By Tunde Oso

DataPro Limited, Nigeria’s leading credit rating agency, has said a well-rated power sector entity stands a better chance of attracting funding because investors can assess its strengths more objectively. 

DataPro, in its June edition of Monthly Rating Brief signed by Founder, Abimbola Adeseyoju said, “Rather than relying solely on assumptions or government backing, banks can make decisions based on structured financial analysis and independent risk evaluation. Over time, this can help channel capital towards more efficient and better-managed operators.. 

According to Adeseyoju, “One of the structural problems in Nigeria’s infrastructure financing landscape is the mismatch between long-term projects and short-term funding. 

“Power projects require patient capital. Transmission infrastructure, metering programmes, renewable energy investments and generation expansion are not projects that yield immediate returns within a few months. Yet many financing arrangements available within the domestic market remain relatively short-term. This creates refinancing pressure and contributes to recurring liquidity stress.

“Credit ratings can help broaden access to longer-tenor financing instruments such as infrastructure bonds, green bonds and corporate debt issuances. A stronger credit profile may also reduce borrowing costs by giving investors greater confidence in repayment prospects.

“Government interventions have repeatedly helped prevent deeper crises within the power sector. However, long-term sustainability cannot depend indefinitely on refinancing programmes and emergency support. A commercially viable electricity market requires institutions capable of attracting private capital on the strength of their own financial credibility.

Adeseyoju explained, “The rating process itself often pushes institutions toward stronger governance, improved financial disclosure, better risk management and greater operational discipline. These are qualities investors actively look for when deploying capital into infrastructure markets.

Importantly, ratings also create accountability. They provide continuous market signals regarding the financial health and stability of issuers, helping investors monitor risk more effectively over time. 

He asserted: “Credit ratings may not solve every challenge confronting the industry. Tariff reforms, metering gaps, energy theft, transmission bottlenecks and policy consistency remain essential issues. But ratings can help build the trust and transparency needed to mobilise the long-term investment capable of transforming the sector.

Going down memory lane, he said, “For a market long constrained by uncertainty, that confidence may prove just as important as the electricity itself. Electricity in Nigeria is more than infrastructure; it is deeply tied to productivity, investment, jobs and everyday life. 

“Yet decades after reforms and privatization efforts, the power sector continues to struggle under the weight of mounting debts, liquidity shortages, weak investor confidence and an endless cycle of financial intervention.

“Nigeria’s power sector has increasingly become a market sustained by intervention. Distribution Companies (DisCos) often struggle to recover enough revenue from customers. As collections weaken, payments across the electricity value chain become disrupted. Generation Companies (GenCos) are not fully paid. Gas suppliers face delays. Debt obligations pile up. Government eventually steps in with support measures, guarantees, refinancing programmes, or bailout arrangements to stabilize the system. 

Adeseyoju stated, “The challenge is no longer simply about generating electricity. It is increasingly about financing the sector sustainably. Industry estimates suggest that trillions of naira in obligations have accumulated across the market over the years, with fresh shortfalls emerging annually. Investors and lenders naturally become cautious in an environment where revenues are uncertain, and repayment structures appear fragile.

“The power sector is often viewed as one large high-risk industry. But not every operator carries the same level of risk. Some companies may have stronger collection systems, healthier balance sheets, better management structures, or more stable contractual arrangements than others. Without independent assessments, investors may simply avoid the sector altogether rather than attempt to distinguish stronger credits from weaker ones.

He added, “One of the structural problems in Nigeria’s infrastructure financing landscape is the mismatch between long-term projects and short-term funding. Power projects require patient capital. Transmission infrastructure, metering programmes, renewable energy investments and generation expansion are not projects that yield immediate returns within a few months. Yet many financing arrangements available within the domestic market remain relatively short-term. This creates refinancing pressure and contributes to recurring liquidity stress.

Concluding, he said “Credit ratings can help broaden access to longer-tenor financing instruments such as infrastructure bonds, green bonds and corporate debt issuances. A stronger credit profile may also reduce borrowing costs by giving investors greater confidence in repayment prospects.”