Nigeria’s electricity industry is sinking deeper into financial distress, with projections showing that the Federal Government’s liabilities could climb to N6.2 trillion by the end of 2025. The worsening situation is being driven by the exodus of premium customers from the national grid.
The government is already burdened with a N4 trillion legacy debt owed to generation companies (GenCos). Fresh arrears, which stood at N1.6 trillion in August 2025, are expected to reach N2.2 trillion by December, raising the total debt to N5.6 trillion before year’s end.
Officials at the Nigerian Electricity Regulatory Commission (NERC) disclosed that commercial customers’ reliance on the grid has dropped to 13 per cent, down from 20 per cent, as industries and affluent households increasingly turn to alternative power sources due to erratic supply and rising tariffs.
Manufacturers spent a record N1 trillion on self-generation in 2024, while premium households accelerated their adoption of solar systems. That same year, NERC licensed 24 bulk consumers to produce their own power and approved 22 off-grid projects, which together added about 289 megawatts of capacity outside the grid.
Several states, including Jigawa, Zamfara, Lagos, Delta and Katsina, have signed renewable energy agreements this year. The Federal Government has also announced plans to disconnect its agencies from the grid, leaving it largely to low-income households and small businesses that lack access to solar or gas-fired plants.
These shifts have deepened government revenue shortfalls. The monthly tariff deficit is now around N200 billion, worsened by the authorities’ continued freeze on electricity tariffs.
Despite repeated assurances, confidence in government strategy remains low. Industry players say that interventions by President Bola Tinubu and Finance Minister Wale Edun amount to temporary fixes rather than a coherent plan.
Edun told Nigerians in August that steps had begun to clear the legacy debts, but he gave no definite timeline or refinancing framework. The government is weighing the use of promissory notes, although the Debt Management Office (DMO) has only opened an N800 billion window for 2025 to cover all federal obligations, including payments to the Dangote Group, state governments, and contractors such as Julius Berger. Analysts caution that the sum is far too small, even if devoted entirely to GenCos.
The 2025 Appropriation Act allocates N900 billion for electricity subsidies, well below the sector’s average annual requirement of N2 trillion. Operators warn the budget cannot absorb both outstanding arrears and new deficits.
Some stakeholders maintain that without firm commitments to pay GenCos for their full available plant capacity of around 7,000 megawatts—rather than the often-quoted 13,000MW—the market will remain fragile. Meeting this obligation carries an estimated cost of N1.059 trillion.
At present, Nigeria generates about 4,500MW at an annual cost of N2.9 trillion. Raising usable capacity by another 2,500MW would drive costs up by 35 per cent, or roughly N1.059 trillion more.
In a bid to stabilise operations, NERC has directed all grid-connected generating units to adopt Frequency Generation Control (FGC), an automatic system designed to balance supply. But industry leaders, including Edu Okeke, Managing Director of Azura Power, caution that compliance will be impossible without stronger financial support.