N4trn FG Debt: Blackout Looms Nationwide As GenCos Threaten Shutdown

The Power Generation Companies (GenCos) have threatened to shut down their operations over N4 trillion debt owed them by the federal government.

A statement by the Chairman BOT Power Generation Companies, Col Sani Bello (rtd), said it was forced to issue the threat due to the prevailing situation in the power sector that has seen GenCos brought to the rear in payment settlement for services they render to the sector despite keeping their promise in expanding their operations.

The statement said GenCos have continued to bear the brunt of the liquidity crisis in the Nigerian Electric Supply Industry (NESI) but the increasing debts owed by the government without a clear financing plan, lack of firm contracts and a market without securitisation are hampering future planning.

“Against the backdrop of the many challenges facing the power sector in Nigeria, the crises from cash liquidity are on the top burner and have reduced GenCos’ ability to continue to perform their obligations, thereby threatening to completely undermine the electricity value chain.

“The GenCos’ expectations of being settled through external support, such as the World Bank PSRO, have also been dampened due to other market participants’ inability to meet their respective Distribution Linked Indicators (DLIs) as enshrined in the Power Sector Recovery Programme (PSRP).”

It added that access to forex is another problem given that major operation and maintenance needs in the generation subsector are dollarised.

It added that bills it collected in 2024 have dropped below 30%, and 2025 is not any better, thereby severely affecting GenCos’ ability to meet financial obligations, while high corporate income tax, concession fees, royalty charges, and new FRC compliance obligations are further straining their revenue.

“GenCos are currently owed about N4tr (N2tr for 2024 and N1.9tr in legacy debts). No possible solutions, including cash payments, financial instruments, and debt swaps are in sight. The 2025 government budget allocates only N900bn, raising concerns about its adequacy to cover arrears and future payments.”

They, therefore, demanded an immediate implementation of payment plans to settle all outstanding GenCo invoices, reprioritization of payments under the waterfall arrangement to give full priority to a 100 per cent payment of GenCos’ invoices as at when due and a clear financing plan to backstop the exposures in the NERC’s Supplementary Order to the MYTO and the DRO 2024.

The electricity sector is weighed down by a culmination of huge debt from the federal government, consumers and utility companies.

Apart from the N4tr debt, the GenCos also lose 35 per cent of revenue from electricity distributed to their customers from Aggregate Technical and Commercial losses (AT&C).

This has led to underpayment to gas power generating plants that made up 85 per cent of the Nigerian electricity generation mix.

While this also affects the hydropower plants that make up the 25 per cent of the mix, the illiquidity in the sector has made it difficult for the players to raise money from international and domestic investors to prop up aging infrastructure for the country to meet up its energy needs.

An industry expert, who spoke with our correspondent on condition of anonymity, noted that currently the government is only paying 40 per cent of GenCos’ invoices, which is not good for their business.

“In any business, when you sell and you are only able to get 40 per cent, you are not doing well. They have been very patient with the government because what is holding down those invoices is the tariff shortfall and market shortfall. So the government has not been forthcoming with fulfilling its own side of the bargain,” he said.

The expert warned that if the GenCos should go ahead with shutting down, every Nigerian would be in darkness.

“They have sold this power, we have been owing the GenCos since the time of Fashola (former minister) and this is not sustainable. I am not advising them (GenCos) to shut down, let them sit down with the government,” he added.

…Debt will be soon addressed – Minister

The Special Adviser, Strategic Communications and Media Relations to the Minister of Power, Bolaji Tunji, said the government is aware of this debt arising from the FG’s commitment on subsidy.

“Parts of the debts are legacy debts, which were on the ground before the Minister of Power assumed office. The Minister of Power has repeatedly harped on this, knowing the implication of such debts to the operations of the various power sector stakeholders, especially the GENCOs. The Minister of Power is very much concerned.The issue is being discussed with the Ministry of Finance, making a case for how the debt must be paid. We expect the Ministry of Finance to take action on this soon.”