Agro Integrated Facility (AIF)

Mini-grids in Nigeria continue to grapple with challenges from capacity utilisation of the system and commercial viability. Furthermore, most of these systems operate predominantly in agrarian communities where post-harvest losses are high due to limited options for storage and processing. Post-harvest losses are estimated to cost the country an estimated 3.5 trillion Naira (USD 8 billion) annually . While efforts are being made to stimulate demand for electricity in communities powered by mini-grids, developers are also beginning to identify opportunities where electricity can be used for value addition, especially in the agriculture value chain.

There is a growing interest and involvement in the agriculture value chain by mini-grid developers in Nigeria. Mini-grid developers expand their role beyond electricity generation and distribution to include agricultural activities such as processing, storing, and managing supply chains of agro-products for local markets. This way, the operator sets up an increasingly profitable mini-grid business while making profits further downstream. The potential benefits include increased mini-grid capacity utilisation; reduction in losses and improvement in agro-produce quality; increased employment opportunities; and integration of rural areas into the national economy.

The Pilot: The Agro Integrated Facility (AIF)

The AIF’s objective is to finance innovative approaches and business models that integrate rural electrification through solar mini-grids with the provision of services that improve the agriculture value chain and livelihoods in rural communities. The Pilot will build on lessons learned from NoMAP’s existing Productive Use Financing pilot that tests the viability of financing productive use equipment at “friendlier” terms than the prevailing market rates. 

Under the AIF, NoMAP will provide a debt facility (through a SEC licensed fund manager) to three minigrid developers for the deployment of agro integrated services in mini-grid powered rural communities. It will closely monitor the types of business models deployed and impact on the mini-grid utilisation and viability, the agro value chain, and the rural economy with an emphasis on improved livelihoods and job creation for women and youth.

The Primary objectives of the Pilot include:

Proposed Pilot Structure of the AIF

NOMAP has earmarked a total sum of USD 150,000 (USD 50,000 per developer) with a possibility of increasing to USD 300,000 (USD 100,000 per developer) for three developers at an interest rate of 18% per annum. The interest rate was pegged at the current Monetary Policy Rate (MPR) by the Central Bank of Nigeria. The fund will be channelled through a licensed Security and Exchange Commission (SEC) Fund Manager (Cowrywise) to the three developers. The Fund Manager will manage the day-to-day running of the fund (disbursements and repayments from the portfolio companies). NOMAP will be responsible for the overall management of the pilot and the parties involved in the initiative.

Each Portfolio SMG Developer is entitled to a loan equal in value to USD 50,000 of the total AIF fund amount. The loans will be disbursed in local currency to portfolio companies. Repayments with interest will be made by the Mini-Grid Developer to the Fund Manager on a quarterly or monthly basis. NOMAP will provide the funds to mini-grid developer(s) on the following conditions:

    • Loan tenor: 12 – 18 months
    • Interest rate: 18% per annum
    • Repayment: Monthly or Quarterly
    • Impact Measurement: Mini-Grid developers will share relevant datasets required for monitoring the impact of the facility in line with AIF’s objective

Criteria for Selecting Mini-Grid Companies

  • Mini-Grid company has been in existence for three years and above and has a minimum of three active mini-grid sites.
  • Pilots must be in mini-grid powered agrarian communities with clear potential for agro value chain services. Mini-grids must have the capacity to accommodate the agro value-added service.
  • Viable business plan and model, with established demand/off-taker for the agro-product
  • Comprehensive plan for co-financing the pilot, including specific details on the sources of funding such as debt, equity, etc.
  • High-level impact plan summarising the social, economic and environmental benefits of the facility.
  • Willingness to share data sets required for the pilot.
  • Fulfilment of all regulatory and technical requirements in line with SON, REA, Ministry of Environment and NERC.

Role of NoMAP

NOMAP will be responsible for the management of the initiative, data collection, monitoring and evaluation exercises, provision of funds to the Fund Manager, and other relevant pilot tasks. At the completion of the pilot, NOMAP will develop a learning report to be shared with sector stakeholders particularly financiers to attract increased commercial finance for similar initiatives in the sector.

Role of Solar Mini-Grid Developers

  • Deployment and provision of all relevant equipment, machinery, and requirements for the pilot
  • Obtaining relevant community buy-in and support for the pilot, including carrying out an evaluation of potential risk factors for the project and mitigative measures
  • Provision of relevant pilot data to NOMAP as required for the pilot. A monthly report will be provided by the developer to NOMAP on the progress of the pilot.
  • Appointing a designated focal person to oversee the pilot and be the point of contact with NOMAP
  • Obtaining co-financing for the pilot if the capital cost for the deployment of the pilot exceeds
  •  

Improving the viability of mini-grids through economic value-added services in the agriculture sector

High-level Timeline

S/N

High Level Activities

Timeline

1

Short-list and sign MOU/Agreements with three mini-grid developers for the pilot

June 2023

2

Identify and agree on project communities with the mini-grid developers for the pilot 

June 2023

3

Site verification of identified communities for pilot

July 2023

4

Disbursement of first tranche of loan

July 2023

5

Monitoring & Evaluation Exercise on Pilot 

Quarterly

6

Stakeholder Convening on APF Pilot

2024 (TBD)

7

Learning report from the APF Pilot

2024 (TBD)

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