By Oke Peter
Small and medium-sized enterprises (SMEs) are vital to Nigeria’s economic fabric. They account for an estimated 96 percent of businesses and provide about 84 percent of employment in the formal sector. However, one of the most persistent constraints on their growth is the unreliable and expensive supply of electricity. Against this backdrop, off-grid power solutions—such as solar mini-grids, hybrid generation systems, and standalone renewable setups—offer a compelling opportunity to unlock SME productivity, reduce costs, and enhance competitiveness.
A central barrier for many Nigerian SMEs is the lack of dependable, affordable electricity. Research has shown that inadequate power supply has a significant negative effect on SME performance, forcing many firms to rely on diesel or petrol generators—an option that is both expensive and unsustainable. Running a business on generator power drains profit margins and limits growth potential. According to Nigeria’s Off-Grid Electrification Strategy, diesel generation in some areas costs up to USD 0.75 per kilowatt-hour, far higher than what solar or mini-grid systems could deliver. Beyond the high cost, unreliable electricity undermines competitiveness. Businesses lose production hours, experience spoilage of perishable goods, miss delivery deadlines, and struggle to scale operations. The result is that SME growth is constrained, job creation suffers, and the sector’s vast potential remains underutilized.
Off-grid power presents a clear alternative to this persistent challenge. These systems provide stable and reliable electricity by bypassing or supplementing the national grid’s limitations. With consistent power, SMEs experience fewer interruptions, reduced downtime, and better planning and productivity. Studies show that many small businesses lose two to three hours of productivity daily due to power outages—equivalent to about 60 hours per month. By contrast, switching to off-grid or hybrid systems lowers energy costs and improves profitability. Although the initial investment may seem high, the long-term cost is significantly lower than continued reliance on diesel or petrol generators. Many SMEs that have transitioned to solar power have reduced their monthly energy expenses by substantial margins.
Encouragingly, Nigeria’s Off-Grid Electrification Strategy targets the deployment of 10,000 mini-grids to power about 250,000 SMEs—a recognition that affordable, sustainable energy is central to the country’s small business growth. Reliable electricity enables enterprises to expand operations, adopt modern technologies, run more equipment, maintain consistent customer service, and even extend working hours. SMEs that embrace renewable off-grid systems can also differentiate themselves in the marketplace, hedge against volatile fuel prices, and project an environmentally responsible image. With diesel prices rising following subsidy removal, renewable energy has become not only a green alternative but also a smart business strategy.
Off-grid systems are especially relevant in peri-urban and rural areas where access to the national grid is weak or non-existent. For enterprises in such regions, mini-grids and standalone solar systems open up new opportunities for value addition and local production. Agricultural SMEs, for example, depend on reliable power for agro-processing and cold storage. Consistent electricity reduces spoilage, improves product quality, and supports value-added production. Manufacturers, printers, welders, and ICT hubs also need continuous power to operate efficiently and competitively. Likewise, businesses in retail, hospitality, and food services benefit from reduced generator noise and emissions, better customer experience, and lower operating costs.
Beyond powering machines and lights, off-grid energy drives broader economic benefits. It enables SMEs to operate more efficiently, reinvest savings into marketing, training, and expansion, and create more jobs. A stable power supply not only strengthens existing businesses but also encourages the birth of new ones, particularly in regions previously left behind due to poor electricity access.
Despite these advantages, the adoption of off-grid power among Nigerian SMEs still faces several challenges. The most common hurdles are the high upfront costs of solar and battery systems, limited access to financing, and the lack of technical knowledge required to install and maintain such systems. Some SMEs are hesitant to make the switch due to uncertainty about system reliability or fear of poor after-sales service. Moreover, inconsistencies in import duties, tariffs, and government incentives often discourage investment. Many small businesses also fail to accurately assess their power needs and future growth plans, leading to undersized systems that quickly become inadequate.
These challenges, however, are not insurmountable. Through targeted government programmes, empowerment schemes, and financial interventions by agencies such as the Bank of Industry and the Ministry of Humanitarian Affairs, SMEs can access credit facilities, grants, and technical support to ease adoption. The key is to create a friendly ecosystem where financing is flexible, information is available, and policies are consistent.
To fully harness the benefits of off-grid power, both business owners and policymakers have crucial roles to play. SMEs must begin by conducting energy audits to understand their consumption patterns, downtime costs, and potential savings from switching to renewable power. They should also explore flexible financing options such as pay-as-you-go solar, energy service company (ESCO) partnerships, grants, or mini-grid subscriptions that reduce upfront expenses. It is equally important to work with credible off-grid providers who offer quality components, warranties, and reliable maintenance services. Business owners must also plan for scalability by choosing systems that can expand as their energy needs grow, while ensuring efficient energy use to maximize returns on investment.
On the policy side, government and regulatory agencies should expand access to concessional loans and grants for renewable energy investments, streamline mini-grid licensing, and ensure that duties on renewable components are predictable and supportive of local adoption. Training and awareness programmes can help SMEs understand the practical and financial benefits of off-grid systems. Encouraging local manufacturing of solar panels, batteries, and related equipment will not only reduce costs but also create more jobs and build technical expertise within the country.
In today’s Nigeria, where grid power remains unreliable and fuel prices continue to soar, off-grid energy solutions offer a sustainable and strategic path for SMEs to thrive. By embracing decentralized energy systems such as solar, mini-grids, and hybrid technologies, small businesses can move from merely surviving under erratic power conditions to flourishing with reliable and predictable electricity supply.
The potential of off-grid power will only be realized when the key barriers—cost, financing, and technical capacity—are effectively addressed. SMEs must be willing to invest in modern energy systems, while policymakers must provide an enabling environment that encourages and rewards such investments. Off-grid power is not just an alternative source of electricity; it is a growth catalyst—a foundation upon which Nigeria’s next generation of resilient, competitive, and innovative businesses can be built.
