Nigerian businesses struggling with the high cost of transitioning to solar power are set to receive a major financing boost as financial services company Nomba and renewable-energy fintech Synafare commit N2bn to help about 300 small and medium-sized enterprises acquire solar equipment over the next two years.
The financing programme, announced by the companies in a joint statement, is designed to remove one of the biggest barriers facing businesses seeking more reliable electricity: the substantial upfront cost of purchasing and installing solar systems.
Under the initiative, eligible SMEs will be able to finance equipment including solar panels, inverters and batteries rather than paying the full cost upfront. The companies expect the programme to run over the next 24 months.
The commitment builds on an existing partnership between Nomba and Synafare that has been running for more than a year. During that period, Nomba has provided financing to SMEs identified and vetted through Synafare's renewable-energy network.
So far, more than N500m has been disbursed to 10 businesses, with the partners reporting a zero per cent non-performing loan rate and no recorded defaults.
Direct lending model
The two companies said the new N2bn commitment would build on a financing model that combines Synafare's expertise in sourcing and assessing businesses seeking renewable-energy solutions with Nomba's lending infrastructure and balance sheet.
Under the arrangement, Synafare identifies SMEs interested in purchasing solar equipment, vets the businesses and pre-qualifies suitable applicants. It then submits their applications and Know Your Customer documentation to Nomba for an independent credit assessment.
Businesses that meet Nomba's lending requirements receive financing directly from the financial services company.
The loans average about N50m per merchant and can reach as much as N100m, giving larger SMEs access to substantial capital for renewable-energy installations.
Synafare subsequently manages repayment collections to Nomba, allowing the companies to divide responsibilities between renewable-energy origination and financing.
Nomba Chief Executive Officer, Yinka Adewale, said the expanded commitment reflected confidence in both Nigerian SMEs and the financing structure developed through the partnership.
“At Nomba, we’ve built our credit business on a simple principle: lend responsibly, and lend directly, so the value reaches the merchant without unnecessary friction,” Adewale said.
He said the partnership had demonstrated the potential of direct lending to tackle financing gaps in critical areas of the Nigerian economy, particularly the country's growing demand for alternative sources of electricity.
Solar cost remains a major obstacle
For many Nigerian businesses, unreliable electricity and the rising cost of running diesel-powered generators have made alternative energy increasingly important.
Solar power offers businesses a way to reduce their exposure to fuel costs and interruptions in conventional electricity supply. However, the initial investment required for panels, batteries and inverters can put the technology beyond the reach of many SMEs.
Synafare CEO Tobi Esho said the cost barrier remained one of the most significant challenges for businesses looking to make the switch.
“Every business we work with wants solar power equipment to run and grow their operations, but the upfront cost of solar products is often out of reach,” Esho said.
According to Esho, Nomba's direct financing has helped bridge that gap by enabling businesses to obtain the equipment while spreading the cost over time.
He said the additional N2bn commitment would allow the partners to take the model to a much larger group of businesses.
Financing productive assets
The solar initiative is also part of Nomba's broader strategy of using its credit business to finance productive assets that can help merchants and SMEs operate more efficiently and expand their businesses.
Rather than focusing solely on conventional working-capital loans, the company is seeking opportunities to connect financing directly to the equipment and other assets businesses need to generate revenue.
Nomba said its recent financing announcement with Globus was also part of this broader direction as it explores ways of linking credit with productive business assets.
The strategy could become increasingly important for SMEs facing high operating costs and limited access to affordable long-term capital.
By financing assets that can directly improve productivity or reduce operating expenses, lenders can potentially create a closer link between borrowed funds and the businesses' capacity to repay.
Maintaining lending standards
Despite the ambitious expansion target, Nomba and Synafare said scaling the programme would require more than simply putting additional capital into the market.
The companies said they would need to expand their ability to identify, assess and support suitable businesses while maintaining strong underwriting standards.
The immediate focus will remain on sectors and merchant segments where the two companies already have experience, allowing them to refine the financing model as the programme expands.
The partners said the success of the initiative would ultimately be judged not simply by how much money is disbursed, but by whether the financing results in productive solar assets and improved business performance for participating SMEs.
For businesses that have long relied on expensive generators to keep their operations running, the programme could provide a more accessible route to solar power while helping to address one of the country's persistent challenges: the high cost and unreliability of electricity for small and medium-sized enterprises.