Nigeria’s Power Sector Faces Crisis As GenCos Demand Full Debt Settlement.
Nigeria’s power sector is facing an escalating financial crisis as electricity generation companies (GenCos) warn of potential shutdowns due to unpaid government debts. Despite promises of intervention, the Federal Government has only paid 19.5 per cent of the N1.9 trillion subsidy debt owed to GenCos, raising concerns over the sustainability of power supply.
Mounting Debts And Payment Shortfalls
Recent documents from the Nigerian Electricity Regulatory Commission (NERC) reveal that the government has paid just N371 billion towards last year’s tariff shortfalls. The shortfall has left GenCos struggling to cover operational costs, with over 26,160 megawatts (MW) of generated power stranded due to inadequate funding.
Between January and November 2024, GenCos issued invoices worth N2.7 trillion, yet only N762.1 billion was paid, translating to a mere 28.18 per cent payment rate. Payment trends fluctuated throughout the year, with some months recording as little as 9.29 per cent settlement of issued invoices.
Meanwhile, the Nigerian Bulk Electricity Trading (NBET) company has only contributed N371 million towards the 2024 tariff deficit, covering a negligible 0.019 per cent of the total outstanding debt. Despite an 84 per cent remittance rate from distribution companies (DisCos) on their Debt Repayment Obligation (DRO), the overall invoice settlement rate for GenCos stood at 29.48 per cent, further compounding the crisis.
GenCos Demand Urgent Government Intervention
Faced with severe financial strain, GenCos have called on the government to implement a mechanism ensuring full payment of invoices by NBET. In a letter addressed to the Minister of Power, Adebayo Adelabu, and copied to key officials, including the Chief of Staff to the President and the Central Bank of Nigeria (CBN) Governor, the Association of Power Generation Companies (APGC) warned of dire consequences if immediate action is not taken.
The letter, signed by APGC Chairman Sani Bello, highlights that NBET’s remittance rate of less than 30 per cent has made it nearly impossible for GenCos to sustain operations. The operators are demanding not only the settlement of historic debts but also the establishment of a sustainable payment structure to prevent further crises.
Concerns Over New Taxes and Multiple Levies
Adding to their financial woes, GenCos have raised concerns about new taxation policies, including Section 33 subsection one of the Financial Reporting Council (FRC) Act (Amended) 2023, which imposes annual levies based on company turnover.
The power companies argue that multiple taxation at both federal and state levels is further straining their finances. Currently, GenCos are required to pay corporate tax at 30 per cent, education tax at 3 per cent, police tax, land use charges, and various state and local government levies, despite struggling to operate at full capacity.
A Sector on the Brink
According to NERC’s February 2025 report, most power plants in Nigeria are operating on the verge of collapse. With only 3,900MW to 4,900MW currently being generated—well below the 6,000MW target—the energy deficit continues to affect businesses and households nationwide.
While the government has allocated N450 billion for subsidy payments in 2024 and N900 billion for 2025, stakeholders insist that without a comprehensive funding strategy, the crisis will persist.
As the situation unfolds, the urgent need for financial stability in the power sector remains paramount. Industry players and stakeholders are calling for decisive action to ensure reliable electricity supply and prevent a total breakdown of Nigeria’s power generation capacity.
