How Nigeria Can Attract Private Capital for Reliable, Affordable Electricity

Nigeria faces a critical challenge in attracting private capital to provide reliable and affordable electricity to its citizens. In many cases, home-based businesses must choose between purchasing fuel for generators or restocking their supplies, as a power outage can lead to significant losses. Expanding access to clean electricity could alleviate this pressure, but major upfront investments are required, making private capital hesitant to enter.

Three key problems must be addressed to facilitate private investment: late or missed payments, a mismatch between naira revenues and foreign-currency debt, and a shortage of long-term lending. To reduce these risks, society should expect clear returns, which would be reliable and affordable electricity for households and businesses that currently lack access.

Nigeria has made progress through the Nigeria Electrification Project launched in 2018, which supported mini-grids and solar home systems. The World Bank recently approved a $750 million Distributed Access through Renewable Energy Scale-up (DARES) program to build upon this work, targeting electricity access for over 17.5 million Nigerians.

To strengthen existing platforms, such as the Nigeria Sustainable Investment Authority's Nigeria Distributed Renewable Energy Fund and the Green Finance and Investment Facility, public support, commercial lending, and equity investment must work together. The upcoming meeting between Finance Minister Taiwo Oyedele and CBN Governor Olayemi Cardoso with World Bank President Ajay Banga on October 12, 2026, could provide an opportunity to discuss wider use of World Bank guarantees, drawing in private infrastructure investment.

Payment risks can be mitigated through sovereign guarantees backed by government obligations and multilateral partial risk guarantees to protect lenders if the government breaches commitments. Guarantees must be paired with credible payment arrangements, and public authorities must disclose and manage the debts and obligations they take on.

Currency risks can be addressed by guarantees that help developers secure loans in naira, reducing the mismatch between local revenues and foreign-currency debt. Loan-loss reserves can absorb a specified share of defaults, encouraging private lenders to participate. These risk-sharing tools should be applied to viable projects facing specific financing barriers, ensuring lenders retain enough risk to evaluate projects soundly.

Domestic pension capital can also be tapped, provided that projects meet pension funds' risk, return, and regulatory requirements. Institutional investors generally prefer larger holdings, so smaller loans could be pooled and sold, freeing up money for new lending. Securitization, combining both pooled loans and securities, could further attract institutional capital.

Nigeria needs consistent lending standards, enforceable contracts, and reliable data on project performance. Conditions attached to public support should include clear targets for reaching underserved communities, affordable connection charges, and financial sustainability. Service must continue after commissioning, with financing plans covering maintenance and equipment replacement. Operators should report service hours, outages, and charges, allowing customers and funders to assess whether public backing is effective.

Ultimately, the goal is to attract private capital that delivers dependable electricity at affordable prices. For a food seller, this means a freezer that stays on and a cost structure that allows her to restock and maintain her livelihood. Segun Taiwo, a chartered accountant and energy finance professional, emphasizes that these efforts should be driven by clear results: increased private investment, more underserved customers connected to electricity, and reliable service at affordable prices.