By Seun Ibiyemi
Power Generation Companies (GenCos) in Nigeria have issued a stark warning that electricity production may grind to a halt unless the federal government urgently settles outstanding debts amounting to over ¦ 4 trillion.
In a statement released on Monday in Abuja, the Chairman of the GenCos Board of Trustees, Colonel Sani Bello (Rtd), said the companies have been left with no choice but to raise the alarm over what they describe as a “critical” financial situation. He urged the government and relevant stakeholders to act swiftly, noting that the continued failure to make payments for electricity already supplied to the national grid is pushing the sector to the brink.
“The situation is now critical and threatens the continued operation of power generation plants across the country,” the statement read.
According to Bello, the GenCos have been forced to shoulder the burden of an enduring liquidity crisis within the Nigerian Electricity Supply Industry (NESI). He warned that if left unresolved, the financial instability could lead to a full-scale collapse of electricity supply, with potentially grave consequences for national security.
He revealed that payment recovery has deteriorated sharply, with the collection rate in 2024 falling below 30 percent. The outlook for 2025 appears equally grim. Compounding the problem are corporate taxes, concession fees, royalty charges, and new compliance obligations from the Financial Reporting Council (FRC), all of which have placed further pressure on revenue streams.
“GenCos are currently owed about ¦ 4 trillion — ¦ 2 trillion for 2024 and ¦ 1.9 trillion in legacy debts,” he said. “There are no workable solutions in sight — whether in the form of cash disbursements, financial instruments, or debt swaps.”
The statement also expressed concern that the 2025 national budget makes provision for only ¦ 900 billion for the power sector, raising questions about its capacity to cover both current arrears and future payments.
Bello criticised the lack of meaningful impact from recent market reforms in the sector, including the Partial Activation of Contracts implemented in July 2022, the Minimum Remittance Order, and the declaration of a bilateral market. He said that despite these measures, GenCos continue to supply power that is consumed in full but paid for only in part.
He explained that inflation, forex volatility, and the absence of a dedicated foreign exchange window for power producers have further compounded the problem. Meanwhile, the supplementary MYTO order has left up to 90 percent of monthly GenCos invoices unpaid, with no viable securitisation or financing mechanism in place.
“This situation is not only unsustainable but also undermines the very foundation of the power value chain,” Bello said. “We, as responsible investors, have remained committed over the past decade, ramping up capacity in line with our contracts despite systemic limitations, investor-unfriendly policies, and a lack of firm contracts and bankable guarantees.”
He further criticised the current waterfall payment structure introduced in May 2019, which ensures that service providers such as the Market Operator (MO), the Nigerian Electricity Regulatory Commission (NERC), and the Nigeria Bulk Electricity Trading (NBET) receive 100 percent payment for their invoices, while GenCos are left with scraps — often as little as 9 to 11 percent.
“This is a clear violation of the Power Purchase Agreement (PPA), under which NBET is contractually bound to pay for available capacity,” he said. “Power generation is the foundation of the entire electricity value chain, and GenCos must be prioritised in the payment structure.”
Bello also noted that hopes of a financial rescue through the World Bank’s Performance-Based Fiscal Support Programme have been dashed due to the failure of other market participants to meet the Distribution Linked Indicators (DLIs) under the Power Sector Recovery Programme (PSRP).
Access to foreign exchange, he added, remains another major obstacle. With a large portion of GenCos’ operations and maintenance costs denominated in US dollars, he called for the creation of a dedicated forex window or a more stable allocation structure.
The GenCos are now demanding urgent intervention from the federal government and stakeholders to ensure continued power generation. Their demands include:
Immediate implementation of a structured payment plan to clear all outstanding invoices.
Restructuring of the payment waterfall to prioritise full settlement of GenCos’ bills.
A robust financing plan to support the Supplementary MYTO Order and the 2024 Distribution Remittance Order.
Provision of payment guarantees backed by institutions such as the World Bank or the African Development Bank.
Enhanced transparency in billing, revenue collection, and remittances within the sector.
Policy and regulatory reforms that encourage investment and economic growth.
Strict monitoring and enforcement of market agreements and regulatory rules.
Full market liberalisation to promote confidence and ensure sector viability.
“The liquidity crisis confronting GenCos must be tackled decisively and sustainably,” the statement concluded.
“In addition to being owed huge debts, we are contending with harsh fiscal and monetary conditions reflective of the broader economic realities. Until the flow of funds within the power sector is stabilised, sustainable improvement in electricity supply will remain elusive.”
Bello reiterated that without immediate attention, GenCos may be forced to scale down or halt operations, with serious consequences for electricity access nationwide.