Why renewable energy companies rely on debt financing
For service companies in Nigeria, Nigeria’s population of 200 million is an advantage.
But that 200 million should be followed by an asterisk at the end, because that doesn’t exactly translate to a thriving consumer base.
It’s easy for companies that provide off-grid energy services to get confused. Over 40% of Nigeria’s 200 million people live without grid access. In addition, the electricity supply for those who have access to it is not excellent, thanks to the deplorable state of the network. It is therefore easy to assume that providing alternative energy sources to Nigerians would be a definite winner. But not quite.
The major problem is that Nigerians are poor and those without access to the grid live in the poorest parts of the country, which are mostly rural areas. For people who live in urban areas, renewable energy providers must compete with generators for commercial and industrial consumers and low-income retail consumers. This poses a big problem for renewable energy companies: slow-growing revenue when their capital is tied up in receivables. It also doesn’t help that renewable energy solutions are capital intensive, especially in the short term.
The road to entrepreneurial success in Nigeria is bumpy and renewable energy companies are not exempt. This is especially true
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