Solar for Microbusinesses in Nigeria with Sanmi Lajuwomi (Winock)

In this episode, we speak with Winock Solar on how they are deploying solar systems for microbusinesses in Nigeria. We talk about the challenges to solar adoption in Nigeria and what the opportunities are for solar entrepreneurs.

Recorded in 2019

Sanmi: My name is Sanmi Lajuwomi. I am Nigerian of origin and I am the founder and CEO of Winock Solar Limited. My background is in IT, particularly in project management. I studied in the UK. I went to University of East London and then took some extra courses at City University and in the course of doing IT, I started to look at what was out there in terms of how I can impact Africa. One thing that I saw clearly that was slowing down economic growth and really stifling information is the lack of electricity. So, I said, “What can I do in this space?”. In 2013, doing research, I discovered that solar is the answer. I was happy that solar was the answer because I am also very environmentally friendly. I believe that we are custodians of Earth and we have the responsibility to ensure that we leave a safe planet for future generations. So, I got into solar in 2017 and started Winock Solar in Nigeria with my partner Arinzi.

So, while Arinzi and I were starting we said, “Where can we really add value in Nigeria using solar?”. And then we looked at the 90 million people and we said, “Actually the people that make the wheels of the economy turn in Nigeria are the micro businesses” - they contribute about seventy percent of the GDP and they are also the largest employers of labour- “but do they really have challenges with electricity?” We said, “Okay, we'll find out”. We started off by first designing a market survey. We surveyed about 500 businesses and said hey, “What's your challenge with electricity?”.

We were absolutely astounded at what we found. We found that the majority of these micro businesses, of which there are 37 million in Nigeria, rely only on petrol generators and those that see some electricity from the grid barely get it. So, for example, the guys that see it, some of them in Dei Dei Market only get it for five or four hours a day on a very good day.

Sometimes, for example during rainy season, they do not see electricity for days. So, they are spending money on petrol generators now. Apart from the fact that due to the lack of stable electricity they have to rely on petrol generators, there are major problems with generators themselves. The first one being the effect on the environment. The size of generators that these micro businesses use emit around 1500 grams of CO2 per kilowatt hour. The second problem is that the cost is very prohibitive in terms of getting into business. They cost about 40 cents per kilowatt hour. The third problem is that these generators are very dangerous. They emit carbon monoxide. According to a World Health Organization report that was done in 2015, about 600,000 Africans die annually from carbon monoxide inhalation -not just from generators, also from cooking and other sources like that.

So those are the problems that were identified. Now we said, “Okay. What sort of solution can we introduce to solve this problem?”. Because if we eliminate the generator then we eliminate all these problems and if we provide solar we provide stable electricity. The real problem now was, imagine: these people, even though they have stable cash flow, don't have the capital upfront to buy the solar system which is about a $1,000 each.

You can imagine a business person that earns the equivalent of $300-$400 a month. And you are asking them to buy a $1000 system upfront. So we said we would provide them systems at no capital upfront, which is leasing it to them. And we designed two systems: 1 kilowatt and 1.5 kilowatts, priced at $14 and $17 respectively per month.

We said to them, “Would you be able to afford this?”, because in Nigeria, there is no data. So you just have to trust, you have to trust that they will be able to pay. So we started off in January 2017 precisely rolling out this model with a gentleman named Suleiman who is the head of The Barbers Association in a place called Karshe.

I'm happy to say that two years on Suleiman is still one of our best customers. Suleiman vouches that the system has improved his life drastically. How? Suleiman has saved 70% on his electricity cost- just the cost versus the generator upfront, not including the ongoing cost of petrol. I guarantee you if you see him now compared to years ago, he looks healthier because he used to keep the generator in shop. Can you imagine all the smoke and what that would do to your skin? Suleiman is a biggest champion of Winock now.

To date we've been able to self-finance over 150 kiloWatts of power. That equals 80 customers’ distributed systems. So that is it in a nutshell. Now we are looking to scale and are looking to see how we can help more people. Our mission is to ensure that clean energy is available to all, because they are over 1 billion people that don't have access to electricity.

We can give them clean energy and that will help in reducing carbon emissions. So that is what we are doing.

Distributing Solar: For people who've never been to a local Nigeria Market, can you just give a bit of an understanding of what a micro business is and what your typical customers look like so that people can really get a bit of a flavor of how this is changing their lives?

Sanmi: So according to the Nigerian Bureau of Statistics, the micro business is defined as a business that employs no more than 10 people. In the market you have different varieties of business. The most common businesses that you find are barbing salons or hairdressing salons, tailors, and mobile charging companies.

Distributing Solar: So that's been a fantastic overview of what you've been doing for the last two years. Can you tell us a bit about what your goals are for the next five years?

Sanmi: For the next five years our goal is to become the number one Solar Company in Nigeria. That's the overarching vision. Now, how do we reach that? For micro business segments we want to have saved about 50,000 businesses by 2024.That's what our goal is.

Distributing Solar: And you mentioned that you used to live in the UK. You currently have a team that split between the UK and Nigeria. How has this been working? What are the advantages and the challenges involved?

Sanmi: We have a team in London and in Abuja. So far it’s been going fine, I myself only returned to Nigeria two months ago. That's why I still sound like the queen. Before I returned the business was running for two years, and it was actually being run by the local team. We had four people on the ground. The challenge has been the internet speed in Nigeria. It is getting better but two years ago it was really bad. Doing video conferencing and all of the communication in general was a challenge, but with persistence and with courage we've been able to make it work.

Distributing Solar: It sounds like it was working really well. How have you seen a change in you and the company's direction now that you're back and you're really immersing yourself with your local customers?

Sanmi: It is difficult to make correct assumptions about what was working really well without being on the ground because previously I'd come to Nigeria maybe four times a year, but only for a few days each time. I wasn't able to get a full picture of what was happening.

So being on the ground over the last two months I took my time to see to the customers, understand how the system has been for them, and understand what challenges they've been facing with it.

I was able to get real actual data on the ground. And in terms of the team how has it affected them? Their morale has been seriously boosted. First of all, I don't run the company like another Nigerian because Nigerians are very hierarchical, and they use the word sir for senior people.

So I banned the word ‘sir’ in the company. It's very refreshing for them to see a different way of running business, which is like a UK way. I find that by running it more like a startup in Silicon Valley they are able to express their ideas and you'll be surprised what these people, even though some of them have never been out of Nigeria, what they are expressing in terms of great ideas that can be useful anywhere in the world.

Distributing Solar: What are the upcoming projects you are most excited about and how do you prioritize your products and potential customers? How do you think about that landscape of solar opportunities?

Sanmi: Nigeria is like a basket of opportunities. If you try to pursue everything you find out you run out of breath quickly because there are so many opportunities.

We knew that from the onset and that's why we initially started focusing on the micro businesses. Now we recently added EPC and O&M for residentials that need between 650 Watt and 10 kiloWatt systems and a third leg is government projects which are going to be constituency projects.

The three segments of businesses have different requirements and resource allocation needs. For the micro business, for example, we rely on external capital. When it comes to that, we define it very clearly and it just really is about ensuring that we are documenting our work correctly for investors, providing information, and engaging investors. Whereas for the residential segment it is about marketing and getting customers that want to install. The government segment is about building relationships and tendering to secure contracts to install for government. So they are really different segments.

Distributing Solar: There seems to be a huge amount of appetite for solar power Nigeria, just as I was getting my Visa for Abuja I spoke to at least three people in the queue who were really excited about solar power and asked me how they could get solar power for their own homes. What do you think are the major challenges or hurdles towards greater adoption of solar within Nigeria?

Sanmi: I mean, I'm very happy that you're seeing that actually everyone is championing solar energy in Nigeria. Even the little kid on the street knows about solar now. But before I touch an answer in terms of the hurdles, I'll just quickly touch on why that attraction is there in Nigeria.

The grid situation is very poor. You have a national grid supplying 4,000 megawatts of generation capacity. And the demand is 180 gigawatts. So you see the gap is massive. Now, in Nigeria, the main driver for solar is the fact that solar is or the clear solution to the electricity problem. That's why everyone wants to learn.

So, what are the major hurdles? The major hurdle is that solar- for the distributed systems or even the mini-grids -is capital intensive. Willpower as a whole is a very capital-intensive industry and access to capital is a major problem. So that will be the main challenge.

And the other challenges are that there is a lack of understanding of proper execution of solar in Nigeria. We don't have a lot of people have the technical knowledge to deploy solar. That's the other challenge.

Distributing Solar: Do you have any comments or observations on the general difficulties of getting financing within Nigeria whether it be for solar business specifically or just as a startup?

Sanmi: The general difficulty is that there is little capital in the country itself, even though the country is very rich with natural resources a large population of the country are not productive. So, the country itself is not that rich.

Then the second challenge is that the banks charge very high interest rates up to about thirty percent -and that's with collateral by the way. It's a great obstacle then for someone with a great idea and a lot of confidence and positivity because the banks don't buy that. They only want to see that you can pay the 30%.

The third thing is that a lot of capital comes from outside of the country. But in recent times Nigeria has been in a recession, although the country's back into positive. GDP growth I think is about 2% as of last quarter. So that's a good thing. But as of three years ago/two years ago, we were at negative growth. So, a lot of investors started pulling out. Even those that were in the country already started pulling out their capital. So those were the challenges: One, the country is not that rich that the government can really support initiatives, two, the capital providers locally make it very expensive, and three, because of the recession, capital inflow has been very slow.

Distributing Solar: I think for a lot of people who don't understand the country in detail there's a large perception of risk around political climates, around corruption, and around number of different areas that I think scares away a lot of otherwise very sensible investors, and there's a lot of obviously very exciting opportunities. I was wondering if you could shed a bit of light on what it is really like? You know, how do people understand that and where is that gap between the perception of risk and the actual risk that is to be encountered here?

Sanmi: That's actually a question that's very much at my heart. And I sometimes ponder and try to find how to try to understand the whole picture because I'm very much into philosophy. I will first of all tell you the philosophical challenge and then I'll tell you what is the perception and what's real and what's not.

The challenge is that Nigerians as a whole are short-term thinkers, right? Because naturally people think short term. So they don't think of the long-term impacts of actions. They mainly think of what is in it for me now and because of that you find that a lot of people would probably just be dubious. That's the honest truth.

So there’s lot of dubious Nigerians that’s the clean honest truth. Now is it Nigerians that are dubious or is it the environment that creates dubious Nigerians. I think it is the latter because now in America Nigerians are the highest median income earners. So that shows that we can actually be very positive. So, really that's the challenge.

Now, in terms of what is the perception? I think the perception is far far larger than the reality. Yes. There is a risk, but the perception of the risk from Chinese whispers has been blown largely out of proportion, right? I grew up in Nigeria. I haven't had more challenges. I love Nigeria. I don't think I can live anywhere else again.

The risk of doing business is not as much as people perceive, but I do think though that what could have actually increased the perception is that there have been a lot of fraudulent people.

We call them 419 in Nigeria that go around presenting themselves as legitimate business people, but if you look at it, if someone comes to you and says that you can earn 200% in a year you as an investor should question it very well. What I'm saying is that the risk is there just like anywhere in the world in America we’ve had the case of the likes of Madoff etc. it can happen anywhere. But in Nigeria, especially because of lack of data, please do your due diligence very well. But if you do your due diligence very well, I can assure you that you are in safe hands.

Distributing Solar: That's really interesting and thank you for shedding light on that. I think what’s a really insightful moment you struck upon was talking about short-term thinkers. And I think we take it for granted often the luxury to be able to be long-term thinkers. Now a bit of a challenging question. I suppose is that the solar model relies on long-term plan. As you've mentioned it has a high upfront capital cost and then it's a long game, right? As in once it's paid off it is very profitable. However, how do you then balance where your customers are short-term thinkers, but your business model is a long game?

Sanmi: The first one is luckily in Nigeria the cost of capital for solar is much lower than other areas because of the high irradiation. So it's not as long term as it would be in other places in the world. Then, the other thing is that luckily as much as Nigerians think short term, they value electricity so they wouldn't want to do anything to jeopardize the opportunity to have stable access to electricity.

So in fact to give you an example, we had a customer in the early days that went to marry a second wife - I'm just telling a Nigerian scenario - and then his capital got stretched. He did a big wedding and they can't afford it. So, he wasn't paying us for three weeks -because we charge weekly- so he didn’t pay for a month. So, we wanted to remove our system and he was pleading and saying, “Please don't remove the system I’ll clear it today I'll clear the arrears today because it will be very very shameful that I have stable electricity and all of a sudden I don't have it anymore because of my action”.

What I'm saying is that the psychological reason why they sometimes may default is actually the same reason why psychologically they won’t because they don’t want any shame. They wouldn't want to lose that benefit. Now from an investment perspective, as an investor Nigerians are very used to access to short-term capital, right? So because of that short-term thinking as well, you can come in and give a loan for short-term and make your money back quickly. So that was my longtime game. So, let's say one year, two years rather than say, the 25 years that they do in America.

Distributed Solar: Great. And so you mentioned some dubious actors. Can you give some examples of dubious actors within the solar industry? We've heard stories about people photocopying solar panels for instance and batteries that have been repackaged and branded as new. Tell us a bit more about what it's like on the ground in Nigeria.

Sanmi: Just to clarify actually these dubious actors actually just part of its global syndicate. They partner with Chinese and Indians and people of other origins. The first thing they do is- the first level- is that they import subpar products because Nigerians typically think of cost, right? They don't typically think of quality. So, when you are selling to somebody, they just say, “How much is it?” and then they pay you and then tomorrow it's not working.

These people know that, and they take advantage of that to import subpar products. To give you an example, initially when we imported from China when we were buying the guy said, “Should I give you the Nigerian price or the UK price?” what does that mean? He meant quality wise so they are used to Nigerians that buy low quality.

Then the second thing is that there are also people in the business that take old batteries, recycle them, and then they sell it on to customers as new. Now this is actually a very bad practice because with recycled batteries, let's say with gel batteries typically in Nigeria they last two years.

If you recycle a gel battery, let's say it lasted three years the first time, you can’t really tell how long it's going to last a second time. It's a gamble. So, you're selling someone something that might last two years or it might last one month. And as you mentioned the photocopied solar panels, etc. Those are the sort of acts that we see with dubious players.

Distributing Solar: And how do you avoid that as a company? How do you make sure you don't fall into some of those traps?

Sanmi: Usually, sadly it's actually the companies that perpetrate these acts. But as a buyer, procuring from companies, the first thing we've done is that we've struck an agreement with a very reputable distribution company that is trustworthy. They help us in checking our components before they come to us and they give us a long-term warranty that's longer than what you typically get as a Nigerian company. So we reduce our procurement risk in that sense.

The second thing is that we have a rigid Q&A process that ensures that before we go and take it out to the customers, we do our checks. We bought equipment like battery testers etc. Even though we are a small company we are thinking like a big company. We do our Q&A.

The third thing is that when we do the installation, we spend some hours looking at the behavior of the components to see that it is actually behaving the way we expect. An example is that if you charge a battery based on the design of your solar system, you expect the battery would last six hours after sundown. If the battery lasts two hours, that's a telltale sign that this battery is really bad and then you need to change it. In a nutshell with the risks by signing an agreement with a distributor the agreement favors us and then our Q&A process is very rigid.

Distributing Solar: So there was a major election in Nigeria earlier in the year. It will be great to hear how the election and its results have impacted the solar business and what the impacts are on politics and energy.

Sanmi: The first thing, just a general observation as a Nigerian with this election, Nigeria was one of the countries that had notorious military leaders. But since 1999 we haven't had any fear or threat. So the democracy is pretty much stable now just like in a stable countries most or advanced countries like the UK or U.S. You have two parties majorly in the UK, Conservative or Liberal, in the U.S. you have Democrats and Republicans, and Nigeria you have PDP and APC.

Also, typically the alliance to a candidate was usually driven by either religious or tribal sentiments. But for the first time we had an election that was driven by purely by, “What can you do for me as a candidate?”. So Nigerians are becoming more politically mature. That's a good thing.

Now in terms of solar, how does it affect solar? The president in his first four years, he introduced an organization called Rural Electrification Agency (REA), which is a government parastatal that is given the mandate to see how they can -how the government really can- help with catalyzing access to clean energy, not just any energy in rural areas. Now that initiative attracted the backing of the World Bank with over 350 million dollars loaned. Recently African Development Bank also just announced another I think 200 million dollars loan to the Lagos government for areas to implement projects and majority, about 90%, of these projects are solar projects. So that's a good thing for the solar industry. The REA through World Bank provides grants, sometimes 50%-70%-80% depending on the project, to solar companies and then solar companies bring in the rest through private investors and this is actually helping open up doors in the industry.

Now historically Nigerian governments have been known to, whether it’s real or not, the hearsay is that they’ve been known to be contributors to the delay in solving the electricity problem in Nigeria. So, it's very good that we have a government at the moment that is pro electricity access for the citizens or for the Nigerians.

Distributing Solar: It's really great that at the top level you're seeing a big difference. But often in Nigeria, we hear that there is a lot of difference between the national level and then the local level of government. Do you still see that difference or is that bridge getting smaller? Whereby we are seeing that gap reducing and therefore the local government are actually implementing on the national scale. Or are there still challenges at a local level? And what would you recommend in terms of ways to then influence those local areas to make them more aligned to the vision of the country as a whole?

Sanmi: The challenge is that Nigeria is a very large country and has a large population of people that are not educated. It actually has the lowest literacy rates in West Africa, sub-Saharan Africa as a whole. As a result it's very difficult to get things done because you really have to engage people and explain to them that you're doing good for them at the local level etc. That's the first thing the engagement is difficult.

The second problem is that Nigeria has a federal stock structure where everything is controlled by the federal government. So, the state governments and local governments are not really empowered to take initiatives and develop projects by themselves without Federal approval. How that came about was that majority of the revenue started coming from oil so all the money flows to the federal and they channel it so then the states submit projects and say this is what I want to do with the money and the federal government approves it.

Now, how would I help to improve it? The first thing is that in terms of engagement the local governments are the closest to the people and they understand their mindset more. So, the local government should be empowered to start their own initiatives locally that can help to drive revenue generation, which would help to improve the quality of lives in that region. And then the state level should be allowed to implement statewide projects and then the federal government should just be like a regulator or referee rather than the people that control it.

The other challenge is that sometimes even though the government controls budget allocation, the states are responsible for the delivery of this project. You may have a situation where you see a road, a federal road, that is being built and they just stop here and say the state is supposed to continue from here today. It's really a mess in that sense. In a nutshell, the political structure needs to be redefined so that all tiers of government can be empowered, but there are reasons why that wouldn't happen because Nigeria is a very sensitive country. So if you empower some people what if they want to break away or you use the state police for nefarious purposes etc.?

Distributing Solar: What we're going to do now is just go through a few quick-fire questions and we want to really understand the man behind the company. Who are you? What makes you tick? So firstly, who's an inspiring character for you and really motivates you?

Sanmi: An aspiring character for me these days is Marcus Aurelius who's the guy that wrote meditations, the former Roman Emperor, and then there are other people like Aliko Dangote who is the most successful man of color globally and is Nigerian and a third person is Jay Z. On family level my father and my older brother really inspire me as well.

Distributing Solar: That's great. And can you tell us a bit about some books that you read that you recommend and really maybe changed the way you think of different things?

Sanmi: Look, unfortunately I'm a very boring guy! Okay nonfiction. I was gonna say I'm very boring guy. I don't read nonfiction. But some that have really touched me the number one book I recommend for everyone is the Alchemist by Paulo Coelho. It is about finding your personal legend, so I am actually on that journey. I see myself as an alchemist or about to become an alchemist.

Another one that really touched me was Plato’s Republic and what touched me there was when it was talking about the divided line. The allegory of the divided line really opened my eyes in terms of how I see the world. Another one that I recommend is Nigeria: A Hundred Year History, it's a really good book. A final one would be The Bottom Billion by a gentleman called Paul Collier who was an Oxford Professor. So, there's the books that have really opened my eyes.

Distributing Solar: So that is really insightful. What I’d really like to know is: obviously you're moving through your career and you've had over 15 years so far -still very youthful looking though- but what would be some advice you'd give to yourself 10 years ago if you looked back and went to your younger self. What would you tell yourself now?

Sanmi: What I would tell myself is the thought process that really got me to be who I am now which is that everyone is a researcher in the world. No one is born knowing anything. So just pick an area and try to excel at it. Don't worry about whether you know it or not or whether you make mistakes just do your best and something good will come out of it for the world.

Distributing Solar: And finally, do you have a lasting message you'd like to leave people on the African continent and Nigeria in particular?

Sanmi: I wish I could sing like Michael Jackson, but I can't so I'll just say, I'll just quote Michael Jackson, “We are the world”. We are the world and the butterfly effect is real. Anything that happens in the far corners of Africa is something that could affect the world whether without we like it or not because there are no boundaries.

We need to now get to a place where by rather than seeing any problem whether it's in Africa or Europe or the U.S. -because every country has its challenge every region has it’s challenge- we should know that it’s something that could affect us and we should care about it and see what we can do in our own little space to solve it.

Distributing Solar: Amazing. Well, thank you so much Sanmi that's been a fascinating interview. We look forward to watching Winock Energy grow.

Sanmi: Thank you very much for having us.