GenCos Sound Alarm As Power Sector Debt Hits N6.5trn

By Enam Obiosio

Electricity generation companies (GenCos) say the federal government’s payment backlog has climbed to about N6.5 trillion, intensifying pressure across Nigeria’s already fragile power value chain.

Joy Ogaji, CEO of the Association of Power Generation Companies, disclosed the figure during a televised interview, linking the arrears to persistent underpayments by the Nigerian Bulk Electricity Trader.

DECISION HIGHLIGHT
Industry operators are warning that the current settlement approach is materially insufficient.

Ogaji stated that monthly GenCo invoices average N280 billion, but “the payment is just about 35 percent and sometimes below that,” leaving “a monthly shortfall of N200 billion every month.”

She stated that although government recently issued a N501 billion bond, the liability is “still swelling like garri soaked in water.”

DECISION MEMO
The GenCos’ latest warning exposes the widening financial fault line at the core of Nigeria’s electricity market, where chronic payment shortfalls are now approaching systemic risk levels.

At N6.5 trillion, the accumulated debt is no longer a routine liquidity issue but a structural solvency concern for the generation segment. Ogaji’s disclosure that the liability has risen from N4 trillion in December 2024 to the current level underscores the speed at which the deficit is compounding.

The monthly cash flow picture is equally concerning. With only about 35 percent of the N280 billion monthly invoice being settled, the sector is effectively operating under a persistent revenue compression regime. The implied N200 billion monthly gap suggests that without a structural fix, the debt stock will continue to expand even if periodic bonds are issued.

Government has attempted partial relief through the Presidential Power Sector Debt Reduction Programme, including the N501 billion bond issuance and plans to raise N1.23 trillion in the first quarter of 2026. However, Ogaji’s critique highlights the scale mismatch between intervention and obligation. Her assertion that the N500 billion support is insignificant relative to the over N6 trillion owed reflects deepening industry frustration.

More politically sensitive is her claim that President Tinubu had earlier indicated a willingness to approve N4 trillion to clear legacy debts, but that “his handlers and his advisors” have “hijacking this N4 trillion and have decided to balkanise it.” While unverified from the government side, the comment signals rising trust deficits between operators and policymakers.

The broader structural issue remains unchanged. NBET continues to sit between cost reflective generation tariffs and the weaker payment capacity of distribution companies and end users. Until tariff alignment, subsidy clarity and market discipline converge, the sector risks remaining trapped in a recurring debt accumulation loop.

In practical terms, GenCos are warning that the current trajectory threatens generation reliability, gas supply confidence and future private investment into Nigeria’s power infrastructure.

DATA BOX

• Total GenCos debt claim: N6.5 trillion
• Debt level as of Dec 2024: N4 trillion
• Monthly GenCo invoice: about N280 billion
• Monthly unpaid portion: about N200 billion
• Effective payment rate: about 35 percent
• Government bond issued: N501 billion
• Planned arrears raise (Q1 2026): N1.23 trillion

WHO WINS / WHO LOSES
Generation companies face mounting balance sheet stress and cash flow strain. Gas suppliers and lenders to the power sector also carry rising counterparty risk.

Electricity consumers may face future tariff pressure if cost recovery reforms accelerate. Government gains short term fiscal breathing room but at the cost of growing contingent liabilities.

POLICY SIGNALS
The situation reinforces the urgency of comprehensive power market reform, particularly around tariff realism, subsidy transparency and NBET’s intermediary role.

Government’s reliance on bond backed settlements suggests a continued preference for financial engineering rather than immediate structural correction.

INVESTOR SIGNAL
For power sector investors, the expanding receivables overhang remains a major red flag. The credibility of the Presidential Power Sector Debt Reduction Programme will be closely scrutinised in coming quarters.

Until payment discipline improves materially, new generation and gas investments are likely to price in elevated sovereign and market risk premiums.

RISK RADAR
Systemic vulnerabilities are intensifying.

• Debt stock continues to compound monthly.
• Payment rate below cost recovery threshold.
• Partial bond interventions risk being diluted by new arrears.
• Trust gap between operators and government is widening.
• Persistent liquidity stress could threaten generation stability.

Nigeria’s power sector remains caught in a structural payment loop. Without deeper market reform, the growing N6.5 trillion liability risks becoming both a fiscal and energy security flashpoint.