Synafare, a renewable energy supply-chain and financing company, plans to back 100 solar merchants with up to N100 million each, in a push to ease the capital and sourcing constraints facing Nigeria’s solar businesses. Chief executive Tobi Esho announced the initiative at Solar Roundtable 2.0 in Lagos on Saturday, 24 October.
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How the financing works
Individual merchants can access up to N100 million depending on their turnover, with a typical minimum of about N10 million. Esho said two merchants had already received N170 million in combined financing before the roundtable formally opened.
The company also negotiated special prices with participating distributors, asking them to offer their lowest rates of the year. For the event, Synafare cut its monthly financing rate from the usual four to five per cent to 3.5 per cent.
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What the rate means for borrowers
A monthly rate of 3.5 per cent works out to roughly 42 per cent over a year if simply multiplied, which is in line with the cost of credit available to many Nigerian businesses. The discount helps, but merchants will still need healthy margins to carry the repayments.
That is why the pricing arrangement with distributors matters. Cheaper stock gives merchants room to absorb financing costs and still compete on large projects.
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Why solar businesses need working capital
Synafare says it works with more than 2,000 businesses in the sector, covering supply-chain support and financing. Esho said the company was set up about two years ago to address the financing gap facing installers, many of whom win orders they cannot easily fund upfront.
Esho also encouraged installers to move into retail and distribution, and stressed that financing must be matched with business capacity. Lenders in this space have been burnt before by merchants who borrowed beyond what their operations could support.
The announcement follows a N2 billion commitment from Nomba and Synafare at the end of August to finance solar systems for about 300 SMEs over 24 months, with loans averaging N50 million.
For solar merchants, the real test will be whether financing, discounted stock and better structured businesses combine to produce profitable growth, rather than simply larger loan books. If they do, the sector could become one of the clearer examples of SME lending tied to a productive asset.
