The Bankability Problem

There is no shortage of energy projects in Nigeria, and no shortage of capital looking for a home. Yet the two often fail to meet. Many technically sound projects, with real demand and competent sponsors, never reach financial close. Understanding why reveals what the market actually rewards, and it is rarely the engineering.

Bankability is the quality that lets a lender or investor commit money with confidence that it will come back with a return. In Nigerian power it rests on a handful of conditions, and the failure of any one can sink an otherwise good project. The offtaker must be creditworthy and willing to pay. The tariff must cover the cost of supply over the life of the asset. Someone must absorb the risk that the naira weakens against the dollar in which much of the equipment and debt is priced. And the sponsor must be able to build and operate without expensive surprises.

What separates the financed from the stalled

The projects that struggle usually fail on the offtaker or the tariff. Selling power to a distribution company with a weak balance sheet introduces payment risk that no amount of clever structuring fully removes. A tariff set below the true cost of supply, however politically attractive, guarantees that the project loses money and therefore cannot be financed. Currency risk left unallocated frightens away exactly the international capital a large project needs.

The projects that succeed invert each of these. They sell to commercial and industrial customers who pay reliably and value the supply enough to sign firm contracts. They price power at a level that reflects its real cost. They place currency and offtake risk with the parties best able to bear it. And they are led by developers whose previous assets are visibly delivered and still operating, because in a market this difficult, a track record is itself a form of collateral.