The Federal Government is proposing new measures to ring-fence electricity market revenues and provide credit guarantees to ensure that power generation companies (GenCos) and gas suppliers receive payments for electricity delivered, as part of efforts to address Nigeria’s persistent power sector liquidity crisis.
Special Adviser to President Bola Tinubu on Power, Dr Rilwan Lanre Babalola, disclosed the proposals at the second Lagos Energy Summit 2026, held at the Landmark Event Centre in Lagos on November 10 and 11.
According to The Guardian report of November 11, Babalola, represented by a member of the Presidential Task Force on Power Sector Reset and Restoration, Uzoma Achinanya, said the government was considering bilateral electricity contracts backed by escrow accounts, payment waterfalls and improved revenue collection monitoring.
He explained that revenue generated from new electricity supply arrangements would be protected and directed towards meeting the contractual obligations of the companies responsible for delivering the power.
The proposed ring-fencing mechanism would prevent funds generated from specific electricity transactions from being diverted to unrelated obligations. Under the arrangement, payments would follow an agreed priority structure, ensuring that generation companies and their gas suppliers receive money for the electricity produced and fuel supplied.
Babalola warned that improving electricity generation without addressing payment failures across the value chain would not deliver sustainable improvements in power supply.
The government is also considering credit enhancement arrangements to reduce investment risks and strengthen confidence among lenders and electricity market investors. Such guarantees would provide financial backing for market participants whose payment obligations are not yet considered sufficiently secure.
However, Babalola said government-backed support should be recovered from future electricity market revenues rather than become a permanent burden on public finances.
The proposals come amid mounting debts across Nigeria’s electricity value chain, particularly between generation companies and gas suppliers.
In an interview with Fresh FM reported by TheCable on March 13, 2026, Chief Executive Officer of the Association of Power Generation Companies, Joy Ogaji, said GenCos were owed approximately ₦6.8 trillion.
Ogaji estimated that thermal power plants accounted for about 70 per cent, or ₦4.76 trillion, of the debt, with approximately ₦3.3 trillion owed to gas suppliers.
She attributed the growing liabilities to persistent payment shortfalls in the electricity market, explaining that generation companies had struggled to receive full payments for electricity supplied through the Nigerian Bulk Electricity Trading Plc (NBET).
According to her, the market was recording monthly revenue shortfalls of approximately ₦200 billion in 2025, worsening the financial pressure on generation companies and their gas suppliers.
Ogaji also warned that gas producers were increasingly demanding upfront payments before supplying fuel to power plants because of accumulated outstanding debts.
The Federal Government has separately introduced a legacy debt settlement programme to address outstanding obligations in the sector. On October 28, 2026, Minister of Power Joseph Tegbe disclosed that the government had paid ₦1.2 trillion out of ₦2.3 trillion in outstanding obligations covered by the payment arrangement.
The figure formed part of the government’s broader effort to ease liquidity constraints and restore confidence among electricity market operators.
Beyond debt repayment, the government is pursuing changes to the electricity market structure under the Electricity Act 2023, which provides for decentralised electricity markets and allows eligible participants to enter bilateral supply agreements.
The reforms are intended to create alternative commercial arrangements that can improve payment certainty and reduce dependence on the existing centralised trading structure.
At the Lagos summit, Tegbe also outlined a four-pronged power sector roadmap covering grid stabilisation, sector liquidity and sustainability, asset optimisation, and electricity network expansion.
He identified the Lagos-Ogun, Benin-Enugu-Port Harcourt and Abuja-Kaduna-Kano corridors as priority areas for aligning electricity generation, transmission infrastructure and distribution capacity with demand.
The minister said the Lagos-Ogun corridor and Abuja franchise area, which account for more than half of national electricity demand, would serve as pilot locations for proposed 24-hour energy zones.
However, the success of the revenue protection measures will depend on whether electricity distribution companies can improve collections, reduce technical and commercial losses, and meet their payment obligations.
Without stronger revenue collection and a sustainable mechanism for clearing outstanding debts, the proposed safeguards may protect new electricity contracts while leaving much of the existing market burden unresolved.
The Federal Government is therefore seeking to address both sides of the crisis: ensuring that new electricity transactions generate reliable payments while preventing the accumulation of fresh arrears that have continued to undermine power generation and gas supply.
