Bank loans at 15% for mini-grid operators

Deposit Money Banks (DMBs) are planning concessionary loans of between 15 and 20 per cent interest rates for mini-grid operators under the Nigeria Energy Support Programme (NESP) 2, it was learnt yesterday.

The Executive Director, Rural Electrification Fund (REF), Dr. Sanusi Ohaire, who spoke with The Nation at mini-grid stakeholders workshop in Abuja, said the banks are already conducting  due diligence on the sector.

Mrs. Ohaire added that the lenders have reached a “stage where they are comfortable to take that leap. It is a good thing because once we have the local commercial banks key into this project, it is easy for us to scale up.”

But speaking in the workshop, the Advisor, Sustainable Energy Access (off-grid) NESP, Temitope Udo- Affia, said the interest rate is for between five and seven years moratorium period.

The loan, according to her, will be denominated in naira to remove the foreign exchange risk and provide access to large amount of credit.

She, however, said how long the due diligence will take and the risk mitigation that the local financiers will need are yet unknown.

Her words: “In NESP 2, we will also be targeting access to local finance which is good for replication. We are currently in discussion with a few local commercial banks.

“So, far we have received some terms from between 15 and 20 per cent interest rate for over five to seven years, plus grace period. The strength is that these are naira denominated loans, so it reduces or removes the forex risk, and there is access to large amount of finance.

“The weakness is that we are not yet sure what the duration of the due diligence process will take. And what the risk mitigation that these local financiers require in NESP 2. NESP 2 is also looking at concessionary finance, training finance and capital investments.”

In a remark, Managing Director, Rural Electrification Agency (REA), Damilola Ogunbiyi, said the agency  needed the financial institutions to come and key in with the flexibility of guarantee they would not have in any other project.

Right now, she said, the agency knows that “it is not just the rural people that need power, a lot of urban places are also in need of power.”

She acknowledged the assistance of the USAID, GIZ with the help of the European Union in funding, noting that they have taken the agency’s programmes and fit them into their plans instead of making decisions for Nigerian’s project from the Diaspora.