Nigeria’s electricity generation sector is facing a deepening financial crisis, with generation companies (GenCos) reportedly owed ₦6.5 trillion by the Federal Government through the Nigerian Bulk Electricity Trader (NBET). The mounting arrears are threatening electricity reliability, investor confidence, and broader economic growth.
According to the Association of Power Generation Companies (APGC), the debt has grown from ₦4 trillion in December 2024 to ₦6.5 trillion by February 2026, as GenCos collect only 35 percent of monthly invoices, averaging ₦280 billion. This leaves a shortfall of roughly ₦200 billion per month, creating liquidity gaps that undermine maintenance, operations, and debt servicing, while keeping national generation far below demand.
Experts attribute the crisis to structural weaknesses in the electricity value chain. Chinedu Okoro, energy analyst, described a weak payment chain, noting that DisCos often collect insufficient revenue and remit only a fraction to NBET. Funmi Alade, energy policy advisor, highlighted weak enforcement of Power Purchase Agreements, which reduces GenCos’ guaranteed income. Jide Oladipo, financial analyst, said government interventions, such as bonds and partial settlements, are too small to tackle the backlog or address systemic payment issues.
The impact on electricity supply is significant. Liquidity gaps limit generation, keeping output around 3,000–4,000 megawatts. Frequent outages disrupt homes, businesses, and schools, forcing many to rely on diesel generators or solar alternatives, increasing costs and reducing productivity. Consumers shifting to alternative power sources also shrink DisCos’ revenue, further weakening the grid.
Government interventions include plans to raise ₦1.23 trillion in early 2026 to settle verified arrears and a ₦501 billion bond under the Presidential Power Sector Debt Reduction Programme (PPSDRP). However, analysts warn that these measures fall short. Tunji Bello, energy consultant, said enforcing PPAs and capacity payments is critical to stabilizing GenCos’ revenues. Mercy Onyekachi, policy analyst, called for cost-reflective tariffs to make DisCos financially viable, while Emmanuel Musa, industry researcher, recommended market restructuring to remove bottlenecks.
To restore stable payment flows, experts suggest better metering and reducing technical losses to improve revenue collection. Direct pass-through payments from consumers to NBET and GenCos, along with performance-based incentives and transparent settlement systems, could strengthen accountability and efficiency.
The economic consequences are broad. Debt uncertainty discourages both domestic and foreign investment. Higher perceived risks increase financing costs, while energy constraints slow industrial growth, jeopardize jobs, and force households to spend more on generators and solar solutions.
The ₦6.5 trillion debt reflects deep systemic issues in Nigeria’s electricity sector. Persistent under-payment, low tariffs, weak contractual enforcement, and flawed market design perpetuate financial instability. Immediate fiscal action, backed by structural reforms, including tariff adjustments, contract enforcement, metering upgrades, and market restructuring, is essential to restore confidence, stabilize electricity supply, and support economic growth. Without decisive intervention, Nigeria’s debt spiral will continue, threatening both the power sector and the broader economy.
