Darkness at end of tunnel: Why FG must pay GenCo debts

The federal government owes electricity generation companies a whopping N6.8 trillion, while gas suppliers are threatening to cut supply, currently millions of Nigerians are already living in the dark. The clock is ticking, writes Onu Okorie. Excerpt.

Nigeria’s power sector is built on a chain and that chain is close to breaking. At the heart of the country’s electricity supply system sit the Power Generation Companies, or GenCos, the firms that convert fuel into electricity and feed it into the national grid. Without them, there is no power to transmit, no power to distribute, and no electricity to reach homes, hospitals, schools, or the millions of small businesses that keep the economy turning. Yet these companies are owed a staggering debt that has now ballooned to nearly N7 trillion and the federal government, their primary off-taker, has shown little urgency in settling it.

The consequences are already being felt. National electricity generation has crashed to around 4,300 megawatts, which is far below the country’s demand. Gas suppliers are threatening to cut fuel supply to thermal power plants entirely. And industry leaders warn that unless decisive action is taken, Nigeria could be staring down a total nationwide blackout.

To understand why the GenCos crisis matters, one must first understand where they sit in Nigeria’s power value chain.

Generation companies operate the power plants, both gas-fired thermal plants and hydroelectric facilities that produce electricity and connect to the national grid. From there, the Transmission Company of Nigeria TCN wheels the power across high-voltage lines to distribution companies DisCos, who then deliver it to end-users. The Nigerian Bulk Electricity Trading Plc NBET sits in the middle, acting as a financial intermediary, buying power from the GenCos and selling it on to the DisCos.

In theory, the system is straightforward. In practice, it has been broken for over a decade.

Since the sector’s privatisation in 2013, NBET has consistently failed to pay GenCos in full for the power they generate. Monthly invoices average approximately N280 billion, but only about 35 percent of that, roughly N80 billion is paid. The remaining N200 billion goes unpaid every single month, accumulating into what is now a crisis-defining debt.

“From 2015 to December 2024, the debt profile grew to N4 trillion. In each month of 2025, there is a shortfall of N200 billion,” Joy Ogaji, Chief Executive Officer of the Association of Power Generation Companies APGC, explained during a recent television interview. “The debt grew to N6.6 trillion in January and N6.8 trillion in February. At the end of March, you need to add N200 billion again to make it N7 trillion.”

The debt, she said bluntly, “is still swelling like garri soaked in water.”

Of Nigeria’s 30 power plants on the national grid, approximately 70 percent are thermal, meaning they run on natural gas. These plants are the backbone of national electricity supply, and they are now in acute danger.

Because GenCos have not been paid by NBET, thermal plants have in turn been unable to pay their gas suppliers, accumulating a separate debt of approximately N3.3 trillion owed to gas producers. The patience of those suppliers, Ogaji warns, has reached its limit.

“Gas is not available because the gas suppliers have told us that if we need gas, we need to put money on the ground to get gas in the pipe. We owed them a lot of money,” she said. “The gas suppliers have really been very kind to us. They are the reason why the thermal plants are still generating power. But now, they have told us that if there’s no payment, there will be no gas for the thermal power plants.”

The numbers paint a dire picture. Thermal power plants require approximately 1,588.61 million standard cubic feet of gas per day to operate at full capacity. Recent figures from the Nigerian Independent System Operator NISO show that only about 652.92 million standard cubic feet have been available, less than half of what is needed. The result: multiple generating units have been forced to shut down or operate well below capacity, dragging national output down with them.

A pipeline explosion at Escravos-Lagos in December last year further compounded the supply crunch, knocking out several plants for weeks. The fallout has never fully been reversed.

The effects of generation shortfalls ripple immediately through the entire economy. Since all distribution companies draw from the same national grid, a drop in generation automatically means reduced electricity allocation to every state across the country. Grid operators have been forced to implement widespread load shedding to maintain system stability, a measure that hits ordinary Nigerians and businesses hardest.

Industry leaders estimate that over 40 million micro, small and medium enterprises MSMEs nationwide are trapped in a prolonged crisis of low energy supply and frequent power outages. From food processing and manufacturing to welding shops, tailors, laundries, and bakeries, the disruption cuts across the entire value chain of the informal and formal economy alike.

“Correct to say that the debt is the reason why we are in darkness,” Ogaji stated plainly.

Consumer advocates agree. Kunle Olubiyo, president of the Nigeria Consumer Protection Network NCPN, has called for urgent modernisation and automation of the power sector, warning that without systemic reform, human elements will continue to create chronic inefficiencies in debt calculations and energy measurement across the generation, transmission, and distribution networks.

Sola Salako Ajulo, founder of the Consumer Advocacy Foundation of Nigeria CAFON, said consumers are bearing the brunt of what is fundamentally an institutional failure. “The consumer’s right to information is clearly being violated,” she said, adding that the back-and-forth blame between GenCos and gas suppliers is leaving ordinary Nigerians frustrated and without answers.

The federal government has not been entirely silent on the debt crisis. In December 2024, it announced plans to raise N1.23 trillion in the first quarter of 2026 to settle verified arrears. In January, it issued a N501 billion inaugural bond under the Presidential Power Sector Debt Reduction Programme PPSDRP, presented as a first step toward clearing the backlog.

Ogaji revealed that President Bola Tinubu had personally assured generation company executives during a July 2024 meeting that he would approve N4 trillion to clear the legacy debt and prevent it from growing further. The N501 billion bond, less than 13 percent of that figure, was not what they were promised.

“The N500 billion does not align with the promise of the President,” Ogaji said, accusing those around the president of “hijacking” the N4 trillion pledge and distributing it in ways that do not reflect the sector’s actual needs.

The government, for its part, has indicated through the former Minister of Power Mr. Adebayo Adelabu that the verified and audited debt may be closer to N4 trillion, with ongoing reconciliation creating disputes over the exact figure. But whether the debt is N4 trillion or nearly N7 trillion, the monthly shortfall of N200 billion continues to grow regardless of who is counting.

As if the domestic debt crisis were not enough, an external shock has arrived to further squeeze Nigeria’s gas-dependent power sector.

The path forward is not complicated in principle, even if it is difficult in practice. The federal government must honour its debt obligations to the GenCos. Until NBET pays generation companies what it owes, those companies cannot pay gas suppliers, gas suppliers will cut supply, thermal plants will go dark, and the national grid will collapse.

Industry analysts and consumer groups have called for broader institutional reform, from automated metering and telemetering under the Nigerian Electricity Regulatory Commission’s NERC programme, to direct commercial agreements between power plants and gas producers that bypass the current payment logjam. The government has also been urged to ensure smart meters procured under the World Bank-funded DISREP programme are provided to consumers free of charge, as already announced under NERC’s regulatory oversight.

But none of those longer-term reforms can substitute for one immediate, unavoidable action: clearing the debt.

Nigeria’s generation companies, thermal and hydro alike, are not simply businesses seeking profit. They are the foundational layer of the country’s electricity architecture.

 Chinua Achebe once wrote that when the roof falls in, it is not the farmer in his field who suffers first, but the family sheltering beneath it. Nigeria’s generation companies are, in many ways, that roof. And right now, they are under enormous strain.

The federal government has a choice: pay what it owes and keep the lights on, or continue to delay and risk plunging the entire country into darkness.