…Say Payment Yet To Be Received
…As Stakeholders Express Doubt Over Improved Service Projection
By SUNDAY ABBA, Abuja
Electricity generation companies (GenCos) in Nigeria has clarified that the N3.3 billion recently announced by the federal government (FG) as fund meant to offset the long outstanding debt owed the sector, particularly, the GenCos, does cover the financial shortfalls the sector is currently grappling with.
The Executive Secretary and Chief Executive OfficerQ (ES/CEO) of the Association of Power Generation Companies (APGC), Dr Joy Ogaji, who disclosed this to SUMMIT POST NEWS in Abuja however, acknowledged the announcement of the plan by government, but expressed the fear that implementation of such plans has always been the setback in the past.
Dr Ogaji maintained that the statement issued on Sunday by the Special Adviser to the President on Information and Strategy, Bayo Onanuga, talked about the legacy debt, spanning 2015 through December, 2024, and does not cover up to date.
She dismissed the claim of “final review” of legacy liabilities as unfounded, stressing that for any review or reconciliation of account to be credible and acceptable, all parties – in this case, the GenCos and the government side – must sit at a table, and that the last time such account reconciliation took place was in March, which took care of the legacy debt from 2015 to December 2024.
“To the best of my knowledge, the last reconciliation we did was in March. And from that March to date, has another one taken place? When did that happen? The State House statement that was issued yesterday, talked about the legacy debt. And the legacy debt as discussed at that last reconciliation meeting spanned 2015 through December, 2024.
“And they’ve not granted us the opportunity to reconcile what has accumulated from that point till now. So, how can you say the legacy debt is still N3.3 trilion,” Joy said.
According to the APGC boss, none of the GenCos had indicated receiving any alert to that effect as at press time, not even the ₦223 billion tranche of the N501 billion raised in bonds recently, said to have been disbursed.
She even dared the federal government to publish whatever amount they claimed to have disbursed for transparency and public accountability sake.
Speaking a at February, the APGC CEO affirmed that electricity generation companies were being owed about N6.5 trillion.
Amidst growing concerns over the seemingly intractable problem of erratic electricity supply in Nigeria, the federal government has approved a plan to settle longstanding debts owed across Nigeria’s power sector, in what officials describe as a critical step toward stabilising the country’s fragile electricity value chain.
The announcement, conveyed in a statement on Sunday by the Special Adviser to the President on Information and Strategy, Bayo Onanuga, followed what authorities called a “final review” of legacy liabilities that have plagued the sector for more than a decade.
According to the President’s Special Adviser on Energy, Olu Arowolo-Verheijen, the proposed settlement is expected to unlock improvements across the electricity value chain, boosting power generation, enhancing reliability, attracting new investment, and ultimately creating jobs.
“This programme is not just about settling legacy debts,” the adviser said. “It is about restoring confidence across the power sector—ensuring gas suppliers are paid, power plants remain operational, and the system begins to function more efficiently.”
What is the legacy debt here?
The term “legacy debt” broadly refers to the federal government’s financial obligations to the Nigerian Electricity Supply Industry (NESI), spanning 2015 through March 2025.
These liabilities largely stemmed from default in payment of subsidies meant to cushion the bite of electricity tariffs on consumers after power was privatised.
The Nigerian Bulk Electricity Trading (NBET) Plc acted as the intermediary through which the government absorbed part of the cost to keep electricity affordable.
What is now termed “legacy debt” is, therefore, not a single liability but a build-up of years of underpayments embedded within the NESI.
Nigeria’s electricity sector has grappled with a persistent liquidity crisis since its privatisation in 2013. At the heart of the problem is a structural imbalance: the cost of generating and delivering electricity consistently exceeds the revenue inflows.
Amid the biting economic hardship in the country, and the groaning by operators that current electricity tariffs – adjusted upward severally to assuage the liquidity crisis in recent times – are non-cost-reflective, distribution companies struggle with inefficiencies in metering, billing, and revenue collection, a mismatch that has created chronic funding gaps.
To cushion the effect on consumers, the government—through the Nigerian Bulk Electricity Trading (NBET) Plc—absorbed part of the cost via subsidies and payment assurances. Over time, these unpaid obligations accumulated and cascaded across the value chain, leaving generation companies and gas suppliers significantly underpaid.
Industry stakeholders stress that the debt comprises a complex bundle of contractual liabilities rather than simple unpaid invoices. These include payments for electricity generated and supplied, capacity charges for power made available but not utilised, and “deemed capacity” costs tied to contractual commitments.
There are also foreign exchange (FOREX) differentials driven by naira volatility, interest on overdue payments—often benchmarked at the Nigerian Interbank Offered Rate (NIBOR) plus four percentage points—and gas supply costs, including outstanding VAT obligations.
Operational inefficiencies have further inflated costs. Power plants incur heavy expenses due to frequent start-stop cycles caused by grid instability, while additional burdens arise from providing ancillary services such as spinning reserves and black start capabilities—often without clear compensation frameworks.
GenCos are also required to operate under Free Governor Mode of Operation (FGMO), which places added mechanical strain on equipment without corresponding financial recognition.
Taken together, these elements underscore the depth and complexity of the liabilities the government seeks to resolve.
According to the statement by Onanuga, the repayment had the buy-in of 15 power plants with N223bn disbursed. But the money raised so far from the bond market, which is less than 15 per cent of N3.3 trillion the government claims to owe, is grossly insufficient to quench the dissatisfaction that led to reduced gas supply to generation plants.
Against the backdrop of assurances given by the federal government that settling the debts would stabilise the sector and improve the electricity supply, industry stakeholders believe such would continue to remain an illusion provided inadequate funding mechanism, structural/technical, transmission, and distribution constraints continues to limit the amount of power that can be generated.
Speaking, President of the Nigeria Consumer Protection Network (NCPN), Kunle Olubiyo, warned that the current scale of repayment is too limited to incentivise gas suppliers to increase supply to power plants.
He said the earlier N501 billion bonds announced by the government has yet to significantly impact the sector due to stringent disbursement conditions that GenCos must meet.
He feared that recent adjustments in gas pricing among other factors could trigger further electricity tariff hikes, compounding the burden on consumers.
“Payment of debts and tariff increases are not silver bullets,” Olubiyo said. “They will not resolve the structural distortions in the electricity market. We have been going in circles while avoiding the fundamental issues.”
The energy expert hinted at a far larger burden, saying debts owed to generation companies and gas producers alone are estimated at about N8 trillion, with additional capacity-related obligations of roughly N4 trillion, bringing the total to approximately N12 trillion.
Olubiyo also raised concerns about unresolved liabilities in other segments of the market, including debts in the transmission subsector linked to auxiliary services and wheeling charges, as well as persistent shortfalls in the distribution segment arising from market inefficiencies, tariff gaps, and subsidy deficits.