Electricity generation companies have warned that Nigeria’s power plants are facing the risk of collapse as mounting unpaid debts continue to cripple their operations, with gas suppliers increasingly cutting off fuel supplies to indebted generation companies.
The Association of Power Generation Companies said the worsening liquidity crisis in the Nigerian Electricity Supply Industry had left several generation companies struggling to remain operational, warning that the country’s electricity supply could deteriorate further if the Federal Government failed to address the sector’s financial challenges through sustainable reforms.
The Chief Executive Officer of the Association of Power Generation Companies, Joy Ogaji, disclosed this in an interview with The PUNCH while reacting to the Federal Government’s plan to raise another N729bn through a second bond issuance under the Presidential Power Sector Debt Reduction Programme.
The Federal Government recently concluded an investors’ forum ahead of the proposed bond issuance, which is expected to settle part of the N4tn owed to electricity generation companies. The bond forms part of the Presidential Power Sector Debt Reduction Programme aimed at restoring liquidity in the power sector.
However, Ogaji said the bond programme alone would not resolve the crisis because fresh liabilities continue to accumulate monthly while market participants fail to meet their payment obligations.
She warned that unless the liquidity crisis is addressed, more power plants could be forced out of operation as gas suppliers continue to cut off indebted generation companies due to unpaid debts, which she said had risen to over N3tn because of monthly accumulations.
Asked whether the current trend meant Nigeria could face a more unstable electricity supply, she said many power plants were already shutting down because they could no longer pay for gas.
You can see that most of the power plants are shutting down. Ibom Power, for example, has not generated since 2025 because of the debt. Gas suppliers have cut them off. Several other GenCos have been cut off by gas suppliers. The story of Ibom Power is the story of most of the GenCos. Some of them have not paid salaries for months,” she said.
Ogaji warned that unless the underlying liquidity problem is addressed, generation companies may have no option but to suspend electricity generation. “The way forward is for GenCos to stop generating so that there will be no more shortfalls,” she said.
Ogaji said the situation reflected the depth of the financial crisis confronting power generation companies, many of which are battling mounting debts, gas supply disruptions and cash flow constraints.
She maintained that the generation companies were not opposed to the Federal Government’s efforts to settle outstanding obligations but insisted that the approach must address the structural causes of the liquidity crisis.
She wondered how a business could survive with unpaid debts spanning more than a decade. “The GenCos are not against bond issuance or whatever the Federal Government wants to use to pay their debts. They should take into consideration the time value of money and the sustainability of this business. That’s just our position,” she stated.
Ogaji also questioned suggestions that the latest bond issuance would resolve the sector’s debt burden. “Will the bond really clear the debts? Please let’s send the right message. How will the second tranche clear a seven-year bond of N4tn? What happens to the accumulation from 2025 to 2026? Please, no one should use GenCos to play politics,” she warned.
According to her, the debt reduction programme only addresses verified legacy debts up to December 2024, while fresh liabilities continue to accumulate because electricity distribution companies and the Nigerian Bulk Electricity Trading Plc are still unable to fully settle invoices.
Every month, the DisCos are not paying 100 per cent. NBET is not paying 100 per cent. You’re raising a N4tn bond over seven years. This N4tn will be spread over seven years. And currently, there is still a shortfall. Not that the shortfall has stopped. So by the time you finish paying the N4tn over seven years, more than another N7tn would have accumulated. How do we deal with that? So what we are looking for is a sustainable solution,” she added.
Ogaji also criticised the current electricity subsidy framework, arguing that the Federal Government’s subsidy commitment was not backed by actual budgetary provisions, saying, “One of the sustainable ways is for the Federal Government to acknowledge the fact that they cannot subsidise the power market. Because you can see it’s only on paper that the government is subsidising power. It’s not in the budget.”
She urged the Federal Government to adopt a sustainable funding model for the electricity market by making realistic subsidy provisions and implementing reforms capable of restoring liquidity across the power value chain.
Ogaji warned that unless the underlying structural issues are addressed, the continued accumulation of debts and disruption of gas supplies could further weaken electricity generation and undermine efforts to improve power supply in the country.
However, the Federal Government on Tuesday said it had fulfilled all commitments under the first tranche of its power sector debt financing programme, disclosing that it deployed about N501bn to settle part of the long-standing legacy debts owed to electricity generation companies and paid the first bond coupon on schedule.
It disclosed that N333bn had so far been paid to eight participating GenCos, covering 17 power plants under the first phase of the power sector debt settlement programme.
The government said the successful execution of Series I of the Power Sector Multi-Instrument Issuance Programme had restored investors’ confidence in Nigeria’s electricity market and laid the foundation for the launch of a N729bn Series II bond to deepen liquidity across the power value chain. The Special Adviser to President Bola Tinubu on Oil and Gas, Olu Verheijen, disclosed this on Tuesday at the NBET Finance Company Plc Series II Bond Issue Investors’ Forum held in Abuja, stressing that the Tinubu administration deliberately chose to demonstrate credibility by honouring every obligation made to investors before returning to the capital market for another round of fundraising.
Punch
