Abuja — Power Generation Companies (GenCos) in Nigeria have issued a warning about an imminent shutdown of their operations due to over N4 trillion in unpaid debts owed by the federal government.
In a statement signed by Sani Bello, Chairman of the Board of Trustees, Association of Power Generation Companies, GenCos revealed that the total debt includes N2 trillion accrued in 2024 and N1.9 trillion in legacy debts. The companies say the mounting debt is crippling their ability to continue generating electricity, threatening to derail Nigeria’s entire electricity value chain.
Operational Breakdown and Financial Crisis
In February, the Minister of Power, Adebayo Adelabu, confirmed the government’s debt burden to both GenCos and Distribution Companies (DisCos) exceeds N4 trillion, a situation he described as “crippling.”
GenCos say this financial crisis, especially the cash liquidity shortfall, has severely undermined their ability to meet obligations, invest in maintenance, or expand capacity. They also expressed disappointment that external funding support, such as the World Bank’s Power Sector Recovery Operation (PSRO), has been stymied due to the failure of other market participants to meet required distribution-linked indicators (DLIs).
Key Challenges
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Forex Access: GenCos highlighted challenges in sourcing foreign exchange, which is vital for their dollar-denominated operations and maintenance needs. They urged the government to create a special forex window or a stable dollar allocation mechanism.
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Low Revenue Collection: The GenCos reported a 2024 collection rate below 30%, with no improvement projected for 2025. This low remittance further limits their ability to sustain operations.
Insufficient Budget Provision: The 2025 national budget allocated only N900 billion to the power sector, a figure GenCos say is grossly inadequate to cover existing debts and future obligations.
Call for Government Intervention
Mr. Bello said GenCos are demanding:
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Immediate payment plans to clear all outstanding invoices.
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Reprioritisation of the NESI payment waterfall to ensure 100% payment of GenCos’ invoices.
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Financing plan to support NERC’s Supplementary MYTO Order and 2024 Distribution Revenue Order (DRO).
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Payment security backed by international institutions like the World Bank or the African Development Bank (AfDB).
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Greater transparency in billing, collection, and remittance processes.
He noted that despite reforms like the partial activation of contracts, minimum remittance orders, and market liberalisation declarations, the lack of payment enforcement continues to hinder sector performance.
Implications for National Security
GenCos warned that failure to address the debt crisis could lead to a nationwide blackout, exacerbating economic and security challenges.
“The continued consumption of electricity without full payment, the lack of a bankable securitisation plan, and the disregard for contractual obligations under the Power Purchase Agreements (PPAs) have pushed GenCos to the brink,” said Bello.
Conclusion
Bello emphasized that power generation is the foundation of the electricity value chain, and as such, GenCos should receive top priority in payments to maintain consistent and reliable electricity supply to Nigerians.
“This issue demands urgent and sustainable solutions, as the survival of the GenCos—and the electricity sector as a whole—is at stake,” he said.
