President Bola Tinubu has approved a N3.3 trillion payment plan to settle outstanding debts in Nigeria’s electricity sector under the Presidential Power Sector Financial Reforms Programme, marking one of the most significant financial interventions in the industry since privatisation. The development was disclosed in a statement issued on Sunday by the President’s Special Adviser on Information and Strategy, Bayo Onanuga, who said the decision followed a final review of legacy debts that have plagued the power sector for over a decade.
The government stated that the liabilities accumulated between February 2015 and March 2025, adding that after verification, N3.3 trillion was agreed as a full and final settlement. Implementation has already commenced, with 15 power generation companies signing settlement agreements valued at N2.3 trillion. The federal government has raised N501 billion so far to fund the payments, out of which N223 billion has been disbursed, with further payments ongoing. The intervention comes amid persistent electricity shortages across Nigeria, forcing households and businesses to rely heavily on petrol and diesel generators and solar alternatives.
From an economic perspective, the debt settlement addresses a structural problem that has paralysed the power sector for years. Generation companies have been unable to pay gas suppliers because distribution companies have not paid for the electricity delivered. This circular debt has led to gas supply curtailments, reduced generation capacity, and frequent grid collapses. By injecting N3.3 trillion into the value chain, the government aims to break this cycle, enabling gas suppliers to receive payments, generation companies to operate at capacity, and ultimately, more electricity to reach consumers.
The approval comes months after the Nigeria Labour Congress criticised demands by power generation companies for financial intervention. In February, the union described a reported N6 trillion demand by the companies as “a clandestine scheme” to siphon public funds under the guise of sectoral support. The NLC accused the Association of Power Generation Companies of seeking an unjustifiable bailout, arguing that the privatisation of the power sector has failed to deliver improved generation capacity or reliable service. According to the NLC, a key concern is that assets reportedly acquired for about N400 billion are now linked to demands running into trillions of naira, despite what it described as stagnant output since privatisation. “This is not economics; this is plunder. They call it business, but we call it a heist,” NLC President Joe Ajaero said at the time.
The government’s decision to proceed despite labour opposition reflects its assessment that the cost of inaction exceeds the cost of intervention. Grid collapses, load shedding, and high self generation costs impose a daily economic penalty on Nigerian businesses and households. The N3.3 trillion settlement, while substantial, represents an investment in breaking the cycle of debt and underperformance. If successful, the intervention could lead to increased generation, improved reliability, and reduced need for expensive diesel and petrol generators.
The federal government said the debt settlement is expected to improve liquidity across the power value chain and enhance electricity generation. It noted that timely payments to gas suppliers and generation companies would help stabilise operations and improve service delivery. “This programme is not just about settling legacy debts. It is about restoring confidence across the power sector ensuring gas suppliers are paid, power plants can keep running, and the system begins to work more reliably,” said Olu Arowolo Verheijen, Special Adviser on Energy to the President. She added that the initiative forms part of broader reforms, including improved metering and service based tariffs linked to electricity supply quality.
The success of the intervention depends on several factors. First, the settlement must be accompanied by reforms that prevent the re accumulation of debt. This requires distribution companies to improve collection efficiency, reduce losses, and enforce payment discipline among customers. Second, the government must ensure that the N3.3 trillion is disbursed transparently and reaches the intended beneficiaries. Third, generation companies must use the funds to restore and maintain generation capacity, rather than treating the settlement as a windfall. The government has indicated that the next phase of the programme will commence this quarter, suggesting that the intervention is part of a broader reform agenda rather than a one off bailout.
For businesses, the intervention offers the prospect of more reliable power and lower operating costs. For households, it promises fewer blackouts and reduced expenditure on generator fuel. For investors, it signals that the government is willing to address structural problems in the power sector, potentially improving the investment climate for energy related projects. However, scepticism remains. Nigerians have heard promises of power sector improvement before, and the proof of the intervention’s success will be in sustained improvements in electricity supply, not in the announcement of a payment plan.
