The Board of the Executive Directors of World Bank, the International Finance Corporation, IFC, and Multilateral Investment Guarantee Agency, MIGA, on Wednesday approved a package of loans and guarantees to support two key power projects in Nigeria.
The projects for the 459-megawatt, MW Azura Edo power plant, near Benin City, Edo State and the 533-MW Qua Iboe plant in Ibeno, Akwa Ibom State, were initiated to help boost independent power generation and ease crippling energy shortages in the country.
The Bank's partial risk guarantees approved include up to about $245 million for the Azura Edo plant and about $150 million for the Qua Iboe plant.
The Boards of IFC and MIGA also approved loans and hedging instruments of up to $135 million and guarantees of up to $659 million for the Azura Edo project.
Both projects, which are gas-fired, are a critical element of the World Bank Group Energy Business Plan for Nigeria.
"Efficient, affordable and reliable access to electricity is essential for small and medium-sized enterprises in Nigeria to accelerate job creation," said Vice President, Africa Region, World Bank, Makhtar Diop, said.
Mr. Diop expressed delight that the Bank was able to support Nigeria's extensive energy reform programme and provide direct assistance to assist the country to increase electricity generation capacity by mobilizing nearly $ 1.7 billion of private sector financing through a range of instruments.
He said the International Bank for Reconstruction and Development, IBRD, guarantees include forward-looking mitigation and risk-sharing arrangements, designed to augment Nigeria's power sector reforms, while building market confidence and setting industry benchmarks.
The IFC's investment and MIGA's guarantee for the Azura Edo power plant, the World Bank Vice President said, would support a trail blazing project at the centre of Nigeria's ambitious power sector programme, while setting a replicable model for future power projects.
According to the IFC Regional Vice President, Jean Philippe Prosper, addressing energy needs in Nigeria required investments from both public and private sector investors.
He said working across the Group, the World Bank was capable of helping catalyze significant private sector investments in an environment that best assures successful delivery of increased power supply.
Despite Nigeria's endowment with huge reserves of hydrocarbon resources, including natural gas, which puts the country as one of the world's largest reserves, about 65 per cent of its population of over 170 million people have no access to adequate electricity.
Unlocking the flow of Nigeria's extensive natural gas reserves would significantly expand power supply and energy exports to neighboring Ghana, Togo and Benin Republic under the West Africa Power Pool.
Support to private sector-financed independent power producers, IPPs, has been a critical part of the Federal Government's Power Sector Reform Roadmap, a strategy designed to improve power generation, transmission and distribution throughout the country.
MIGA Vice President and Chief Operating Officer, Michel Wormser, said the decision of the agencies to support the Azura Edo IPP was the expectation that it would have a strong demonstration effect and set a precedent for future private sector investors in the country.
Under the joint Energy Business Plan, the World Bank Group has committed to leveraging its diverse competencies along the energy value chain to support the provision of affordable, reliable, and sustainable energy services in Nigeria.
The Bank's approach, Mr. Diop said, was anchored on long-term support and extensive technical assistance to the reform process and capacity building of sector institutions.
The business plan also includes IFC project structuring and investments along with tailor-made packages of risk-mitigation instruments that include World Bank Partial Risk Guarantees and MIGA political risk insurance.
The approved project is also fully aligned with the World Bank Group Country Partnership Strategy that prioritizes improving Nigeria's power supply, which is critical to expanding inclusive economic growth.