DataPro has identified credit ratings as a critical tool for restoring investors’ confidence and unlocking long-term financing in Nigeria’s struggling power sector.
The Nigerian technology-driven Credit Rating Agency stated this in its latest Monthly Rating Brief for June, warning that persistent liquidity shortages, mounting debts and weak cash flows continue to undermine the industry’s sustainability.
The rating agency said Nigeria’s electricity market remains trapped in a recurring cycle of financial distress despite years of reforms and privatisation efforts.
According to DataPro, distribution companies often fail to recover sufficient revenue from consumers, triggering payment disruptions across the electricity value chain.
This leaves Generation Companies (GenCos) underpaid, delays payments to gas suppliers and drives up debt obligations, forcing repeated government interventions through guarantees, refinancing programmes and bailout arrangements.
“The challenge is no longer simply about generating electricity. It is increasingly about financing the sector sustainably,” the firm said.
READ ALSO:
- How Rising Debt, Political Standoffs End US Perfect AAA Run – DataPro
- DataPro Holds Media Training to Boost AI-Driven Financial Reporting Skills
- Foreign Investors Retreat as Domestic Capital Powers NGX Rally
- Stronger Naira a Double-Edged Sword for Nigeria — Expert
DataPro noted that trillions of naira in obligations have accumulated across the power market over the years, while fresh funding shortfalls continue to emerge annually, making investors and lenders increasingly cautious.
The firm argued that one of the sector’s major constraints is not only an electricity shortage but also a “confidence gap”, as investors struggle to assess risks in a market characterised by uncertain revenues and fragile repayment structures.
It said credit ratings can help close that gap by providing independent risk assessments and distinguishing financially stronger operators from weaker ones.
“A well-rated power sector entity stands a better chance of attracting funding because investors can assess its strengths more objectively,” the agency stated.
DataPro also highlighted a structural mismatch between the long-term nature of power infrastructure projects and the short-term financing commonly available in Nigeria’s domestic market.
It said projects such as transmission infrastructure, metering programmes, renewable energy investments and generation expansion require patient capital, but short-term funding arrangements continue to fuel refinancing pressure and liquidity stress.
According to the firm, stronger credit profiles could expand access to longer-term financing instruments, including infrastructure bonds, green bonds and corporate debt issuances, while potentially lowering borrowing costs.
The agency stressed that sustainable reform of the electricity market cannot rely indefinitely on government support measures.
“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,” it said.
DataPro added that the rating process could also drive stronger governance, improved financial disclosure, better risk management and greater operational discipline within the sector.
While noting that credit ratings alone will not resolve challenges such as tariff reforms, metering gaps, energy theft, transmission bottlenecks and policy consistency, the firm maintained that stronger financial credibility and transparency are essential to mobilising the long-term investment needed to transform Nigeria’s power industry.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X