The Nigerian Federal Government has initiated a bold plan to address the crippling ₦4 trillion debt owed to electricity generation companies (GenCos) and distribution companies (DisCos), with the presidency announcing that processes are underway to pay ₦2 trillion of the legacy debts by the end of the next quarter.
The announcement, made by Eriye Onagoruwa, a representative of Olu Verheijen, Special Adviser to the President on Energy, came during a stakeholders’ meeting of the Nigerian Electricity Supply Industry (NESI), organized by the Nigerian Electricity Regulatory Commission (NERC) in Abuja.
The ₦4 trillion debt, which includes ₦2 trillion accrued in 2024 and ₦1.9 trillion in legacy debts, has long been a thorn in the side of Nigeria’s power sector, threatening the operational sustainability of GenCos and stifling efforts to stabilize the nation’s erratic electricity supply.
The GenCos, responsible for generating electricity for the national grid, have repeatedly warned that the mounting debt could force them to halt operations, exacerbating Nigeria’s chronic power shortages.
Onagoruwa emphasized the government’s commitment to resolving the crisis, acknowledging the financial strain faced by GenCos. “We’re empathetic to what GenCos are facing,” she said, noting that the ₦2 trillion payment plan is a critical step toward stabilizing the power sector.
However, she cautioned that specific timelines for the payments remain uncertain, as the government is still navigating internal approval processes. “I hope by the next NESI meeting, I’ll be able to share a clear update,” she added, signaling ongoing efforts to finalize the plan.
The initiative has garnered support from key government figures, including the Coordinating Minister of the Economy, Wale Edun, and the Debt Management Office (DMO).
Onagoruwa revealed that alternative debt instruments are being explored to address the federal government’s fiscal constraints, which have limited its ability to settle the debts outright. These instruments include bonds and other financial mechanisms designed to spread the repayment burden over time.
The announcement follows earlier promises by the Minister of Power, Adebayo Adelabu, who in April 2025 pledged to resolve the debt crisis. Speaking in February, Adelabu had described the ₦4 trillion debt as a significant barrier to the power sector’s growth, noting that it was undermining the ability of GenCos to operate efficiently and invest in critical infrastructure upgrades.
The minister’s commitment came amid growing pressure from GenCos, who have warned that the continued accumulation of debts could lead to a collapse of power generation operations, plunging Nigeria deeper into its energy crisis.
The power sector’s financial woes are a longstanding issue in Nigeria, where inconsistent electricity supply has hindered economic growth and frustrated citizens and businesses alike.
The debts owed to GenCos and DisCos stem from a combination of factors, including unpaid subsidies, inefficiencies in the distribution chain, and a lack of cost-reflective tariffs.
These challenges have created a vicious cycle, with DisCos struggling to collect revenue from consumers and remit payments to GenCos, who in turn face difficulties maintaining their plants and securing fuel supplies.
Industry analysts have welcomed the government’s latest move but remain cautious about its implementation. “Paying ₦2 trillion is a significant step, but it’s only half the battle. The government must address the structural issues in the power sector, such as tariff reform and metering, to prevent these debts from piling up again.
WHAT YOU SHOULD KNOW
The federal government’s plan to pay ₦2 trillion of the ₦4 trillion debt owed to electricity generation and distribution companies by the end of the next quarter marks a critical effort to stabilize the nation’s beleaguered power sector.
This initiative, supported by key figures like the Coordinating Minister of the Economy and the Debt Management Office, aims to alleviate the financial strain on power companies, which have warned that the debt—comprising ₦2 trillion from 2024 and ₦1.9 trillion in legacy debts—threatens their operations.
