 per cent by 2016”, the statement said.
The bank explained that the potential impact of the programme would ensure effective and steady power supply, which is critical to the sustainability of Nigeria’s development path.
Meanwhile, the bank’s Director for Energy, Environment and Climate Change, Alex Rugamba, noted that the Nigerian PRG programme was expected to improve productivity, economic activity and growth that would reduce poverty.
“In the short to medium term, the project will yield an increase in the maximum electricity supply and consumption per capita”, he stated.
Mr. Rugamba held that Nigeria would need more private investment in the power sector to meet its development objective of ranking amongst the top 20 economies of the world by the year 2020.
The Director said that private sector investment was required in the supply chain for the country to meet the generation targets.
Nigeria’s current maximum electricity generation capacity of approximately 5,500 MW is inadequate to meet demand estimated at a minimum of 10,000 MW.