By Gideon Osaka
The Minister of Power, Adebayo Adelabu, recently gave a plain appraisal of the power sector during a high-stakes meeting with President Bola Tinubu and members of the Association of Power Generation Companies (GenCos). At the heart of the warning was a staggering statistic: the government owed GenCos N4 trillion, a legacy liability dating back to 2015. Adelabu cautioned that without urgent liquidity support to clear that debt overhang, Nigeria’s electricity ecosystem, which underpins economic activity, investor confidence, and even political stability, might unravel.
The minister’s warning echoed the urgency felt across the sector. He told participants that the long-standing debt is not merely a financial accounting issue; it is a direct threat to generation capacity, service reliability, and the cumulative gains of decades of reform taken at face value. That the issue was raised in the presence of President Tinubu signals its national importance and the recognition that systemic intervention is imperative. This is not a routine policy briefing; this is a sector in crisis, seeking life support.
To underscore the deepening liquidity crisis threatening the country’s power sector, Valuechain reports that not long before the revelation by the minister, the Transmission Company of Nigeria (TCN) had in March disclosed that it was owed a staggering N457 billion for services rendered within the Nigerian Electricity Supply Industry (NESI) as of March 2025. In a related development, the Niger Delta Power Holding Company (NDPHC) revealed in May that it is being owed N600 billion by the Nigerian Bulk Electricity Trading (NBET) Plc, a situation that has severely hampered its ability to operate and maintain its generation assets.
Industry analysts warn that unless the Federal Government urgently addresses the sector’s liquidity challenges and ensures synchronised investment across generation, transmission, and distribution, the nation’s energy crisis will deepen despite infrastructure upgrades and international funding support.
The Origin of N4 Trillion Debt
Tracing the roots of the GenCos N4 trillion debt reveals a complex history of mismatched policymaking, structural deficits, and political compromise. Since 2015, the government’s inability to charge cost-reflective electricity tariffs has necessitated enormous subsidies. Tariffs lagged behind actual costs, and periodic adjustments under the Multi-Year Tariff Order (MYTO) were delayed or watered down. Although the Band-A increase in April 2024 marked a belated attempt to realign prices for high-end consumers, the consequences quickly materialised: subsidy payments ballooned to about N1.95 trillion in 2024. By mid-2025, tariff relief and a politically induced freeze eroded those gains, perpetuating the gap between cost and revenue.
Amid these pricing distortions, Distribution Companies (DisCos) frequently fell behind on remittances. In 2024, DisCos were served invoices totalling N3.10 trillion but remitted only N1.18 trillion, a shortfall that starved the Nigerian Bulk Electricity Trading (NBET), the TCN, and ultimately the GenCos themselves. Inadequate meters, rampant power theft, and failure by numerous public agencies to settle electricity bills further weakened the already fragile financial chain.
Privatisation’s unfinished promise
The 2013 privatisation of the power sector was designed to liberate generation and distribution from the shackles of state ownership, thereby unlocking private capital and instilling competition. Yet, operators found themselves saddled with ageing infrastructure, thin margins, and FX exposure through gas-indexed pricing. The expected commercial discipline never materialised. Instead, the sector underperformed, tariff politics dominated, and arrears began to snowball. Over time, these systemic gaps crystallised into the N4 trillion liability, the cumulative weight of years of under-remittance, subsidy, and inaction.
With that context, Minister Adelabu’s warning takes on a sharper edge. He made it clear that this is not an abstract financial burden; it is a structural threat to Nigeria’s electricity ecosystem. Generation capacity is already compromised; gas suppliers are increasingly wary of delivering fuel in the absence of reliable payments. Maintenance and new investments are deferred. The danger, as the minister emphasised, is that the system could collapse, plunging the nation deeper into blackouts, undermining economic activity, and reversing development gains.
It’s a rare moment from the corridors of power: an admission of vulnerability, a direct appeal for action, and a clear-eyed understanding of the scale of the challenge. But such warnings must be followed by credible, timely action.
The sector’s fragility has spilt into courtrooms. Earlier in 2025, both Ikeja Electric and KEPCO-operated Egbin Power Plant were placed under receivership. Intended to safeguard assets and recoup unpaid debts, these court orders instead sent a chilling message to investors, highlighting legal uncertainty, complexity, and the spectre of state intervention in what was meant to be a privatised system.
The fiscal implications are massive. Some N2 trillion in subsidies were disbursed in 2024 alone, consuming a substantive slice of budgetary space. Education, health, and infrastructure sectors struggling for funds were marginalised in the face of urgent electricity obligations.
The proposed solution and what must change
In a bold attempt to alleviate the liquidity crisis, President Bola Tinubu has pledged to settle the long-standing N4 trillion debt owed to the GenCos through a N4 trillion bond program, which the president has already endorsed by anticipatory approval. The President, who made this declaration during the high-level meeting with the GenCos representatives, acknowledged the inherited liabilities dating back to 2015, stating that only validated debts would be paid.
Reiterating the crucial condition, Special Adviser to the President on Energy, Mrs. Olu Verheijen, clarified that the N4 trillion debt exposure encompasses unfunded tariff shortfalls and market shortfalls accumulated over the past decade. While N1.8 trillion of GenCos claims had been validated by the Nigerian Bulk Electricity Trading Company (NBET) as of April 2025, the full N4 trillion figure remains under review and could be revised downwards.
While awaiting full execution, the bond initiative by the President is expected to receive a significant boost with an anticipated injection of N2 trillion this year. Financial experts and industry leaders have welcomed the proposal as a “positive step,” with the potential to provide much-needed relief and calm within the power sector. However, financial expert and Director at SAP Management Esilly Abe emphasises that while the announcement is promising, sustainability in power production remains a pressing issue, underscoring the importance of subsidy removal and market deregulation.
Abe suggests that navigating towards a free-market system, where GenCos can set their prices, which will then be reflected by distributors for consumers, could ensure improved reliability and sustainability in power generation. However, with this deregulation, power costs would rise above current unsustainable levels, compelling a fine balance between price and energy availability to protect consumers, particularly given the pervasive economic challenges exacerbated by currency devaluation.
Despite the optimism surrounding the bond program, questions about investor confidence linger, particularly concerning the government’s declaration that only valid debts will be honoured. Abe advises caution, noting that many of these debts are legacy debts dating back to 2013. Investors seeking clarity on this move express concerns about potential information barriers due to the historical timeline. Abe further highlights that structural reforms, notably deregulation, are required to bolster investor confidence and encourage private sector participation.
Reversing the crisis will require multilayered intervention. Loss reduction and collection efficiency at the distribution level are foundational. Nigeria must expand metering, deploy smart billing systems, clamp down on energy theft, and, more forcefully, enforce billing discipline, especially among public sector consumers. A culture of non-payment, if unchecked, corrodes the sector’s capacity to sustain itself.
Subsidies, where necessary, should be precisely targeted, not blanket, across-the-board support. Focusing relief on vulnerable households through lifeline tariffs or direct transfers, with sunset clauses, can protect the poor without taxing the broader system.
Meanwhile, a credible tariff pathway should be communicated early and followed through.
In the gas-to-power chain, payment certainty is equally critical. GenCos must have reliable cash flow to secure fuel contracts; gas producers need confidence that deliveries will be paid for promptly. Escrow mechanisms, liquidity buffers, and enforceable contracts could provide that stability, helping to reignite fuel supply and plant dispatch.
Seizing reform amid debt
The N4 trillion crisis may, paradoxically, represent a policy turning point if managed decisively. Clearing the debt through refinancing can open the way for reform, provided it is tethered to credible structural changes. Stronger tariffs, disciplined gas-to-power payments, improved collections, metering investment, and regulatory independence are the scaffolding of a reformed sector.
Adelabu’s warning must become the impetus for a sustained response, not just emergency band-aids. GenCos warn of plant degradation without payment certainty. DisCos lament theft and inefficiencies. Regulators plead for political backing in implementing cost-reflective pricing and tough loss-reduction enforcement. Analysts caution that investor capital, already spooked by court interventions and policy blips, will not return until market structures are resilient.
If the refinancing plan for the N4 trillion debt is executed with rigour, paired with deep reforms and a credible political commitment, it could mark the start of a new chapter: one of reliability, investment, and resilience.
But if the cycle of politics over policy resumes, if tariffs remain frozen for optics, if losses go unchecked, if payments are delayed, the crisis will roar back, just as menacing as before. The country now stands at a crossroads. Will it use this moment of reckoning to finally reform its power markets, stabilise investment, and support growth? Or will it allow inertia, convenience, and short-term populism to push the sector and the economy into darkness once again? The answer to that question will determine whether the lights stay on in Nigeria in the years ahead.
