FG starts clearing legacy power sector debts in bid to stabilise electricity supply
The Federal Government of Nigeria has begun the settlement of a N4 trillion debt owed to power generation companies, with five GenCos already captured in the first phase of the payment process.
The development was confirmed by Nigerian Electricity Regulatory Commission, which said the settlement is part of ongoing efforts to address legacy obligations that have weighed down the electricity value chain for years.
Speaking on the initiative, a senior power sector official said the move is aimed at easing liquidity constraints faced by generation companies. “The federal government has commenced the process of paying the outstanding debts, and five generation companies have so far been captured under the programme,” the official said.
Nigeria’s power sector has accumulated massive debts over time due to tariff shortfalls, poor collections, and delayed remittances, leaving GenCos unable to fully meet obligations to gas suppliers, lenders, and equipment vendors. Industry operators have repeatedly warned that the debt overhang threatens generation capacity and the stability of electricity supply.
According to sector stakeholders, the current settlement targets verified legacy debts and is expected to improve cash flow for affected companies. A GenCo executive familiar with the process said the payments could help stabilise operations if sustained. “This is a positive step, especially for companies struggling to service loans and pay for gas. But it has to be consistent to make a real difference,” the executive said.
The intervention is also expected to ease pressure on gas suppliers, many of whom have reduced supply to power plants due to unpaid invoices. Analysts say improved payment flows could help support more reliable electricity generation in the short term.
However, experts caution that settling debts alone will not resolve deeper structural issues in the sector. A power analyst noted that without cost-reflective tariffs and improved distribution efficiency, debts could quickly build up again. “Debt settlement is necessary, but it must go hand in hand with reforms across transmission and distribution to prevent a repeat of the same problem,” the analyst said.
The government has maintained that resolving the power sector’s debt burden is critical to restoring investor confidence and unlocking new investment. Stakeholders say the next test will be whether the settlement is extended to other eligible GenCos and backed by reforms to ensure long-term financial sustainability.
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