More than two years after its approval, Nigeria’s Distributed Access through Renewable Energy Scale-up programme, known as DARES, is showing some results. The Rural Electrification Agency said that by April 2026, over 830,000 solar home systems had reached nearly 3.9 million Nigerians.
DARES is backed by a $750 million World Bank credit and aims to reach 17.5 million Nigerians while mobilising over $1 billion of private capital.
As of January 2025, Nigeria had 13.6 GW of grid-connected generation capacity, mostly powered by gas. However, only 5.3GW was available, and average output was 4.7GW amidst incessant gas shortages, plant outages and unpaid debts that keep capacity idle.
TCN has said transmission can reach 8.1 GW, but ageing lines, weak substations and instability continue to restrict reliable power transmission. On the distribution leg, the DisCos billed only 83.4 percent of the value of energy received in August 2025, before collection losses.
Given this premise, simply adding renewable power will not make those problems disappear. A utility-scale solar or wind farm connected to the grid is still a generator that typically requires electricity to pass through transmission and distribution legs before reaching customers. If those networks remain weak, changing the source of generation may add limited value to reliability.
Distributed generation offers a more viable route to increasing electricity access in Nigeria. Embedded gas and solar plants, mini-grids, and rooftop solar systems produce electricity near consumers and rely less on transmission networks, which can make them suitable for rural areas and areas without grid access, provided any required fuel supply is reliable.
Cities and industry will still, however, need utility-scale generation, alongside stronger networks and effective system balancing.
With a population of about 238 million in 2025, 63 percent of Nigerians classified as multidimensionally poor in 2022, and more than 80 million people lacking electricity, Nigeria has no shortage of demand but an affordability issue.
In December 2025, NERC reported an average allowed tariff of about N124.30 per kilowatt hour. The government subsidises the gap between allowed tariffs and cost-reflective tariffs. Notably, the federal government incurred a subsidy obligation of N358.32 billion in the first quarter of 2026, about 52 percent of generation invoices.
But to have a grid that powers the economy, a viable tariff must cover efficient operating costs, maintenance, reasonable allowances for losses and bad debts, battery replacement where applicable, and a return on capital. Yet many poorer households cannot pay this full cost.
How do we finance this energy gap?
Nigeria’s pension industry is one of its largest pools of domestic institutional capital. PenCom reported pension assets of N30.7 trillion in June 2026, with contributions totalling N903.70 billion in the fourth quarter of 2025.
One mistake often assumed is that the industry has idle money waiting to be deployed. The reality is that these assets are not simply idle money, but with suitable incentives and risk protections, part of these long-term assets and new contributions could be strategically reallocated towards renewable energy.
Corporate infrastructure bonds and infrastructure funds together accounted for about 1.3 percent of pension assets in June 2026. The challenge lies in structuring renewable energy projects to meet pension funds’ requirements for risk, returns and reliable cash flows.
Attracting pension money, however, does not make electricity affordable. Investors price naira debt against government bond yields, plus a premium for credit and liquidity risks. These financing costs ultimately enter the electricity tariff unless grants or concessional funding absorb part of them. Guarantees can narrow the premium but cannot by themselves overcome high benchmark interest rates.
Other countries have addressed this problem by sharing costs beyond the individual mini-grid’s customers. Bangladesh’s IDCOL solar mini-grid programme financed 50 percent of project costs through grants and 30 percent through concessional loans, leaving sponsors to provide 20 percent as equity.
IDCOL capped tariffs at Tk32 per kWh, based on a targeted equity return of 13 to 15 percent. This approach makes the subsidy explicit rather than expecting rural households to bear the full cost of supply.
The current service bands link prices to supply hours, not income. Poor households could instead receive a small monthly electricity credit through their meters, with normal tariffs above it. South Africa and Brazil use versions of this approach. Separate support could cover meters and wiring.
These household electricity subsidies should be funded in advance and paid only when service is delivered. Tariff calculations should cover operations, maintenance, equipment replacement and a reasonable return on capital actually financed by investors, without charging consumers a return on grant-funded assets.
DARES grants and concessional funding should reduce the amount that must be borrowed commercially, while pension debt should be limited to what realistic customer payments can support.
DARES has shown that distributed solar can reach households quickly. Its next phase should prove that those connections can support productive use and remain affordable. And Nigeria needs both distributed and utility-scale renewables, but not in the same places or for the same job.
Fawaz Ayobami-Akanbi is a professional focused on energy and corporate finance. His experience spans energy investing, infrastructure and strategy across Sheybiss Renewables, Access Pensions (Head of Research) and Siemens.
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