The Federal Government’s efforts to settle outstanding obligations to electricity generation companies (GenCos) are facing mounting pressure, as debts in the power sector surged by 62.5 per cent to N6.5 trillion by the end of 2025, up from N4 trillion at the start of the year.
In a bid to address the liquidity crisis, the government launched a funding initiative in mid-December 2025 with the issuance of a N590 billion Series 1 Power Sector Bond, part of a broader plan to raise N1.23 trillion by the first quarter of 2026 to stabilise the electricity market.
Nigeria’s power sector has long struggled with accumulated debts, limiting investment in infrastructure critical to improving electricity supply. However, the initial bond issuance — made up of N300 billion Tranche A and N290 billion Tranche B — has raised concerns among industry players over transparency and its ability to resolve liquidity challenges.
Industry data obtained by Financial Vanguard revealed that GenCos were paid only 35 per cent of their electricity invoices, worsening the cash crunch within the Nigerian Electricity Supply Industry (NESI). Over six payment cycles between May and October 2025, 25 generation companies issued invoices totaling N1.531 trillion but received just N547.37 billion, leaving an outstanding balance of N984.3 billion expected to be covered by government subsidies.
The data showed that in May, GenCos invoiced N282.14 billion and received N96.4 billion (34.17%). June payments stood at N91.36 billion out of N257.26 billion invoiced, while July saw N96.29 billion paid from N267.99 billion billed. In August, companies received N88.59 billion against N245.96 billion, while September and October payments were N81.78 billion and N92.95 billion respectively, representing slightly over 36 per cent of invoices.
Explaining the low remittances, the Nigerian Electricity Regulatory Commission (NERC) pointed to the DisCos Remittance Obligation (DRO) introduced in 2024, which requires distribution companies to remit about 40 per cent of invoices received from the Nigerian Bulk Electricity Trading (NBET) Plc.
NERC stated that the Federal Government’s subsidy framework is designed to bridge the gap between cost-reflective tariffs and approved consumer tariffs during the transition period, with the government responsible for funding the difference. This subsidy is applied directly to generation costs through the DRO mechanism.
In its Q3 2025 report, NERC disclosed that electricity distribution companies billed customers N706.61 billion during the quarter but collected N570.25 billion, reflecting a collection efficiency of 80.7 per cent. Revenue growth was driven largely by the migration of customers to the Band A tariff, despite persistent nationwide power outages.
Concerns have also emerged over the structure of the proposed N1.23 trillion bond. GenCos have raised objections to its design and contractual terms, demanding greater transparency. An advisory report commissioned by the Association of Power Generation Companies (APGC) described some provisions in the bond documents as potentially disastrous for GenCos.
The report warned that the bond lacks a solid, bankable framework and relies largely on government assurances, noting that the issuing entity, NBET Finance Company, is a special-purpose vehicle without clear regulatory recognition. It also questioned claims that sinking funds and DisCo collections would cover shortfalls, citing historically poor remittance performance.
Stakeholders have attributed the ballooning debt to the government’s failure to provide cash backing for electricity subsidies. Chijoke James, Chairman of the Electricity Consumers Association of Nigeria, said while consumers are dissatisfied with service delivery, government commitments must be honoured.
Energy expert Prof. Yemi Oke described the subsidy regime as unsustainable, warning that adding trillions of naira annually to existing debts undermines economic growth. Similarly, Edu Okeke, Managing Director of Azura Power West Africa, said GenCos still receive less than 40 per cent of their invoices, discouraging new investment.
He cautioned that without resolving structural issues in collections and payments, sector debts will continue to rise, regardless of bond interventions.
