The Federal Government of Nigeria has reached a long-awaited agreement with electricity generation companies (GenCos) on the implementation framework for clearing an estimated ₦4 trillion debt owed to power producers and gas suppliers. The deal marks a major step towards restoring liquidity to the country’s struggling power sector and improving generation capacity after years of financial strain.
The agreement follows a high-level meeting in Abuja last week between the Minister of Finance and Coordinating Minister of the Economy, Wale Edun; the Minister of Power, Bayo Adelabu; and the Special Adviser to the President on Energy, Olu Verheijen, alongside senior executives of several generation companies. It comes in the wake of President Bola Tinubu’s approval for the issuance of ₦4 trillion in government-backed bonds to offset verified arrears owed to operators.
According to a statement issued by Senan Murray from the Office of the Special Adviser on Energy, the implementation plan—previously endorsed by the Federal Executive Council (FEC) in August—will rely on bilateral negotiations between the Federal Government and the affected companies. These negotiations are expected to finalise settlements that balance fiscal realities with the financial distress facing the power producers.
For years, Nigeria’s GenCos have struggled with mounting unpaid invoices for electricity supplied to the national grid, leading to liquidity challenges that have cascaded through the entire energy value chain. The debts, which include obligations to gas suppliers, have limited the ability of power companies to operate efficiently, maintain assets, or invest in new capacity. Many operators have warned that without a sustainable solution, generation output could further decline, worsening Nigeria’s chronic electricity shortages.
The new bond issuance represents the most significant government intervention in the sector since the 2013 privatisation of the generation and distribution arms of the former Power Holding Company of Nigeria (PHCN). The move is expected to improve cash flow, restore investor confidence, and provide GenCos with the capital needed to clear debts to gas suppliers and undertake essential maintenance.
Officials familiar with the agreement said the settlement process will be carefully structured to ensure transparency and accountability. The bonds will be issued through the Debt Management Office (DMO) after the verification of claims by the Ministry of Finance and the Bureau of Public Enterprises (BPE). Payments will be made in tranches based on the outcomes of the verification and negotiation processes, ensuring that only validated debts are honoured.
The Power Minister, Bayo Adelabu, had earlier described the debt clearance plan as critical to stabilising the power sector. He noted that many gas suppliers had reduced or halted supply to GenCos due to outstanding payments, leading to frequent generation shortfalls and grid collapses. By addressing the financial bottlenecks, the government hopes to boost generation to more reliable levels and attract private investment into the sector.
Industry analysts have also welcomed the development, noting that Nigeria’s power market has long suffered from liquidity gaps, tariff misalignments, and inefficiencies in revenue collection by distribution companies (DisCos). Clearing the GenCos’ debts, they argue, could have a ripple effect on the broader electricity ecosystem, improving trust among market participants and strengthening the Nigerian Electricity Supply Industry (NESI).
However, experts also caution that the debt repayment must be accompanied by structural reforms to prevent the re-emergence of similar arrears. These reforms include enforcing payment discipline within the sector, reviewing electricity tariffs to reflect cost realities, and improving metering and revenue collection efficiency. Without such changes, they warn, the government’s intervention could offer only temporary relief.
The Federal Government has also pledged to continue engaging with stakeholders to ensure the sustainability of the power sector. Presidential Adviser Olu Verheijen reiterated the administration’s commitment to implementing market-driven policies that encourage private participation, efficiency, and innovation in the energy industry.
The debt settlement initiative underscores President Tinubu’s broader economic reform agenda, which aims to tackle long-standing fiscal and structural weaknesses in key sectors. As the bonds are rolled out and payments commence, industry players are optimistic that the intervention could mark a turning point for Nigeria’s power sector—potentially ending years of financial uncertainty and paving the way for a more stable and investor-friendly energy market.
If successfully executed, the ₦4 trillion debt clearance plan could unlock fresh capital for the power industry, restore gas supply confidence, and ultimately enhance electricity generation and reliability for homes and businesses across Nigeria.
