- The AfDB financing plan is tailored to drive reforms in Nigeria’s tech sector, reduce energy poverty, improve access to electricity in homes and businesses, and attract private investment into the segment.
- The plan also aims to deepen fiscal policy reforms by strengthening the country’s public financial management systems.
- The funding will target initiatives that encourage climate change adaptation and mitigation, including the introduction of energy efficiency standards for electrical appliances.
Africa’s largest economy Nigeria has received a $500 million loan from the African Development Bank (AfDB) to finance energy transition and implement measures to improve economic governance.
In an update on Wednesday, the AfDB said this financing is aimed at the second phase of the country’s Economic Governance and Energy Transition Support Program, which will be implemented in the 2024 and 2025 budget years.
“The second phase of the program aims to boost inclusive growth by accelerating structural reforms in the energy sector while supporting progressive fiscal policy reforms to boost non-oil revenues and expand fiscal space. The new phase will consolidate and build on the achievements of the first phase,” said Abdul Kamara, Director General of the AfDB Group Office in Nigeria.
What new financing aims to address in the energy transition
According to the multilateral lender, the program will focus on three key target areas. First, the program aims to deepen fiscal policy reforms by strengthening the country’s public financial management systems and increasing the transparency and efficiency of public expenditure.
At the same time, the push is aimed at accelerating energy sector reform to reduce energy poverty in the country, help light more homes and businesses, improve sector governance while attracting private investment.
Furthermore, the communiqué says the AfDB financing is structured to support the implementation of Nigeria’s energy transition strategy through initiatives that encourage climate change adaptation and mitigation, including the introduction of energy efficiency standards for electrical appliances. The Nationally Determined Contribution (NDC) will also be updated for the period 2026–2030.
The direct beneficiaries of the program are the Federal Ministry of Energy, Federal Ministry of Finance, Federal Revenue Agency, Office of the Auditor General, Debt Management Office, National Climate Change Council of Nigeria (NCCC), Federal Ministry of Environment, Nigerian Electricity Regulatory Commission (NERC) and other agencies responsible for social and economic policies.
The benefits will also accrue to private companies in the form of an improved investment climate and opportunities in the energy sector at the level of the individual states of the Federation, and by creating an environment more conducive to public-private partnerships. As of October 31, 2025, AfDB Group’s active portfolio in Nigeria consisted of 52 projects with a total commitment of $5.1 billion.
Nigeria’s energy transition: a deep dive
Currently, Nigeria’s energy transition remains a work in progress, anchored by the ambitious Energy Transition Plan (ETP), unveiled at COP26 and updated in 2024 to achieve net-zero emissions by 2060. This framework addresses the twin challenges of energy poverty – where more than 80 million Nigerians lack reliable electricity – and climate commitments under the Paris Agreement, emphasizing a just transition using natural gas as a bridging fuel.
The plan aims to scale up total installed energy capacity to 277 GW by 2060, with renewables and efficiency measures playing a leading role, while requiring around $500 billion in investments that could deliver $686 billion in fuel savings. Supported by the Climate Change Act of 2021 and the Energy Transition Office (ETO) under the Vice Presidency, the ETP has already mobilized more than $3.6 billion in financing, advancing a coordinated push at the federal and state levels to align policies, secure OEM partnerships for local manufacturing, and integrate renewables into the national grid.
Progress in renewable energy has accelerated in 2025, although it lags behind the targets of the Renewable Energy Master Plan, which this year aimed for 2,000 MW of small hydro, 500 MW of solar PV, 400 MW of biomass and 40 MW of wind.
Installed renewable capacity has reached a total of about 3.44 GW, with solar leading the way through initiatives such as the Rural Electrification Agency’s (REA) implementation of 400 mini-grids and 50 metro grids through a March 2025 MoU with WeLight, and a 2.5 MW hybrid solar power plant commissioned at the Nigerian Defense Academy in May.
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National Renewable Energy and Energy Efficiency Policy (NREEEP)
The National Renewable Energy and Energy Efficiency Policy (NREEEP) Updates have introduced tax breaks for solar equipment, increasing the renewable share of the energy mix to 16 percent – up from 13 percent in 2023 – and enabling projects such as the Lagos-GreenPlinth MoU for 80 million clean cooking stoves.
Off-grid solar and distributed renewable energy (DRE) efforts, including the Nigeria Electrification Project and DARES, have electrified millions of people in rural areas, while forums such as the Nigeria Renewable Energy Innovation Forum (NREIF) are emphasizing local manufacturing and skills development for electric vehicles and solar energy systems in 2025.
Yet the transition faces enormous hurdles, including chronic underinvestment, policy inconsistencies and infrastructure shortages that keep electricity access below 60 percent nationally. Funding gaps persist despite calls for $10 billion to boost implementation, with high upfront costs, import tariffs and skills shortages in sustainable technologies deterring wider adoption. The International Energy Agency notes that sub-Saharan Africa, including Nigeria, has received less than $2.5 billion for new connections by 2023. Security concerns such as oil theft and vandalism exacerbate grid instability, while cultural preferences for traditional cooking and unreliable EV infrastructure slow sectoral shifts.
According to 2025 analyses, emerging challenges include striking a balance between energy security and decarbonization, with reliance on fossil fuels (particularly in transportation and industry) offsetting gains from renewable sources, and regulatory overlaps between federal and state entities under the Electricity Act of 2023 making it difficult for decentralized markets to operate.
Looking ahead, Nigeria’s energy landscape is promising for 2026 and beyond, with the 2025 oil bidding round – which opens on December 1 – prioritizing gas development to support domestic energy and industrial growth, alongside divestments that empower indigenous companies like Oando and Seplat. The National Integrated Electricity Policy (NIEP), adopted in May 2025, encourages private investment in renewable energy and carbon markets.
This could lead to the creation of as many as 340,000 jobs in the energy, cooking and transport sectors by 2030. As events like the Nigeria Energy Summit underscore, strategic public-private partnerships and international collaborations could accelerate universal access by 2030, allowing Nigeria to become an African leader in equitable, gas-bridged decarbonization – if financing and implementation align to translate policy into tangible power.
Also read: Africa’s energy transition must be locally led
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