Payment security remains the most decisive factor in determining whether gas and power projects in Nigeria secure financing, according to Mr. Ukandu E. Ukandu, Managing Director/CEO of FirstCap Limited, an investment banking firm and subsidiary of First HoldCo Plc.

Speaking during a panel discussion on project bankability at the 2026 SPE Lagos Energy Week, Ukandu noted that while several risks influence financing decisions, payment risk consistently emerges as the key barrier to financial close. He emphasized that sustainable financing hinges on robust payment security and disciplined collections.

“Every major risk matter, but payment risk is the ultimate deal-breaker. Without strong payment security and disciplined collections, no project can attract sustainable financing,” he said.

Lenders typically evaluate three core risk pillars: payment reliability, foreign-exchange exposure, and contract enforceability. According to Ukandu, payment reliability presents the greatest challenge across Nigeria’s energy value chain. He cited persistent collection inefficiencies, rising arrears, and liquidity pressures as factors weakening investor confidence.

To enhance payment security, Ukandu highlighted mechanisms widely used by financiers. These include letters of credit, bank guarantees, escrow accounts with payment-waterfall structures, reserve and sinking funds, sovereign or sub-sovereign support, and take-or-pay offtake agreements.

Addressing foreign exchange risk, he noted that volatility remains difficult to manage, especially for projects with dollar-denominated costs but naira-denominated revenues. Lenders typically mitigate this through foreign exchange -linked tariff indexation, partial dollarisation for credible industrial offtakers, escrow protections, selective hedging, and foreign exchange reserve buffers. However, he cautioned that indexation alone seldom eliminates exposure due to regulatory limits and timing delays.