Gas providers are increasingly turning off fuel supply to bankrupt generation companies, and electricity generation companies have warned that Nigeria’s power facilities are in danger of collapsing due to massive unpaid bills.
According to the Association of Power Generation Companies, the Nigerian electricity supply industry’s worsening liquidity crisis has made it difficult for a number of generation companies to continue operating. The organization warned that if the Federal Government did not implement sustainable reforms to address the sector’s financial difficulties, the nation’s electricity supply could worsen even more.
In response to the Federal Government’s proposal to raise an additional N729 billion through a second bond offering under the Presidential Power Sector Debt Reduction Program, Joy Ogaji, the CEO of the Association of Power Generation Companies, revealed this in an interview.
Prior to the planned bond sale, which is anticipated to settle a portion of the N4 trillion due to energy producing businesses, the Federal Government recently ended an investors’ roundtable. The bond is a component of the Presidential Power Sector Debt Reduction Program, which aims to increase power sector liquidity.
But according to Ogaji, the bond program by itself won’t be able to end the crisis because new liabilities keep piling up every month while market players don’t fulfill their payment commitments.
As gas suppliers continue to cut off indebted generation businesses due to unpaid obligations, which she claimed had increased to over N3 trillion due to monthly accumulations, she cautioned that if the liquidity situation is not resolved, more power facilities may be forced to shut down.
When asked if Nigeria may experience a more unpredictable energy supply as a result of the current trend, she replied that several power facilities were already closing because they were unable to pay for gas.
The majority of the power plants are shutting down, as you can see. For instance, the debt has prevented Ibom Power from producing since 2025. They have been shut off by gas suppliers. Gas providers have cut off a number of other GenCos. The majority of GenCos share the same story as Ibom Power. She stated, “Some of them haven’t paid salaries in months.”
Ogaji said that generation businesses might be forced to stop producing electricity if the underlying financial issue is not resolved. “GenCos must cease producing in order to prevent future shortages,” she stated.
According to Ogaji, the circumstances demonstrated the severity of the financial crisis facing power generation businesses, many of which are dealing with growing debt, interruptions in the gas supply, and cash flow issues.
Although she underlined that the strategy must address the underlying roots of the liquidity crisis, she stated that the generation companies were not against the Federal Government’s efforts to settle overdue liabilities.
She questioned how a company could endure with almost ten years’ worth of outstanding obligations. “The GenCos have nothing against the Federal Government issuing bonds or using any other method to settle its debts. They ought to think about the business’s sustainability and the time worth of money. That’s simply our stance,” she said.
Ogaji also questioned claims that the sector’s debt load will be alleviated by the most recent bond sale. Will the debts actually be paid off by the bond? Let’s convey the correct message, please. How would the second tranche pay off an N4 trillion seven-year bond? What will happen to the total between 2025 and 2026? “Please don’t use GenCos for political purposes,” she said.
She claims that because energy distribution firms and Nigerian Bulk energy Trading Plc are still unable to fully collect invoices, new liabilities continue to accrue while the debt reduction scheme exclusively tackles verifiable legacy debts up until December 2024.
“The DisCos don’t pay 100% each month. NBET is not making a full payment. A N4 trillion bond is being raised over a period of seven years. This N4tn will be distributed over a period of seven years. And there is still a deficit as of right now. Not that the deficit is no longer present. Therefore, more than another N7tn would have accrued by the time you finish paying the N4tn over a period of seven years. How do we handle that? Therefore, we are searching for a long-term answer,” she continued.
“One of the sustainable ways is for the Federal Government to acknowledge the fact that they cannot subsidize the power market,” Ogaji said, criticizing the current electricity subsidy framework and claiming that the Federal Government’s commitment to subsidies was not supported by actual budgetary provisions. Because it is evident that the government is merely providing power subsidies on paper. The budget does not include it.
She asked the Federal Government to pursue measures that can restore liquidity throughout the power value chain and make reasonable subsidy allocations in order to adopt a sustainable funding model for the energy market.
Ogaji cautioned that the ongoing debt accumulation and gas supply disruptions could further impair electricity generation and jeopardize attempts to enhance the nation’s power supply if the underlying structural problems are not resolved.
On Tuesday, however, the Federal Government announced that it had fulfilled all obligations under the first tranche of its power sector debt financing program, revealing that it had paid the first bond coupon on time and deployed roughly N501 billion to settle a portion of the long-standing legacy debts owed to electricity generation companies.
It revealed that under the first phase of the power sector debt settlement program, N333 billion had been paid to eight participating GenCos, covering 17 power facilities.
The Power Sector Multi-Instrument Issuance Programme’s Series I was executed successfully, according to the government, restoring investor confidence in Nigeria’s electricity market and laying the groundwork for the introduction of a N729 billion Series II bond to increase liquidity throughout the power value chain.
Olu Verheijen, President Bola Tinubu’s Special Advisor on Oil and Gas, revealed this on Tuesday at the NBET Finance Company Plc Series II Bond Issue Investors’ Forum in Abuja. He emphasized that the Tinubu administration purposefully decided to show credibility by fulfilling all commitments made to investors before going back to the capital market for another round of fundraising.
