April 16, 2025/CSL Research

The Minister of Power has pledged to address the over ₦4 trillion electricity debt owed to power generation companies (GenCos), following warnings from the firms about a potential nationwide blackout due to worsening liquidity in the sector.

According to the Minister’s Special Adviser, Bolaji Tunji, the government is taking concrete steps to resolve the issue, with the Ministry of Finance set to handle the payment soon. He emphasized that a significant portion of the debt predates the current administration and stems from the Federal Government’s subsidy commitments.

The Association of Power Generation Companies, in a statement signed by its Chairman, Col. Sani Bello (retd.), warned that power plants may shut down if urgent action is not taken. They
revealed that GenCos are being paid less than 30% of their monthly invoices, making it unsustainable to continue operations. The total debt includes ₦2 trillion in legacy debt and ₦1.9 trillion from power supplied in 2024.

Additionally, distribution companies (DisCos) are owed ₦450 billion in 2024 subsidies. GenCos lamented the absence of a clear financing plan, weak enforcement of power purchase agreements, and the failure of external support mechanisms like the World Bank’s Power Sector Recovery Operation due to unmet performance targets by other stakeholders. They called for immediate intervention to avert the collapse of the power sector and prevent national security risks arising from an unstable power supply.

NBET was incorporated in 2010 with a mandate to operate as the trading licensee holding a bulk purchase and resale licence. It is responsible for buying and reselling electrical power and
ancillary services from IPPs and from the Successor GenCos. Its role is to act as a broker between power producers and the DisCos until the market is mature enough to support commercial bi-lateral trading.

NBET is structured to be a revenue-neutral institution. It serves as the middle-man, the intermediary between GenCos on one side and DisCos and eligible customers who buy directly from NBET, on the other. Payments are made into its market clearing accounts from DisCos and eligible customers for power supplied (under price and load volume terms incorporated in vesting contracts and Power Purchase Agreements (PPAs). As recourse is to the FGN, it operates the electricity market under sovereign guarantees.

Resolving Nigeria’s ₦4 trillion electricity debt crisis requires a balanced approach, combining urgent short-term actions with sustainable long-term reforms. In the immediate term, the Ministry of Finance must prioritize and fast-track the payment of outstanding invoices, particularly the ₦1.9 trillion owed for electricity supplied in 2024. As with past interventions, a targeted financial injection or bailout can provide temporary stability to the sector and prevent a nationwide blackout.

Additionally, the Federal Government should re-engage with the World Bank and other development partners to revive the Power Sector Recovery Program. This will require a renewed commitment to meeting performance targets across the electricity value chain. For long-term stability, it is critical to enforce Power Purchase Agreements (PPAs) and hold all stakeholders accountable through clearly defined penalties for contractual breaches. Furthermore, there should be a gradual phase-out of electricity subsidies, with targeted support provided for vulnerable populations.

Click here to download full report: CSL Nigeria Daily – 16 April 2025 – Power.pdf​​​​​​​​​