In January 2025, President Bola Ahmed Tinubu announced that Nigeria had secured a $1.1 billion loan from the African Development Bank (AfDB) to provide electricity to 5 million people by the end of 2026. This initiative aimed to address the nation’s significant energy deficit, particularly in underserved rural areas, by funding off-grid solutions, mini-grids, and solar home systems.
The loan terms included an interest rate of 4.2% over a 25-year period, with an eight-year moratorium before repayments commence. This structure was designed to offer Nigeria a substantial grace period to implement the electrification projects and begin generating revenue before the repayment phase.
As the 2026 deadline approaches, experts express concerns regarding the sources of revenue for loan repayment. The Nigerian electricity sector has historically faced challenges such as low revenue generation, inadequate infrastructure, and inefficiencies in billing and collection systems.
In the second quarter of 2023, electricity distribution companies (DisCos) reported a revenue collection of ₦263.08 billion, a 39.63% increase from ₦188.41 billion in the same period the previous year. Despite this growth, the sector continues to grapple with issues like energy theft, non-payment by consumers, and technical losses, which hinder optimal revenue generation.
The success of the AfDB-funded electrification project hinges on the government’s ability to implement effective strategies that ensure the new electricity infrastructure can generate sufficient revenue. This includes setting cost-reflective tariffs, enhancing metering systems to reduce losses, and improving collection efficiency. Additionally, fostering public-private partnerships and creating an enabling environment for private investment in the power sector are crucial steps toward financial sustainability.
In nutshell, while the $1.1 billion AfDB loan presents a significant opportunity to improve electricity access for millions of Nigerians, addressing the underlying challenges in revenue generation remains essential to ensure the project’s long-term viability and the country’s ability to meet its repayment obligations.
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