Nigeria’s energy transition push gets $500M AfDB funding

• AfDB funding plan tailored to boost reforms in Nigeria’s engineering sector, help lower energy poverty, enhance electricity access in homes and businesses, while also attracting private investment in the segment.
• Plan is also wired to deepen fiscal policy reforms by firming up the country’s public financial management systems.
• Funding targets initiatives that encourage climate change adaptation and mitigation, including the introduction of energy-efficiency standards for electrical appliances.

Africa’s largest economy Nigeria has secured a $500 million loan from the African Development Bank (AfDB) to finance energy transition as well as deploy measures that enhance economic governance.

In an update on Wednesday, the AfDB said this financing is directed at the second phase of the country’s Economic Governance and Energy Transition Support Programme, which is set for implementation in fiscal year 2024 and 2025.

“The second phase of the programme aims to stimulate inclusive growth by accelerating structural reforms in the energy sector, while supporting progressive reforms of fiscal policy to boost non-oil revenues and expand fiscal space. The new phase will consolidate and build on the achievements of the first phase,” explained Abdul Kamara, Director General of the Office of the AfDB Group in Nigeria.

What new financing seeks to address in energy transition

According to the multilateral lender, the programme will place emphasis on three main target areas. First, the programme is set to deepen fiscal policy reforms by firming up the country’s public financial management systems and enhancing the transparency and efficiency of public spending.

At the same time, the boost is tailored to accelerate the reform of the power engineering sector to lower the country’s levels of energy poverty, help light up more homes and businesses, enhance sector governance, while also seeking to win private investment.

What’s more, the communique says that AfDB funding 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 2026–2030 period.

The programme’s direct beneficiaries are the Federal Ministry of Power, the Federal Ministry of Finance, the Federal Inland Revenue Service, the Office of the Auditor General, the Debt Management Office, the National Climate Change Council of Nigeria (NCCC), the Federal Ministry of the Environment, the Nigerian Electricity Regulatory Commission (NERC), and other bodies responsible for social and economic policies.

Benefits will also accrue to private businesses in the form of improved investment climate and opportunities in the energy sector at the level of individual states of the Federation, and from the creation of an environment more conducive to public-private partnerships. As of 31 October 2025, the active portfolio of the AfDB Group in Nigeria comprised 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 target net-zero emissions by 2060.  This framework addresses the dual challenges of energy poverty—where over 80 million Nigerians lack reliable electricity—and climate commitments under the Paris Agreement, emphasizing a just transition that leverages natural gas as a bridge fuel.

The plan envisions scaling total installed power capacity to 277 GW by 2060, with renewables and efficiency measures playing a starring role, while requiring approximately $500 billion in investments that could yield $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 over $3.6 billion in funding, fostering a coordinated push across federal and state levels to align policies, secure OEM partnerships for local manufacturing, and integrate renewables into the national grid.

Progress in renewables has gained momentum in 2025, though it lags behind targets set in the Renewable Energy Master Plan, which aimed for 2,000 MW of small hydro, 500 MW of solar PV, 400 MW of biomass, and 40MW of wind by this year.

Installed renewable capacity has reached about 3.44 GW overall, with solar leading the charge through initiatives like the Rural Electrification Agency’s (REA) deployment of 400 mini-grids and 50 metro grids via a March 2025 MoU with WeLight, and a 2.5 MW solar hybrid plant commissioned at the Nigerian Defence Academy in May.

Read also: Why Saudi Arabia oil drive undermines global energy transition

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, boosting the renewable share in the energy mix to 16 per cent—up from 13 percent in 2023—and enabling projects like the Lagos-GreenPlinth MoU for 80 million clean cookstoves.

Off-grid solar and distributed renewable energy (DRE) efforts, including the Nigeria Electrification Project and DARES, have electrified millions in rural areas, while forums like the Nigeria Renewable Energy Innovation Forum (NREIF) in 2025 highlight local manufacturing and skills development for EVs and solar systems.

Yet, the transition faces formidable hurdles, including chronic underinvestment, policy inconsistencies, and infrastructural deficits that keep electricity access below 60 per cent nationally.  Financing gaps persist despite calls for $10 billion to kickstart implementation, with high upfront costs, import tariffs, and a skills shortage in renewable technologies deterring broader adoption; the International Energy Agency notes that sub-Saharan Africa, including Nigeria, received less than $2.5 billion for new connections in 2023. Security issues like oil theft and vandalism exacerbate grid instability, while cultural preferences for traditional cooking and unreliable EV infrastructure slow sectoral shifts.

According to analyses from 2025, new problems include finding a balance between energy security and decarbonization, where relying on fossil fuels (especially in transportation and industry) cancels out gains from renewable sources, and regulatory overlaps between federal and state entities under the Electricity Act 2023 make it hard for devolved markets to work.

Looking ahead, Nigeria’s energy landscape holds promise for 2026 and beyond, with the 2025 oil bid round—opening December 1—prioritizing gas development to support domestic power and industrial growth, alongside divestments empowering indigenous firms like Oando and Seplat.   The National Integrated Electricity Policy (NIEP), which was passed in May 2025, encourages private investment in renewable energy and carbon markets.

This could lead to the creation of up to 340,000 jobs in the power, cooking, and transportation sectors by 2030.  As events like the Nigeria Energy Summit underscore, strategic public-private partnerships and international collaborations could accelerate universal access by 2030, positioning Nigeria as an African leader in equitable, gas-bridged decarbonization—if funding and implementation align to turn policy into tangible power.

Read also: Africa’s Energy Transition Must Be Locally Led