Lidya, one of the country’s most prominent digital lending platforms, has officially announced the closure of its Nigerian operations after nearly a decade of operation. The company, once celebrated as a trailblazer in Africa’s financial technology ecosystem, revealed that persistent financial challenges and an unsustainable business model had forced it to shut down.
This announcement marks the end of an era for a startup that was once hailed as a symbol of Nigeria’s growing digital finance revolution. But what exactly went wrong for a company that processed over $50 billion in credit applications and disbursed over $150 million in loans to small and medium-sized enterprises (SMEs) across Nigeria?
Background: Lidya’s Rise in Nigeria’s Fintech Space
Founded in 2016 by Tunde Kehinde and Ercin Eksin, Lidya positioned itself as a solution to one of Nigeria’s most persistent business challenges — access to credit for SMEs. By leveraging data analytics, machine learning, and automated credit scoring, the company allowed businesses to secure loans without collateral, lengthy paperwork, or traditional banking barriers.
Lidya’s innovative model quickly gained attention both locally and internationally. The company expanded its reach beyond Nigeria into markets like Poland and the Czech Republic, securing millions in funding from global investors. Its vision was simple but ambitious: to close the credit gap for underserved entrepreneurs and empower businesses to grow using digital finance tools.
At its peak, Lidya had disbursed loans to more than 32,000 businesses, many of which credited the platform for enabling their growth and survival during difficult economic times.
The Downfall: From Rapid Growth to Financial Collapse
Despite its early success, Lidya’s fortunes began to shift dramatically over the last few years. According to reports, the company’s closure was the result of multiple interlinked challenges that it could no longer overcome.
- Rising Loan Defaults
The digital lending space in Nigeria has long struggled with the issue of loan repayment. As economic conditions worsened and inflation soared, many small businesses found it difficult to repay loans. Lidya reportedly faced an increasing rate of non-performing loans, which ultimately eroded its profitability. - Investor Fatigue and Funding Constraints
Like many tech startups globally, Lidya faced a tough fundraising environment. After years of aggressive expansion and capital expenditure, the global investment slowdown hit the company hard. With investors tightening their purse strings, Lidya found it difficult to raise the additional capital needed to sustain its operations. - Leadership Departures and Organizational Shake-ups
The resignation of Tunde Kehinde, one of the co-founders, in October 2024, signaled deeper internal instability. This was followed by the exit of the Chief Technology Officer, Cristiano Machado, and several layoffs, particularly within the company’s Portugal-based technical team. These moves reflected growing uncertainty about Lidya’s direction and sustainability. - Operational Challenges Across Multiple Markets
While Lidya’s expansion into Europe initially looked like a success story, managing operations across diverse regulatory and economic environments stretched the company’s capacity. The overhead costs and compliance demands of operating in multiple jurisdictions eventually became too heavy to bear.
Official Closure Announcement and Customer Message
In its farewell message to customers, Lidya acknowledged the difficulties it faced, stating that the decision to shut down was taken after “serious financial challenges” made it impossible to continue serving clients effectively.
The company expressed appreciation to its customers for their loyalty and trust over the years, adding that it was proud of the impact it had made in supporting small businesses in Nigeria and beyond. However, Lidya did not provide detailed information on how existing loans or customer obligations would be handled, leaving many borrowers uncertain about the next steps.
Impact on Nigerian SMEs and the Fintech Industry
The closure of Lidya has raised concerns about the future of digital lending in Nigeria, especially for small businesses that rely heavily on fintech platforms for quick access to credit.
For many entrepreneurs, Lidya represented a lifeline — a bridge between their business dreams and the financial support needed to achieve them. Its exit therefore leaves a gap in the ecosystem that may take time to fill.
Moreover, this development underscores the fragility of the fintech lending model in emerging markets, where high default rates, regulatory gaps, and macroeconomic instability can undermine even the most innovative ventures.
Industry analysts have warned that Lidya’s closure could prompt other digital lenders to rethink their models, improve risk management systems, and strengthen their compliance with regulatory standards.
Regulatory Response and Sector Implications
The Central Bank of Nigeria (CBN) and other regulatory bodies are expected to increase scrutiny of digital lenders following Lidya’s collapse. The incident highlights the urgent need for a robust regulatory framework that protects both borrowers and lenders, ensuring that customer funds and data remain safe even when companies face insolvency.
Financial experts also believe this event could serve as a wake-up call for the fintech community, encouraging greater transparency, sustainability, and accountability within the sector.
A Broader Lesson for Startups and Investors
Lidya’s story mirrors the broader challenges facing many African startups that experience rapid growth but struggle with long-term financial sustainability. The pressure to scale quickly and impress investors often leads to risky decisions that can backfire when market realities shift.
For entrepreneurs, Lidya’s fall is a reminder of the importance of balancing innovation with caution. For investors, it reinforces the need for due diligence and for building realistic expectations about profitability timelines in emerging markets.
What Happens Next?
As the dust settles, questions remain about how Lidya will manage its outstanding obligations to both lenders and borrowers. Many affected customers have expressed concern about pending loan repayments, while others are unsure how their personal data and records will be handled after the company’s exit.
Industry watchers predict that new players may attempt to fill the gap left by Lidya, but sustainability will depend on whether they can learn from the company’s mistakes — maintaining strict risk management practices, adopting stronger repayment tracking systems, and complying fully with financial regulations.
