Ukandu E. Ukandu, the managing director/CEO of FirstCap Limited, has identified payment security as the single most critical barrier to achieving financial close for energy projects in Nigeria.
Speaking at the 2026 SPE Lagos Energy Week, Ukandu warned that despite the abundance of gas and power opportunities, projects will remain unbankable without disciplined revenue collection and structured offtake agreements.
Ukandu, whose firm is a subsidiary of First HoldCo Plc, noted that while technical and fiscal risks are significant, payment risk consistently emerges as the ultimate hurdle for lenders and investors.
The Three Pillars of Project Bankability
According to FirstCap, lenders evaluate three core risk areas when determining whether to fund a project.
Among these, payment reliability is currently the most problematic within the Nigerian energy value chain.
| Risk Pillar | Key Challenges | Mitigation Strategies |
| Payment Reliability | Collection inefficiencies, rising arrears, liquidity gaps. | Letters of Credit, Escrow Accounts (Waterfalls), Bank Guarantees, Take-or-Pay deals. |
| FX Exposure | Dollar-denominated costs vs. Naira revenues; volatility. | Tariff indexation, partial dollarization for industrials, FX reserve buffers. |
| Legal/Regulatory | Unenforceable contracts, tariff flip-flops, price controls. | Clear step-in rights, termination payment clauses, dispute resolution frameworks. |
Incentives are not a Substitute for Fundamentals
Addressing the government’s push for fiscal incentives like tax holidays and accelerated depreciation, Ukandu offered a candid reality check: incentives cannot save a structurally weak project.
“Incentives make a good project better, but they do not make a weak project bankable. Cash-flow reliability and disciplined foreign exchange management must come first,” Ukandu asserted.
He further warned that Naira-based incentives risk losing their value if project revenues are not properly indexed to hedge against inflation and currency devaluation.
Strategies to Unlock Energy Financing
To move the needle on Nigeria’s energy deficit, Ukandu urged developers to prioritize Revenue Security at the source. He recommended several gold standard mechanisms to protect returns:
Escrow Structures: Utilizing payment-waterfalls to ensure lenders are paid before other stakeholders.
Currency Alignment: Ensuring credible industrial offtakers provide dollar-linked payments where possible.
Enforceable Take-or-Pay: Strengthening contracts to ensure revenue is guaranteed regardless of whether the offtaker utilizes the full capacity.
Techeconomy Analysis:
Nigeria’s power sector is currently haunted by a liquidity crisis, with the collection gap creating a massive debt overhang for GenCos and gas suppliers.
FirstCap’s emphasis on disciplined collections highlights a move away from relying on government bailouts toward market-based credit support.
For investors, the message is clear: the focus is shifting from how much gas we have to how surely the cash flows.
